Hon. Victor Oh: Honourable senators, I rise today to speak to Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts. This bill aims to establish a public beneficial ownership registry in Canada, requiring companies to disclose information about their beneficial owners. These individuals own or control, directly or indirectly, 25% or more of a corporation’s shares.

To be clear, this bill is not establishing a beneficial ownership registry; Canada already has one, just not one that is public.

Corporations incorporated under the Canada Business Corporations Act have been required to keep a registry of beneficial owners since 2019. The corporations themselves maintain these registries and shareholders have had the right to access them via affidavit, along with law enforcement agencies.

Last year’s budget made additional amendments to the Canada Business Corporations Act, which required federally incorporated businesses to submit their registry information to Corporations Canada annually and to provide updates of any changes to their registry information within 15 days.

The amendments in Bill C-42 build upon this existing framework to allow Corporations Canada to disclose all or part of that information to investigative bodies and the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC. This information will be accessible to tax authorities, law enforcement agencies and other governmental bodies for investigative and compliance purposes. In addition to that, portions of the registry will be publicly accessible and searchable.

Colleagues, the need for such legislation is well-documented. The infamous Panama Papers leak in 2016 revealed how criminals exploit loopholes in Canada’s corporate beneficial ownership schemes to engage in corruption. Those were not mere allegations but documented proof that put the vulnerability of our systems on international display.

Yet those vulnerabilities were well-known before then and have been repeatedly pointed out by the Financial Action Task Force, or FATF. The FATF is an intergovernmental organization founded in 1989 on the initiative of the G7. Its primary objectives are to develop and promote policies to protect the global financial system against money laundering, terrorist financing and other related threats. Over the years, the organization has become a pivotal global body in setting international standards for combatting these financial crimes.

The Financial Action Task Force, or FATF, monitors countries’ progress in implementing necessary measures and reviews their compliance. Their recommendations are highly influential, serving as the international standard for combatting money laundering, terrorist financing and other related threats to the integrity of the global financial system. Many countries, including Canada, voluntarily align their financial regulatory policies closely with FATF recommendations to ensure they are part of a coordinated international effort to combat financial crimes.

In 2016, the FATF’s Mutual Evaluation Report of Canada’s anti-money laundering and counter-terrorist financing measures noted four items concerning the “transparency of legal persons and arrangements” in Canada.

In 2021 — five years later — the FATF’s follow-up report indicated that no progress has been made on these four points. Specifically, there was no reported improvement in our technical compliance ratings for FATF’s Recommendations 24 and 25, focusing on the transparency and beneficial ownership of legal entities and arrangements. This lapse is not just a tick box that we have missed; it is a gap that poses a significant risk to our financial system and to our reputation on the global stage.

Allow me to quote these four points from the FATF Mutual Evaluation Report and note that, while this is the 2016 report, each issue remains unchanged in the 2021 follow-up report.

Point 1:

Canadian legal entities and legal arrangements are at a high risk of misuse for [money laundering and terrorist financing] purposes and that risk is not mitigated. This is notably the case with respect to nominee shareholding arrangements, which are commonly used across Canada and pose real obstacles for law enforcement agencies.

Point 2:

Basic information on legal persons is publicly available, but beneficial ownership information is more difficult to obtain. Some information is collected by [financial institutions] and to a limited extent [designated non-financial businesses and professions], the tax authorities and legal entities themselves, but is neither verified nor comprehensive in all cases. [Law enforcement agencies] have the necessary powers to obtain that information, but the process is lengthy. Information exchange between [law enforcement agencies] and the CRA is also limited by stringent legal requirements.

Point 3:

The authorities have insufficient access to information related to trusts. Some information is collected by the CRA as well as by [financial institutions] providing financial services, but that information is not verified, does not always pertain to the beneficial owner, and is even more difficult to obtain than in the case of legal entities.

Point 4:

[Law enforcement agencies] have successfully identified the beneficial owners in limited instances only. Despite corporate vehicles and trusts posing a major [money laundering] and [terrorist financing] risk in Canada, [law enforcement agencies] do not investigate many cases in which legal entities or trusts played a prominent role or that involved complex corporate elements or foreign ownership or control aspects.

Colleagues, the urgency for Canada to enact immediate and decisive improvements is undeniable. According to the Canadian Security Intelligence Service’s 2020 report, money laundering in Canada is estimated to range between approximately $45 billion and $113 billion annually. This is a staggering amount of money, and it is due, in part, to the fact that the vulnerability of our systems is no secret.

Internationally, Canada is known to have lax laws to prevent money laundering and terrorist financing, which has affected our reputation with other nations. Bill C-42 is critically necessary to continue correcting this perception.

Bill C-42 is one of those rare instances where we find ourselves with government legislation that echoes the Conservative Party of Canada’s core principles, including a commitment to economic transparency, good governance and the rule of law. This bill also aligns with the efforts our party has taken in years past to strengthen Canada’s resilience against money laundering and the financing of terrorism.

Under Stephen Harper’s leadership, the previous Conservative government took meaningful steps to fight money laundering and terrorism financing. We strengthened the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and expanded the investigative powers of the Canada Border Services Agency and the Financial Transactions and Reports Analysis Centre of Canada, or FINTRAC.

In 2021, the Conservative Party of Canada committed to establishing a federal beneficial ownership registry for residential property. We also pledged to bring comprehensive changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Conservative MP Adam Chambers’s recent private member’s bill aimed at implementing the latter commitment reflects our dedication to this cause. Bill C-42 is another crucial step on the path toward these goals.

But while this bill seeks to address critical issues, it is essential to understand that its success is not guaranteed: It is tied to its execution.

The federal government’s jurisdiction extends to only about 500,000 corporations incorporated under the Canada Business Corporations Act, or CBCA. This represents only 15% of Canadian corporations. The vast majority of corporations in Canada are incorporated under provincial or territorial legislation — but not the CBCA. Provincial and territorial adoption is crucial for the success of this initiative. The corporate registry must be expanded and see the provinces and territories opt into it to be effective.

Without a robust and public corporate beneficial ownership registry, Canada remains vulnerable to a host of financial crimes that threaten our economic stability and national security. Opaque corporate structures offer convenient veils for money laundering, terrorist financing and tax evasion and avoidance.

Right now, it is relatively straightforward for individuals or entities to hide behind shell corporations, nominee shareholders or trusts to conduct illicit activities anonymously. Such secrecy can turn our country into a playground for criminals and corrupt individuals — who can exploit our financial systems and real estate markets, among other sectors.

It is hard-working Canadians who bear the economic brunt of this problem — whether it’s through inflated housing prices, or lost tax revenue that could have been used for public services. The lack of a transparent registry creates loopholes that make it difficult for authorities to track criminal activity, weakening our ability to enforce existing laws effectively.

Bill C-42 is part of a growing global trend toward increased corporate transparency and accountability. Countries such as the United Kingdom — with its public register of people with significant control — and the European Union — through its Fifth Anti-Money Laundering Directive — have already made reforms. The United States is also moving in this direction via the Corporate Transparency Act, signed into law as part of the National Defense Authorization Act for Fiscal Year 2021. According to Transparency International, there are currently 108 countries around the globe that have made commitments to implement publicly accessible registries.

In addition: The International Monetary Fund, or IMF, is considering adopting regulations that will require beneficial ownership registries in countries receiving IMF loans; organizations, such as Transparency International, and think tanks, such as the C.D. Howe Institute, have been unequivocal in their support for a central, publicly accessible beneficial ownership registry; and in 2019, the B.C. Cullen Commission recommended that a pan-Canadian corporate beneficial ownership registry be in place by the end of 2023.

There is a broad consensus among experts that this is the right path for Canada. However, there remain several questions about privacy and personal security rights that need to be examined by a committee. In a brief to the House of Commons Standing Committee on Industry and Technology, the Canadian Bar Association has noted that:

In its current form, we are concerned that Bill C-42 will disproportionately impair the privacy and personal security rights guaranteed by the Canadian Charter of Rights and Freedoms.

Individuals have legitimate personal and business reasons for not publicly disclosing sensitive personal information of beneficial owners. Canada should be mindful that businesses will look carefully at the requirement to make information public and determine how and in which jurisdiction they want to structure their corporations.

Their letter continues:

Public disclosure of additional corporate information may deter corruption and money laundering, and frustrate the efforts of fraudsters to use sham corporate vehicles for criminal purposes. However, it may also increase identity theft (as recently observed in schemes to defraud the government of COVID-19 relief funds) which could undermine the anti-fraud rationale of the registry. We urge the government to carefully consider the policy intent of Bill C-42 to ensure it meets its stated objective.

I am sure you will agree that these severe concerns have not been addressed in the other place. I encourage the committee studying the bill to look into these and any other concerns carefully to ensure that the legislation is well crafted and will achieve its important objectives.

Colleagues, while the Conservative Party may be the opposition, we are not opposed to good legislation. This is one of the rare times when we see such a thing under this Liberal government, which we are committed to working with in a spirit of cooperation when it serves the national interest.

That is why we will be supporting Bill C-42 at second reading. We look forward to studying it further at committee. Thank you.