Bill C-42

An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts

This enactment amends the Canada Business Corporations Act to, among other things,
(a) require the Director appointed under that Act to make available to the public certain information on individuals with significant control over a corporation;
(b) protect the information and identity of certain individuals;
(c) add, or broaden the application of, offences and provide the Director with additional enforcement and compliance powers; and
(d) add regulatory authority to prescribe further requirements in certain provisions.
It also makes consequential and related amendments to other Acts.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Indeed, I think alignment between the federal, provincial and Quebec governments is key, under the circumstances.

How does the RCMP operate now, and how will it operate once Bill C-42 is passed? What additional powers does it give you, in terms of co-operation?

[Supt Denis Beaudoin]

Bill C-42 will provide the powers required to find criminals that use corporations as a front to commit fraud. Sometimes, they are Canadian companies incorporated in other countries—usually the same ones, in fact. Bill C‑42 will give us the ability, further to an independent process, to identify those corporations involved in fraud.

In my opening remarks, I stressed the importance of paying attention to provinces and territories, to prevent criminals from choosing those where incorporation practices are not transparent.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Bill C-42 obviously seeks to strengthen the tools to take action. Will it also give the RCMP more powers, and if so, which ones?

[James Cohen, Executive Director, Transparency International Canada]

Mr. Chairman and members of the committee, thank you for inviting me to speak to you today. My name is James Cohen, and I am the executive director of Transparency International Canada.

TI Canada is a registered charity and is the Canadian chapter of Transparency International, the world's leading anti-corruption movement.

TI Canada, a member of the informally known “end snow-washing coalition”, along with Publish What You Pay Canada and Canadians for Tax Fairness, is enthusiastically supportive of Bill C-42, which will establish a publicly accessible corporate beneficial ownership registry at the federal level in Canada.

Not only are we pleased with the government's introduction of Bill C-42, but we are greatly encouraged to see the cross-party support for the principles of the bill. All parties should be proud to work in this co-operative manner to achieve a win for Canadians in the fight against global corruption.

The term “snow washing” was coined in the Toronto Star and CBC's 2016 investigations into the Panama papers. Essentially, it means bring your dirty money to Canada and it will be cleaned like the pure white snow. Why? First, who thinks of Canada as a destination for illicit funds? Importantly, second, our laws have had transparency gaps and weak enforcement.

TI Canada led a coalition report in 2022, called “Snow-washing, Inc”, where we looked at the websites of foreign corporate service providers. Their sales pitches are shocking in how blatant they are, letting potential clients know that a Canadian or provincial limited partnership is a great vehicle for funds to not be noticed. One website went so far as to say, if you think the U.K. has become too transparent thanks to their registry of significant control, why not try Canada?

While a public beneficial ownership registry is not a panacea for solving money laundering, it is a critically important tool in the fight to end snow washing. As an example of its effectiveness, the civil society organization Global Witness conducted research where they observed that Scottish limited partnerships, which were notorious for being abused by criminals, saw a steady increase of incorporation from 2011 to 2016. In 2016, when SLPs became subject to a registry of significant control disclosure in the U.K., their incorporation rate dropped by 80%. Transparency International has also documented numerous cases of civil society organizations working across borders to help identify kleptocrats and their stolen assets.

On the content of Bill C-42 itself, TI Canada is pleased to see a number of features that the coalition called for, such as zero pay for search, protection for whistle-blowers, and a tiered system for data for the public and for law enforcement.

I would also add that the justification for Bill C-42, which is not just to fight money laundering but also as a form of corporate due diligence, will hopefully bolster the beneficial ownership registry from legal challenges like we saw in Europe last year, where anti-money laundering directive five only justified registries from an AML perspective.

Where the real merit of the registry will come will be its implementation. We urge the government to provide the necessary funding for the registry so that it may be staffed, so regular risk-based approaches to data reviews can take place and so that a dependable form of data verification can be set in place.

Of course, as everyone knows, the provinces and territories need to work with the federal government to make this registry truly effective. I implore provincial representatives who are following these hearings to respond to Minister Champagne's and Minister Freeland's letters to co-operate. Do not be the holdout secrecy jurisdictions in Canada. It's not a reputation that you want.

After years of being an international laggard on this front, Canada now has a foot to stand on, diplomatically, to bring holdout countries up to our standard on beneficial ownership transparency. We encourage the Canadian government to do just that, especially at the Conference of State Parties to the UN Convention Against Corruption later this year. The more the good guys co-operate on this, the more the bad guys lose and we can work toward ending snow washing.

Thank you. I am happy to take any questions from the committee.

[Supt Denis Beaudoin, Director, Financial Crime, Royal Canadian Mounted Police]

Thank you, Mr. Chair.

I'm pleased to appear before the committee today. I am Superintendent Denis Beaudoin, and I am the director of financial crime in federal policing criminal operations at the Royal Canadian Mounted Police, or RCMP.

I want to say first that the RCMP welcomes the measures to implement a beneficial ownership registry. The resulting transparency and disclosure of information will enhance our efforts to combat financial crime.

As you know, keeping beneficial ownership information hidden is a technique used for money laundering and terrorist financing. Front companies or shell corporations make trade-based money laundering much easier by separating illicit actors from their activities. When information about a company's beneficial owners is concealed, it increases the risk of tax evasion, sanctions evasion, and the domestic and international movement of proceeds of crime.

Without transparency around verified beneficial ownership, our ability to prevent and combat financial crimes is undermined. Not being able to quickly identify the beneficial owners of a company without their knowing can slow criminal investigations, prevent police from tracing suspects, witnesses and evidence, and hinder the identification and seizure of suspected proceeds of crime.

The importance of beneficial ownership transparency is well recognized internationally, and beneficial ownership registries are increasingly the international norm. They have existed in the U.K. and in the EU countries since 2016 and have proven a useful tool for law enforcement in deterring the misuse of corporations for illicit finance activities.

Evolving global anti-money laundering standards now expect countries to make these registries accessible to, at a minimum, competent authorities, with the majority of Canada's G7 and Five Eyes counterparts having implemented these registries to put them in place.

In 2021, G7 finance ministers and central bank governors agreed that beneficial ownership registries are an effective tool to tackle illicit finance. The Financial Action Task Force, which is the global money laundering and terrorism financing oversight mechanism, recently adopted new requirements with respect to beneficial ownership registries. Canada is a founding member of the FATF, and the RCMP is a full participant in the Canadian delegation.

With Canada making efforts to address beneficial ownership gaps, including through Bill C-42, we are showing that we are contributing to the global fight against financial crime.

Identifying beneficial owners of corporations means lifting the veil of anonymity on the people behind the transactions and account activities. Beneficial ownership registries are an effective tool for law enforcement. When we combine the information in the registry with other evidence and investigative practices, we are better able to track illicit funds. Registry information serves to complement other evidence-gathering methods, which can take longer and potentially alert suspects to an ongoing investigation. Lastly, this measure will improve the application of sanctions here and abroad, and make it easier to track and freeze financial assets.

Although the RCMP welcomes the bill, the legislation will apply only to a small percentage of companies in Canada, since most of them are incorporated under provincial statutes. In order to prevent illicit actors from exploiting vulnerabilities, it is necessary to address beneficial ownership transparency across the country if we want the registry to be useful. Otherwise, criminals will use provinces without registries to launder the money their criminal activities generate. The full co-operation of provincial and territorial governments is vital.

While a transparent corporate registry is a step in the right direction, it will not resolve all the challenges law enforcement faces in its fight against financial crime. The RCMP welcomes the recent changes announced in the budget, such as the criminalization of the unregistered money service business and the addition of a structuring offence.

Looking at our international partners, Canada's AML regime could benefit from better information-sharing legislation between private and public organizations and tools to investigate professional money launderers. We're working with our AML partners to address these information-sharing gaps and challenges.

Thank you for the opportunity to be here today. I welcome any questions.

[Sasha Caldera, Campaign Manager, Beneficial Ownership Transparency, Publish What You Pay Canada]

Mr. Chair and fellow committee members, thank you for inviting me to speak today.

My name is Sasha Caldera, and I am the beneficial ownership transparency campaign manager at Publish What You Pay Canada. Publish What You Pay Canada is part of the global “publish what you pay” movement of civil society organizations working to make oil, gas and mineral governance open, accountable and responsive to all people. For the past five and a half years, I've been leading a coalition of three civil society organizations to advocate for a public beneficial ownership registry with our partners Transparency International Canada and Canadians for Tax Fairness.

Bill C-42 will deliver a critical blow to criminals who desire to take advantage of corporations governed under the CBCA. We applaud Minister Champagne's commitment to ensuring that Canada's beneficial ownership registry is publicly accessible, free of cost, searchable and scalable with provinces and territories.

As Canada is a G7 country with an advanced service economy and an AAA credit rating, experts estimate that approximately $45 billion to $113 billion is laundered annually into the country. Canada's publicly accessible registry is in line with the G20 and Five Eyes countries that are deploying these tools as part of national security strategies to prevent corrupt foreign officials from hiding dirty money in liberal democracies. Currently, 108 countries around the world have made commitments to implement publicly accessible registries.

Bill C-42 is a positive step, and we recommend the following legislative amendments to strengthen the deterrence capability of Canada's registry.

First, allow anyone to have the ability to search by country of residence and name of corporation.

Second, ensure all publicly accessible data fields are searchable.

Third, forbid post office boxes to act as the service address.

Fourth, add hybrid offences to subsection 21.1(1) or 21.31(1) of the CBCA.

Finally, require beneficial owners to submit non-expired, government-issued photo ID numbers to corporations for safekeeping and future ID verification.

These amendments will improve the searchability of the registry, penalize sophisticated offenders who have the financial resources to absorb current offences and add mechanisms to prevent beneficial owners from knowingly abusing the PO box system or providing false information to corporations.

We are pleased to hear there are efforts on behalf of Minister Champagne and Minister Freeland to reach out to provinces and territories. To bring provinces on board, we recommend the federal government strike an agreement with provinces and territories that allows provincially registered corporations to send beneficial ownership information directly to the federal registry. Provinces would need to pass legislation in their own business acts, yet this harmonization approach was used during the first beneficial ownership agreement in 2017.

The federal government can also suggest that provinces can choose to implement their own beneficial ownership registries using the same design parameters and with the beneficial ownership open-data standard to ensure they are interoperable with the federal government. Through a flexible approach, smaller provinces would not have to devote resources to upgrading their own business registries, while larger provinces can follow the lead of early adopters like British Columbia and Quebec.

As someone who was born and raised in Richmond, British Columbia, I think this registry will mean a lot for my hometown and the province of B.C. Richmond is one of the entry points for money laundering in Canada, and the harm to the province has been well documented by the B.C. Cullen commission. From the fentanyl crisis and increased gang violence in broad daylight to underground casinos and artificially inflated real estate, my hometown has changed.

The impact of Bill C-42 will be felt beyond Canada's borders. Should Canada pass this legislation, this registry will be cheered on by communities around the world that are relying on these tools to track down officials who are looting tax dollars from national treasuries or stealing vital foreign-aid dollars for personal gain. This registry will be a game-changer in the global fight against tax evasion, organized crime, corruption, bribery and terrorist financing. I am proud to see Canada taking this decisive step today.

Thank you so much for your time, and I am happy to take your questions.

[The Chair, Liberal, Joël Lightbound]

Good afternoon.

I call the meeting to order.

Welcome to meeting number 80 of the House of Commons Standing Committee on Industry and Technology.

Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Pursuant to the order of reference of Thursday, June 1, 2023, we are continuing our study of Bill C-42, an act to amend the Canada Business Corporations Act and to make consequential and related amendments to other acts.

I would like to welcome the witnesses and thank them for their patience. We are getting started a bit late because of voting in the House.

We have with us today Justin Brown, senior director, financial crimes policy, governance and transparency, Department of Finance; Annette Ryan, deputy director, Financial Transactions and Reports Analysis Centre of Canada; Sasha Caldera, campaign manager, beneficial ownership transparency, Publish What You Pay Canada; Denis Beaudoin, director, financial crime, Royal Canadian Mounted Police; and James Cohen, executive director, Transparency International Canada.

Thank you all for making time to meet with the committee to discuss this important bill. As you know, you will each have five minutes for your opening statement.

Without further ado, I will turn the floor over to Ms. Ryan for five minutes.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Albas.

I want to thank the officials for being with us this afternoon. It's much appreciated. Thank you for taking the time.

Just before I let you guys go, as you know, next Monday we are doing clause-by-clause study on precisely this bill, Bill C-42. With your permission, I'd ask for additional resources and maybe one more hour for the meeting so that we could have a full panel of witnesses and then do clause-by-clause study. I think that would be useful for this committee.

If that's okay, that's how I'll proceed. I'm not sure if the House will provide the resources, but I'll ask on behalf of the committee.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

What would happen if Bill C‑42 weren't adopted? What would be the economic or fiscal consequences of that?

[Mark Schaan]

The object of Bill C‑42 is somewhat different. Trade agreements are normally reached between governments and concern taxes or free trade. Instead, this bill concerns the directors and officers of business corporations.

Directors and officers have a positive duty to name the human individual at the end of the chain. That includes persons outside the country and in foreign countries where there's a lack of transparency. This is really something other than a trade agreement. The directors and officers in Canada have a duty to provide the required beneficial ownership information even if the actual person at the end of the chain is located in Jersey or on a tropical island.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

As regards the fight against tax havens, do we currently have any free trade agreements with a country that one would call a tax haven?

Would Bill C‑42 help provide bargaining tools to renew those trade agreements and ensure that transparency is a necessary criterion in allowing a Canadian corporation to do business with a less cooperative country?

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Is Bill C‑42 really binding enough? Considering what's happened in recent years with the Panama Papers or the Paradise Papers, for example, could we have avoided that kind of scandal if we'd had provisions such as those proposed under Bill C‑42?

[The Chair, Liberal, Joël Lightbound]

Colleagues, we're going to resume this meeting on Bill C-42. Thank you for your patience, and we apologize for the suspension. This is the kind of thing that happens at this time of the year in Parliament.

We now have the officials with us to answer your questions. I understand that there are no preliminary remarks, given that the minister has done that already.

We are now going to the Conservatives. Go ahead, Mr. Vis.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Yes, Quebec created its beneficial business owners registry, which it adopted in December 2020. Bill 78 contains provisions for the creation of that beneficial ownership registry and to make it public.

How will we make sure it's interoperable? What issues will the province face in cooperating with the other provinces as a result of Bill C‑42.

What are the stumbling blocks? Are there only advantages?

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Allow me to ask you a question that comes from our analysts.

Subclause 2(2) of Bill C‑42 would amend section 21.21 of the Canadian Business Corporations Act to allow the director appointed under the act to determine the information he or she wishes to receive among that appearing in the registry, rather than receive all the information appearing in the registry. However, section 21.21 of the act still appears under the heading "Amendments Not in Force" in the act. No order appears to have been made providing for division 30 of Budget Implementation Act, 2022, No. 1, clause 431 of which creates a new version of section 21.21 in the Canadian Business Corporations Act, to come into force.

When will section 21.21 come into force?

Why does Bill C‑42 make an amendment to a provision that isn't yet in force?

I think that's a good question. Can you tell us more about that?