After years of foot dragging, improvements to Canada’s anti-money laundering regime have been picking up pace in the past few months.
New amendments were proposed to the Proceeds of Crime (Money Laundering) and Terrorist Finance Act (PCMLTFA) on February 15 and include increased requirements for designated non-financial persons and businesses (DNFBPs) to report ultimate beneficial ownership (UBO) information on entities they do business with.
Many individuals and associations who represent DNFBPs have said that if the federal government is requiring reporting UBO data under threat of penalty, then they need access to that data through a public beneficial ownership registry.
At Transparency International Canada, we could not agree more. Thankfully the possibility of establishing such a registry could soon be a reality. The federal government launched consultations on February 13 to determine the merits of a public registry. This follows the provinces of Quebec and British Columbia holding similar consultations.
The idea of increased reporting on beneficial ownership information has garnered some hesitant reactions from Canada’s business community. However, making UBO information public is not just good for helping improve Canada’s anti-money laundering regime, it is good for business.
First, in increasingly complex business environments, companies need to know who they are doing business with to avoid partnering with a company that could be controlled by someone with a poor business history, is a politically exposed person, or is even a front for fraudsters. Fraud cost Canadian business over $30 million in 2017 according to BDO Canada. A public registry would open up due diligence information that is costly for small and medium size businesses to otherwise obtain.
Businesses would also save considerable time and resources in filling out due diligence forms for financial and non-financial service providers. As opposed to filling out a new form per service provider, if a business wants to obtain a loan or insurance for example, a public registry would make UBO information available to Canada’s financial institutions and insurance providers, as well as small nimble money service businesses.
Finally, a public registry would greatly reduce the due diligence costs, and potential fines, for Canada’s financial services industry, which spends millions of dollars each year in compliance costs. These reductions would also lower the cost barriers for Canada’s emerging fintech industry.
Despite these benefits, there is still a lingering perception in some sectors that a UBO registry would be a burden for submitting and maintaining information.
It is important that Canadian businesses understand that a UBO registry would ask for and publish minimal information. TI Canada, our partner organizations, and many experts are only calling for the publication of a few fields of UBO data including full legal name, partial date of birth, nature and extent of beneficial interest held, service address, country of usual residence, and politically exposed person status.
Law enforcement and oversight entities should also have access to residential address, country of principal tax residency, and citizenship(s). Much of this information is already available for publicly traded companies or on the System for Electronic Disclosure for Insiders. We hope that a public registry would eventually have unique identifier numbers to make reviewing data easier and potentially require less information to be published.
Experience from the UK also suggests that a registry would not be a burden on business.
The UK launched its public Persons of Significant Control (PSC) registry in 2016. A 2019 implementation review by the UK Department for Business, Energy and Industry presented promising feedback on the registry since its establishment. A majority (64 percent) of businesses have found the publicly available information useful. Close to a third considered the information “very useful.”
Businesses were also asked if collecting and submitting information had affected how their business operates. Most (95 percent) said it had no impact at all. In fact, some said the registry’s increase in corporate transparency was economically advantageous as it would likely result in improved business confidence and lead to greater investment. These efficiencies can outweigh the median overall cost of compliance, which in the UK was relatively small at just £125 ($153).
Canada has been slammed in the past few years by international authorities and peers like the Financial Action Task Force and the U.S. State Department for gaps in our anti-money laundering regime, particularly on UBO transparency. Money laundering, or “snow washing” as it is referred to in Canada, hit national news in 2019, with the Liberals, Conservatives, and NDP addressing the issue in their platforms for the federal election. British Columbia and Quebec have created serious momentum by adopting the Land Ownership Transparency Act and proposing a provincial UBO public registry respectively.
Movement is finally happening for Canada to play desperate catch up with its peers, receive an improved review by the FATF in 2021, and ensure we are not a safe haven for dirty money. Corporate Canada should be embracing the benefits that come with this.