Beneficial ownership transparency is good for Canadian business

It’s 2023, and Canada is scheduled to have a publicly accessible, corporate beneficial ownership registry by the end of the year. It has been a long time coming for this critical tool to help fight Canada’s money laundering problem, or ‘snow-washing’ as we have come to know it. Canada has the opportunity to improve on lessons learned from the United Kingdom, which laudably launched the first publicly accessible beneficial ownership registry in 2016, yet faced challenges, mostly stemming from a lack of data verification. The U.K. government is incorporating these lessons as it aims to improve its registry. And, in spite of a recent European Court of Justice (CJEU) ruling which invalidated public access to registries amongst EU members, the U.K. plans to keep its registry publicly accessible to combat the misuse of companies and to facilitate economic growth. While Canada’s registry will significantly help fight money laundering –the lifeline for organized crime– it will also bring multiple benefits to the Canadian economy. A publicly accessible beneficial ownership registry can help businesses avoid fraud, improve compliance with federal laws, and strengthen Canada’s capital markets. James Cohen is the executive director of Transparency International Canada. Photograph courtesy of James Cohen The Canadian Anti-Fraud Centre reported a staggering increase in fraud cases in 2021, which led to $379-million in losses. The top five most reported scams and fraud for 2021 were “extortion, phishing, merchandise scams, service scams, and vendor fraud.” To mitigate the risk from these schemes, Canadian companies deserve free-of-cost access to information about their business partners. Indeed, 91 per cent of company executives in a 2016 Ernst and Young fraud survey agreed it is important to know the ultimate beneficial owners of entities with which you do business. In the U.K., a majority of businesses found the publicly available information on their registry useful. Nearly one-third considered the information “very useful.” In 2020, CPA Canada expressed its support for a publicly accessible beneficial ownership registry to help “protect Canada’s economy, society and reputation.” Most of Canada’s 30,000 plus regulated financial institutions and non-financial businesses and professions (DNFBPs) are small businesses. A easy and free registry helps these businesses comply with federal anti-money laundering laws without incurring additional costs. Verified and validated data in the registry will further help all businesses carry out due diligence for prospective suppliers with confidence. As Canada has expanded its list of international sanctions, verified data will help businesses remain on the right side of the law without inadvertently assisting sanctioned individuals. Sasha Caldera is the beneficial ownership transparency campaign manager at Publish What You Pay Canada. Photograph courtesy of Sasha Caldera A publicly accessible beneficial ownership registry would also help reduce securities fraud. Experts suggest that organized crime is moving into securities fraud through pump-and-dump schemes, which hurts Canadian investors and businesses. Market manipulation schemes regularly involve criminals using shell companies to hide their tracks. Left unchecked, rampant securities fraud creates instability in Canada’s capital markets. To ensure the windfalls of beneficial ownership transparency are truly realized, all the provinces must co-operate with the federal government for a pan-Canadian registry. The last thing Canadian businesses need is an inconsistent patchwork of registries like the current state of our business registries. To avoid the headache of 14 different beneficial ownership registration requirements, provinces can reach an agreement with the federal government and pass legislation to allow provincial entities to directly upload beneficial ownership information into a central registry. Save for Quebec, which has taken its own approach, no other province has required collection of corporate beneficial ownership information. By agreeing to a centralized, pan-Canadian framework, provinces would not need to invest money in massive upgrades to their corporate registries. This approach will be especially helpful for smaller provinces that may not have sufficient resources. Protecting privacy is key to a successful registry. This can be achieved by checking that relevant fields of information are compatible with Canada’s privacy laws and charter rights. Additionally, vulnerable people who are at risk of targeting should have a straightforward means to opt out from public disclosure. All Canadians are entitled to privacy, and vulnerable people should be protected. What should not be protected is secrecy – this compromises Canadian businesses and the economy. A publicly accessible beneficial ownership registry can reduce fraud schemes, make due diligence easier, and attract good investment to Canada. This is something that is good for businesses across the country, and all provinces need to get behind. James Cohen is the executive director of Transparency International Canada. Sasha Caldera is the beneficial ownership transparency campaign manager at Publish What You Pay Canada. The Hill Times