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Ottawa charts path for spotlight on shady B.C. companies

A new beneficial ownership registry for federally registered companies will be active next year and B.C. intends to follow suit by 2025; key to both registries will be a free public search mechanism, according to proponents.

The B.C. government says it will follow Ottawa’s lead with a registry for beneficial ownership of companies that will be free of charge for the public.

Last Thursday, the Senate of Canada put the stamp of approval on Bill C-42 and thus a new federal registry that will show the beneficial owners of every federally registered company.

The goal of the registry is to fall in line with international standards for market economies in deterring money laundering and terrorist financing through domestic entities.

“A publicly accessible and searchable registry can deter billions of illicit funds from entering Canada through federal companies each year,” said Sasha Caldera, a manager for non-government organization Publish What You Pay Canada, which has spent years lobbying government for the registry.

“Money laundering is the lifeline for criminal activity, the fentanyl crisis, and foreign interference. Canada will soon have a powerful tool that will strengthen the integrity of its economy,” said Caldera.

While a federal registry is expected to be running by next year, it leaves provinces to do the same for provincially registered companies.

A foreseeable problem is having one province either not participate in the federal registry or create its own, thus leaving a jurisdictional loophole for shady companies to register.

B.C. is already requiring companies to privately list their beneficial owners and will create a registry by 2025, according to the Ministry of Finance.

The ministry now says that registry will be free of charge to search and will follow similar privacy practices to B.C.’s Land Owner Transparency Registry.

The ministry said it will allow federal authorities full access to provincial corporate transparency information, provided an applicable information-sharing agreement is in place.

“I wouldn’t be surprised if they just harmonized with the feds,” said Caldera.

Caldera said the federal registry should allow a person to search a name and see if they are either a director or beneficial owner. Conversely, a person could search a company and have the registry list directors and beneficial owners.

Presently, in B.C., if one wants to find out the director of a company they must pay about $8 through the BC Online portal. And there’s no way to search a person’s name to see what companies they are involved with.

Caldera said regulations are the next step and they will smooth out matters such as privacy concerns, which have been raised by the Canadian Bar Association.

Minister of Innovation, Science and Industry Francois-Philippe Champagne told the Senate on Oct. 18 that the registry will not include personal information such as a person’s citizenship or birthdate. That information will, however, be accessible to law enforcement agencies and relevant federal bodies such as Canada Revenue Agency and Fintrac as part of a “whole of government” approach.

“The use of Canada as a secrecy jurisdiction to engage in ‘snow washing’ is coming to an end. This bill makes it harder for money launderers to hide behind federal corporations to wash their dirty money” said Noah Arshinoff, interim executive director of Transparency International Canada, another NGO lobbyist engaged in tax evasion and money laundering solutions.

The NGOs say 132 countries have committed to their own registries and for Canada it will be important for the Five Eyes’ national security strategies and protect liberal democracies against foreign influence.

The registry, as like the one in B.C., will only divulge beneficial owners who own 25 per cent of company shares or who control said shares, or anyone with various manners in which to control the company.

Of course, anyone, and especially a bad actor, could omit their beneficial status, which is why Caldera said he was pleased with the laws surrounding information verification at the corporate level and especially penalties, in the event of a proven violation.

Under the new law, someone who violates the registry rules can face five years in prison and up to a $1-million fine. These are some of the strongest statutory fines in the business law sector, said Caldera.

There is still work to be done for government, said Caldera, such as incorporating partnerships and trusts into the registry. And, said Caldera, foreign companies doing business in Canada remain outside the scope of the registry.

Caldera said companies operating out of sanctioned countries is an “important gap to flag” as “it’s no surprise none of [those countries] have beneficial ownership registries.”

New Brunswick Senator Pierrette Ringuette told Champagne she found the 25 per cent threshold “quite high,” and Caldera said that remains a matter of debate on the international scene and it would not be surprising to see it lowered in the future.

Committees on the matter have weighed pros and cons of the registry with business costs being one cited concern. On the flip side, such a registry will also made corporate and investing due diligence better, according to Caldera.

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