Hon. Percy E. Downe moved second reading of Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts.

He said: Honourable senators, I rise today to speak as the sponsor of Bill C-42, An Act to amend the Canada Business Corporations Act.

Canadians have been waiting for this important piece of legislation to fight against money laundering and overseas tax evasion. That is why I am pleased to have the opportunity to sponsor this bill.

If passed by Parliament, this bill will create a public and searchable beneficial ownership registry. I welcome this legislation and I am not alone in this.

James Cohen of Transparency International Canada stated:

There was a lot of aggressive language on anti-money laundering in Budget 2023. We’re thankfully seeing the tough talk backed up with increasingly bold proposals that now need to be implemented and financed. Canada’s finally getting on the right track it seems.

A spokesperson for Canadians for Tax Fairness regarded this bill as an important first step and stated:

Tax dodging and money laundering cost the public billions every year. A publicly accessible registry will significantly improve tax compliance and enforcement for all levels of government.

The government has proposed this legislation because a lack of corporate ownership transparency is impairing Canada’s ability to combat serious financial crimes like fraud, money laundering and tax evasion. It also limits our nation’s capacity to enforce domestic and international sanctions through effective tracing and freezing of financial assets. Finally, it is impacting the trust of Canadians and foreign investors in our marketplace and eroding confidence that our tax system treats everyone equally.

Canada’s inability to quickly and quietly identify a company’s beneficial owner, that is the natural person who controls the corporation or company, delays justice and enforcement of laws in our country.

Honourable senators may be interested to know that according to FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada, roughly 70% of all money laundering cases in Canada involve the misuse of corporate legal entities, both to channel foreign proceeds of crime into or through Canada as well as to launder domestically generated proceeds. This is consistent with one of the findings of the final report of the Cullen Commission of Inquiry into Money Laundering in British Columbia.

Unfortunately, drug cartels and foreign criminals have long used corporate vehicles to hide the ownership and control. A public beneficial ownership registry would complement the existing tools of law enforcement. Such registries and the transparency they foster further serve as a deterrent to criminals, foreign and domestic.

In my work in overseas tax evasion, I was always impressed by the Australian experience, which I mentioned in this chamber before. After starting Project Wickenby, a broad-based government effort to fight overseas tax evasion and recover money owed to the Australian people, the authorities discovered that international money transfers to known tax havens declined dramatically once people were charged and sent to jail. Charging, convicting and jailing Australian tax evaders and money launderers curbed their desire to conduct such activities.

To that end, this legislation will have penalties for wilful non‑compliance that are some of the most severe in the world: up to $100,000 fines for corporations, up to $1 million of personal fines for directors and officers and up to five years in prison for those who knowingly provide or allow or permit false or misleading information to be filed.

Colleagues, the need for this type of registry has been well established by now, notably by public consultation held by the Government of Canada and the Financial Action Task Force, the G20 body that sets international standards in these matters.

Incidentally, this was the same task force that in a 2016 report raised significant concerns about the state of beneficial ownership transparency in Canada.

In recent years, Transparency International — the global organization, not the Canadian chapter — has given Canada progressively lower scores in its yearly international Corruption Perceptions Index due in no small part to delays in implementing beneficial ownership transparency. Naturally, the same organization is greatly encouraged by the measures proposed in the bill before us, such recognition being a testimony to the leadership of Minister Champagne on this file. This long-delayed and much-needed action in Canada has finally arrived with this legislation.

Beneficial ownership registries are nothing new, and have existed in the United Kingdom and in a growing number of countries since 2016. They have proven a useful tool in helping law enforcement, journalists and civil society detect and deter the misuse of corporations for illicit financial activity. A beneficial ownership registry will also serve tax authorities here and abroad. They will be able to use the information to track and fight tax evasion and aggressive tax avoidance. The Panama Papers as well as other mass leaks have shown that criminals look for places with weak beneficial ownership transparency and then try to hide their personal ownership and income. The longer the chain of entities between the income and the beneficial owners, the harder the truth is to determine.

We should not underestimate the significant burden that tax evasion and avoidance place on the Canadian economy. In 2019, for example, the U.S. State Department designated Canada as a major money-laundering country. Volume II of the U.S. State Department’s report from March 2022, entitled International Narcotics Control Strategy Report, says that they estimated that between CAD 50 billion and CAD 120 billion is laundered every year in Canada. That, colleagues, is roughly 5% of our GDP. Think about that: 5% of our GDP is consisting of money laundering. That was further documented when the Criminal Intelligence Service Canada’s 2020 report, using an estimate from the United Nations Office on Drugs and Crime, concluded that money laundering represents between 2% and 5% of GDP in Canada, and they pegged the money laundering at between CAD 45 billion and CAD 113 billion.

Senators, we have a major problem that this bill will help to address. Making beneficial ownership information publicly available supports good governance and trust. All businesses can check who they are doing business with by reviewing the entities of potential suppliers and customers, thereby protecting themselves against crooks.

Honourable senators, at this time, I would like to take the opportunity to highlight a few additional features of the bill that, I believe, reflect the significant amount of thought that has gone into designing an effective regime. Obviously, our Senate committee will conduct its own study of this bill in greater detail, but here are a few of the highlights.

Bill C-42 is the product of significant consultation. In 2020 and again in 2022, officials from Innovation, Science and Economic Development Canada and Finance Canada conducted public consultations on options and met with key stakeholders, including law enforcement, businesses, transparency organizations, professional associations and the Office of the Privacy Commissioner of Canada.

The text of Bill C-42 represents a careful balance of the views of all the stakeholders. It also reflects lessons learned from registries already in place in other countries, such as the United Kingdom, the European Union and the United States. Here in Canada, the federal government is providing leadership under Minister Champagne and is working closely with the provinces and territories given that corporation registration is a joint responsibility.

This federal bill, if passed, will cover roughly 15% of corporations in Canada, and with the cooperation of the provinces and territories, we will have 100% coverage. Colleagues, the Province of Quebec led the way with its Bill 78, passed in June of 2021, making it the first province in Canada with legislation to institute a publicly accessible beneficial ownership registry. They were soon followed by British Columbia. I want to congratulate these governments on their leadership and urge other provinces to now join the fight.

Another feature of this bill I want to highlight relates to the protection of the privacy of Canadians. Upon entry into force, Bill C-42 will require corporations to collect more information from their beneficial owners, including name, citizenship, date of birth and address, and to send this, along with other information in their registry of individuals with significant control, to Corporations Canada. They would be required to do this annually and within 15 days of any changes recorded in their registry. This new information is necessary to enable law enforcement to effectively identify beneficial owners and to align with international partners.

At the same time, only a portion of the information collected by Corporations Canada will be made available to the public: the name; the address for service if it has been provided to the corporation or the residential address if an address for service has not been provided to the corporation; the date the individual gained or ceased to have significant control; and a description of the nature of that control.

The proposed legislation collects and discloses only that information that is both necessary and proportional to meet the objectives of the registry. The most sensitive personal information will only be made available to law enforcement and other authorized entities. This design is intentionally privacy-conscious, and a Charter Statement released by the Department of Justice Canada finds Bill C-42 to be fully compliant with the Canadian Charter of Rights and Freedoms.

Honourable senators, Bill C-42 also provides for a two-track exemption regime to protect certain at-risk individuals and further ensure the bill is Charter compliant. The first track will be an automatic exemption from publication for individuals who are less than 18 years old. The second track will be an exemption under application if the director of Corporations Canada is satisfied that the applicant has demonstrated that their safety and security are at risk. It is important to note that in all these cases, law enforcement will still have access to the information and that Corporations Canada’s website will have to make its exemption decisions public. At the same time, the core set of information publicly disclosed will be of great benefit to shareholders, creditors and other business partners of the corporations, like reporting entities, foreign law enforcement and tax authorities as well as non-governmental organizations, journalists and members of the public.

Honourable colleagues, a second notable set of features of Bill C-42 is the measure put in place to deter non-compliance. The effectiveness of the registry will indeed be heavily dependent on the data it contains. Bill C-42 puts in place the building blocks of a comprehensive and progressive compliance program — including the administrative action and criminal sanctions that I outlined earlier — to deter bad behaviour and encourage compliance by all corporations.

On the administrative front, corporations that fail to provide their beneficial ownership information to Corporations Canada may notably be prevented from obtaining a certificate of compliance, a document that is often required to support a loan request or to enter into contract with a potential supplier or buyer. If a corporation remains in non-compliance, it could be dissolved, meaning the end of the legal existence of the corporation.

Honourable senators, I would also like to highlight another key feature that provides individuals, employees and journalists the opportunity to report suspected wrongdoings directly to the director of Corporations Canada. I am referring to the whistle-blower protection provision. For example, the director of Corporations Canada will not be authorized to disclose to the public information submitted to it by a whistle-blower, and the bill amends section 2 of the Access to Information Act to prevent the release of information submitted that could identify any individuals.

Altogether, these measures should serve to enhance the accuracy and integrity of the information in the registry and deter intentional misreporting, or false or misleading information.

Colleagues, I have talked a lot about efforts put in place to increase transparency and hold criminals to account, but this should not have us lose sight of the fact that the vast majority of Canadian businesses are law-abiding and vital contributors to the well-being of our country. Bill C-42 is very mindful of this consideration and works to ease the administrative cost of the new obligations. More specifically, Bill C-42 will enable online-only intake forms and align reporting timelines with pre-existing filing requirements for corporations, such as annual reports and reporting changes of directors. Additional steps will be taken, including a progressive onboarding of corporations based on their original creation date, as well as significant proactive education and outreach efforts.

Colleagues, I would now like to turn to the topic of the interoperability of the registry. This is a key concern for stakeholders and will be an important component of the success of a national approach to corporate transparency. Interoperability has many dimensions, but the general plan is for the federal registry to be aligned with domestic and international registries so that provinces are enticed to join a pan-Canadian registry.

Honourable senators, the government has publicly committed to adopting the Beneficial Ownership Data Standard, which is an internationally accepted open standard that provides a consistent way to use, collect, exchange and establish beneficial ownership information and control of companies. Canada’s use of this standard will ensure that our registry can communicate with and speak the same technical language as beneficial ownership registries around the world, as well as with our provincial and federal authorities.

Provincial and territorial finance ministers have agreed in principle to pursue legislative amendments to their respective corporate statutes to require corporations to hold up-to-date information on beneficial ownership. This bill is step two.

The efforts to harmonize federal, territorial and provincial beneficial ownership regimes are ongoing. On June 5 of this year, Minister Champagne and Deputy Prime Minister Freeland sent a joint letter to their respective provincial and territorial ministerial counterparts asking them to join their federal efforts to create a pan-Canadian beneficial ownership registry and were seeking specifically to understand each area’s particular needs and any supports required to facilitate their participation in a national system.

Honourable senators, the lack of beneficial ownership transparency is impairing Canada’s ability to combat serious financial crimes like fraud, money laundering and overseas tax evasion. It also limits our capacity to enforce domestic and international sanctions and to effectively trace and freeze financial assets. The lack of beneficial ownership transparency is impacting the trust of Canadians and foreign investors in our marketplace. Simply put, we must put an end to Canada’s reputation as a most attractive country to launder money. With our stable government and banking system, we have become an international hot spot for criminals — and foreign money that has been obtained by drug cartels, corrupt dictators and the Mob.

The registry proposed by Bill C-42 would be a significant step forward in those regards. It would be of great benefit to law enforcement, and in building and reinforcing trust in the Canadian marketplace.

Finally, colleagues, Canada is taking action. For those reasons, I hope you will join me in supporting this bill. Thank you, honourable senators.