Thank you for the opportunity to present to the committee on the statutory review of the proceeds of crime and terrorist financing act. It's a good thing that the act has built in a periodic review of how it is working because much more needs to be done if the government is serious about ending snow washing and money laundering.
When criminals and tax evaders use legitimate Canadian investments like real estate to clean dirty money, we call it snow washing. Canada has become an international destination for setting up secret companies to snow wash illicit funds from all over the world. It's easier to set up a secret company than it is to get a library card. This is because, in Canada, the true owners of companies and properties can remain entirely anonymous. Their identities can be concealed even from the government agencies entrusted with enforcing laws. This makes it easy for criminals, tax evaders, and those financing terrorism to hide and launder money in Canada, and it makes it hard for law enforcement, tax authorities, and financial institutions to enforce Canada's existing anti-money laundering and anti-terrorist financing laws.
Canada needs to create a publicly accessible, centralized registry of true beneficial owners of companies in an open, searchable format. That's our main recommendation.
Money laundering, terrorist financing, and tax evasion are still big problems in Canada. Estimates of the money involved range from $15 billion to $60 billion a year. Canada has a reputation of being the snow washing destination for the world because of the ease with which you can set up an anonymous company here. The Panama papers revealed that Mossack Fonseca, the law firm involved, was advising its clients to set up shell companies in Canada. When Canada's finance minister attends G20 finance ministers meetings, he has been embarrassed by the fact that Canada is so far behind other countries in beneficial ownership transparency. In fact, tomorrow Transparency International will be releasing a report that compares progress on beneficial ownership transparency among the G20 countries. It will be no surprise that Canada is among the six out of 20 with the weakest frameworks.
Law enforcement and tax authorities do not have the tools or resources they need currently to go after money laundering and tax evasion. Lack of transparency on beneficial owners is a huge problem for them. The steps they have to take to get this information slow down investigations, and this ultimately means they are able to investigate only a relatively small number of cases.
There are gaping holes in our anti-money laundering regime. While banks and financial institutions are required to determine beneficial owners and track financial transactions over $10,000, real estate agents, lawyers, and other high-risk sectors are not required to do this. Money laundering in Vancouver and Toronto real estate markets is a huge problem that is not being properly addressed, in large part due to this gap.
The B.C. government has taken steps forward in requiring beneficial ownership information to be collected by land registries. Other jurisdictions need to implement similar measures.
We need a public registry of beneficial owners of corporations and trusts. This would make it much easier for tax authorities and law enforcement to go after criminals, and it would make it much easier for financial institutions to fulfill their duty to check on beneficial owners. A public registry, I believe, would also be necessary if the AML/ATF regime were to be extended to real estate agents, lawyers, and other high-risk sectors, as I believe it should.
We need much stiffer penalties and more transparency so that there is effective deterrence built into the system. It's much easier to prevent than to enforce. The chances of getting caught currently are very low and even if you are caught, the penalties are not very severe.
The agreement reached with provincial and territorial governments last December to require corporations to know who their beneficial owners are is not much of a step forward. While we appreciate that the federal government has engaged other levels of government in addressing the beneficial ownership issue, unless further steps are taken to set up a public registry of beneficial owners, it does not get us much further ahead.
When you stop and think about it, what has been agreed is really a bit of a joke. Law enforcement would have to go and ask the company they are investigating for information on the beneficial ownership, thus tipping them off that they are under investigation. If they don't voluntarily comply, they have to go through the rigmarole of getting a search warrant, further delaying and complicating investigative efforts. The fact that they are not required to report their beneficial ownership information to provincial/territorial or federal corporate registries means that it's almost impossible to know if companies will actually be doing this and that the information will not be easily assessed by law enforcement and tax authorities. Moreover, there are no penalties for reporting false information.
The federal government has a responsibility to provide more ambitious leadership on this. As a signatory to international agreements, it has a duty to ensure that other levels of government bring their corporate registries up to international standards. If Canada is to become a leader rather than a laggard on beneficial ownership transparency and fighting money laundering, we need to match the U.K. and the EU standard of a public registry of beneficial ownership of corporations.
Thank you very much.