Ottawa pressed on new registry to flush out mystery corporations

Canada is a global laggard when it comes to forcing private corporations to reveal ownership information, says a new report documenting how easily money launderers, tax dodgers, terrorists and other criminals can remain in the financial shadows.

"The level of transparency is really inadequate in this day and age," said Ottawa-based lawyer Mora Johnson, author of new study on lax corporation-registry rules across Canada. "It shouldn't be so easy for criminals to use laundered funds."

Johnson's study, entitled Secret Entities, was commissioned by the Canadian arm of PWYP, a global coalition that helps citizens have a say in the conduct of resource firms, such as mining companies. The Canadian branch includes Canadians for Tax Fairness and Transparency International Canada as members.

The report focuses on "beneficial ownership," that is, the question of who really profits from mysterious corporations that often hide their financial affairs behind obscure names and numbers.

Johnson's report shows that private firms can apply for a certificate of incorporation from a provincial government, where the corporate name is then listed on a provincial registry.

"The corporation's directors and their addresses will be included in the provincial directory but no beneficial ownership information is disclosed," she notes.

"A securities register which includes the names, addresses and numbers of shares of all registered shareholders (not necessarily beneficial owners) must be maintained at the place of business. There is no requirement to make this information public."

Obscuring 'true ownership'

The group is pressing for tougher and more thorough business registries in Canada, in the provinces and federally, that would compel private corporations to disclose the identities of their secret owners.

Johnson writes in the report, to be made public Monday, that laws in Canada allow "one person to conduct business on another person's behalf without disclosing their relationship, including agents, trustees, nominees, directors and nominee shareholders," Johnson writes in the report, to be made public Monday.

"Powers of attorney are frequently used to perpetrate real estate fraud, and may be abused to obscure the true ownership or control of the holder of the power of attorney. Trust laws in Canada easily allow for the abuse of trusts to obscure true ownership or control for criminal purposes."

It doesn't mean it's not doable- Ottawa lawyer Mora Johnson on the difficulties of getting Canada's 14 jurisdictions to agree on a new corporate registry regime

Currently, a quilt of loose federal-provincial regimes allows these owners to hide their identities, even as Britain and the European Union have cracked down and forced disclosure of beneficial ownership in their jurisdictions.

Johnson says Canada is in the same camp as the United States and Australia, with weak reporting laws for private businesses.

The Liberal government formally committed to reform in its March 22, 2017, budget, saying: "The government of Canada is committed to implementing strong standards for corporate and beneficial ownership transparency that provide safeguards against money laundering, terrorist financing, tax evasion and tax avoidance, while continuing to facilitate the ease of doing business in Canada."

June meeting

The issue was also raised at a June 18-19 meeting that Finance Minister Bill Morneau held with his provincial and territorial counterparts.

"We discussed actions we have taken to crack down on tax evasion and close loopholes, and ways to work together to develop a national strategy aimed at improving the availability of beneficial ownership information," Morneau said following the session.

The previous Conservative government first committed Canada to better transparency in 2014, during a meeting of G20 countries in Brisbane, Australia, but progress has been slow since.

"Progress is being made on a path forward," said Finance spokesperson David Barnabe. "This will be discussed in more detail at the next meeting of the finance ministers in December."

Johnson's report, an advance copy of which was obtained by CBC News, includes eight best practices from other jurisdictions around the world that Canada needs to match for an effective registry. They include a single registry for Canada's 14 jurisdictions, free and open access to the registry for citizens, and prompt updates.

Johnson acknowledges the difficulty of getting so many provinces and territories on board, but says federal governments have managed such co-operation for many other issues.

"They're used to doing it," she said. "It doesn't mean it's not doable."

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