Canada must expose hidden company owners to end 'snow washing,' inquiry hears

British Columbia’s money laundering inquiry was told information from a group of tax fairness groups. They told the money laundering inquiry that hiding ill-gotten cash behind shell companies is so common in Canada that it’s known as “snow washing”.

“It is no wonder criminals set their sights on Canada, which has some of the weakest corporate transparency laws in the world,” said James Cohen, representing Transparency International Canada, Canadians For Tax Fairness and Publish What You Pay Canada.

“There are more rigorous checks to obtain a library card than there are to set up a shell company.”

Due to the illegal cash schemes continuously worsening, B.C. had to work on stopping it. Therefore they launched the provincial inquiry at an attempt to stop these illegal cash schemes that fuel the real estate, luxury car and gambling sectors. Along with help from the Liberal government they claim that they’re committed to tackling the national problem.

 

Three days of opening arguments had finished on Wednesday. British Columbia’s money laundering inquiring will reconcile in May in order to look at how bad the money laundering in B.C. is, before the main hearings in September through December.

Cohen, executive director of Transparency International Canada, said it joined forces with the other two groups in 2016 after the Panama Papers shed new light on wealthy individuals’ use of offshore companies to evade taxes.

There has been leaked documents from the Panamanian law firm Mossack Fonseca, these documents had revealed that Canada was being marketed as a location where people can bring their dirty money.

There is definitely a fair amount of problems in Canada’s anti-money laundering law yet one of its key problems is its weak beneficial ownership regime. This problem leads to allowing company owners to remain anonymous, Cohen says.

Cohen had delivered a proposal of adding owner information to existing business registries already in place in provinces and territories. This addition would deter money laundering while still respecting privacy rights, he argued.

Cohen noted that the United Kingdom gathers information about owners that is available to authorities but limits the details that are posted publicly on its registry. For example, an owner’s month and year of birth are posted but not the date. This is a very effective way of deterring money laundering as it will not actually show any personal information of the person that would disrespect their privacy, yet the information given is very helpful for spotting money launderers.

“The extent of secrecy granted to companies has come at a high cost to Canadians, particularly in British Columbia,” he said. “Bad actors have exploited Canada’s stable economy, leading to crime, housing unaffordability and increased corruption.”

A lawyer for the B.C. Real Estate Association said it supported the province’s land ownership registry and it also struck a working group with others in the sector to make anti-money laundering recommendations.

Chris Weafer asked commissioner Austin Cullen to accept those recommendations, including that the provincial and federal governments create a “comprehensive, efficient enforcement regime” that avoids duplication of reporting practices.

Weafer also had attempted to slow down and remove the idea of mortgage brokers or others in the industry to be regularly accepting cash deposits. This method of money laundering is not often used, except “in extenuating circumstances and even then amounts were modest”, he said.

“The regulation of Realtors and the real estate industry is in a state of flux in this province, through taxes, new regulations and legislation,” Weafer said.

“As a participant in these proceedings, BCREA can provide a practical lens to give the inquiry a boots-on-the-ground perspective of the current and past state of the industry, and provide insight as to what the industry may look like following proposed changes.”

Yet the money laundering issues in Canada have many issues, with another being what lawyers should be included in the national anti-money laundering regime. 

Kevin Westell, representing the Canadian Bar Association and Criminal Defence Advocacy Society, said the regime should not apply to the legal profession. Requiring lawyers to report suspicious activity to the Financial Transactions and Reports Analysis Centre, or Fintrac, would violate solicitor-client privilege, he said.

“At the same time, both organizations are wary that the zealous search for solutions to the money laundering problem will lead to investigative and regulatory overreach that could endanger the independence of lawyers, the privacy of private citizens and the rights of all Canadians to a free and just society.”