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Hidden Beneficial Ownership and Control
Canada as a Pawn in the Global Game of Money Laundering

by Denis Meunier

Series:Commentary No. 519 - Financial Services and Regulation
ISBN 9781987983746
Publication year: 2018

Cdn: $12.00; US: $12.00
Paperback
Language: English
20 pages
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Canada is a laggard when it comes to anti-money laundering and anti-terrorist financing measures, according to a new report published by the C.D. Howe Institute. In "Hidden Beneficial Ownership and Control: Canada as a Pawn in the Global Game of Money Laundering," author Denis Meunier points out the need for a publicly accessible central registry for beneficial corporate ownership, a major structural flaw in Canada's corporate registration system.

"More scrutiny is given to individuals registering for library cards, than to those setting up companies in Canada" says Meunier.

Official estimates of money laundering in Canada range from $5 billion to $100 billion. Offences such as drug trafficking, fraud, tax evasion, smuggling and corruption are fuelling the laundering of dirty money. Taxes that are evaded become a burden for compliant taxpayers and corporations who shoulder a disproportionate amount of government expenditures and deprive citizens of better services, notes the author. The tax gap from non-compliance alone was estimated in 2014 to reach $14.6 billion, and that doesn't consider corporate tax non-compliance.

The focus of the report is to show how the lack of beneficial ownership transparency facilitates the use of corporations and trusts for illicit purposes. At present, there are no requirements to disclose beneficial ownership when creating a corporation. Nominee shareholders and directors can be appointed without disclosing the ultimate beneficial owner or the nominator. For trusts, there are also no requirements to identify the parties when registering.

"There is a global momentum, led by the Europeans, to make beneficial ownership registries accessible to the public, and trusts under certain conditions, to more effectively address the threats posed by money laundering, terrorist financing, corruption and tax evasion," states Meunier. "Canada is lagging behind in ownership transparency, and the United States even more so."

The report recommends:
  • Reforming corporate registries. The federal government, in collaboration with the provinces and territories, establish a central publicly accessible beneficial ownership registry of corporations and certain trusts;
  • Place the onus on corporations and trusts to truthfully and fully disclose beneficial ownership information;
  • Require all reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to identify beneficial ownership information; and
  • Follow the European example by keeping Canada current with the international standards, commitments and trends on beneficial ownership transparency.
Denis Meunier is a former Deputy Director of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and a Board member of Transparency International Canada.
Hidden Beneficial Ownership and Control
Cdn: $12.00; US: $12.00
C.D. Howe Institute / Institut C.D. Howe BookID: 123508 Added: 2018.9.6