Finance Committee on May 2nd, 2019

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

They'll remain consumers. I'm concerned that these people would no longer be just consumers, but would become experts. These people must continue to further promote the interests of consumers, meanings the interests of those who may have less expertise and who don't have many years of experience in the field.

[Julie Trepanier]

As I was saying, the details will be determined in the regulations, but the purpose is to allow these organizations to participate.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Is the fact that they aren't currently remunerated a barrier?

[Julie Trepanier]

Consumer organizations are currently part of the advisory council. However, these changes are the result of a statutory review. This is part of the feedback that we received from stakeholders.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Okay.

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

During your consultations with representatives of this sector, did they tell you that they had difficulty encouraging people to become members of the board of directors? I just want to know why the term of the members of the board of directors was extended.

[Julie Trepanier]

Thank you for the question.

A term is added for members of the board of directors because payment systems are complex subjects and it takes a long time to develop the necessary expertise. An additional term ensures that the expertise acquired by the members of the board of directors can continue to be used.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

These experts don't grow on trees. They're rare.

[Julie Trepanier]

Exactly.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Okay.

Thank you.

[The Chair, Liberal, Wayne Easter]

Are there no further questions? All in, all done?

Thank you very much.

We'll go to part 4, division 2. We'll start with subdivision A and the Canada Business Corporations Act. There are several subdivisions here. If everyone wants to come to the table, there's probably room. You're welcome to it. Then we don't have to shuffle chairs each time.

Mr. Schaan, I believe you're likely the one giving the presentation.

We have with us Mr. Schaan, director general; Mr. Wright, director, financial crimes governance; and, Mr. Patterson, director of the corporate, insolvency and competition policy directorate.

The floor is yours.

[Mark Schaan, Director General, Marketplace Framework Policy Branch, Innovation, Science and Economic Development Canada]

Thank you, Mr. Chair.

Today the changes we're discussing are related to the Canada Business Corporations Act. They follow on from changes that were part of budget 2018, related to beneficial ownership transparency. In budget 2018, we introduced changes to the Canada Business Corporations Act to require corporations to hold information related to beneficial ownership and those who exercised significant control over privately held corporations registered under the Canada Business Corporations Act.

That was part of a broad federal-provincial-territorial agreement that was reached by ministers of finance in 2017 as a commitment from all jurisdictions to be able to proceed with the same agreement arrangements within their own corporate statutes. The change we're introducing here is a further clarification of the rules we set out in those amendments, which is related to who can access that initial information.

In particular, the changes specify that an investigative body would be able to access these records upon request. Notably, those investigative bodies in question are police tax authorities and any investigative body added by regulations, so we've left ourselves some flexibility in the future.

The investigative body can make a request if it has reasonable grounds to suspect that the information would be relevant to an investigation of one of the offences set out in the schedule and at least one of the requested corporation itself, a CBCA corporation sharing, an investor of significant control with the requested corporation, or another entity over which one of the requested corporation's investors of significant control has investor of significant control-like control.

It establishes penalties for non-compliance and it also sets out some safeguards for the usage and request of that register of significant control, notably that an investigative body must file an annual report to the director of Corporations Canada on aggregate use of the request power. It also sets out that investigative bodies must keep records when they use the request power.

[The Chair, Liberal, Wayne Easter]

It's open to discussion. The finance committee did a study on the money laundering and terrorism financing act.

Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

That's why I'm asking the following question.

Mr. Schaan, is the $5,000 fine enough to encourage private companies to keep their information up to date?

[Mark Schaan]

Thank you for the question.

There are two aspects of the penalties set out in the bill.

First, the $5,000 fine is only for administrative errors made by a company that doesn't comply with the details described in the bill.

Moreover, the bill includes an additional fine of $200,000 and a prison term of up to six months for non-compliance with the provisions of the bill.

It's a distinction between the two types of penalties. There are administrative penalties for an organization that simply makes an administrative error in their registry of beneficial owners or for failure to do so in an administrative manner. Then the second type of penalty is for a clear contravention of the spirit of the law, which is when you knew of information related to a beneficial owner that you failed to include. That can be up to $200,000 and up to six months in prison.

We do think that balance is right in terms of administrative burden for the vast majority of these private corporations that are small and medium-sized enterprises, but there's also the significance of a significant fine and prison time for those who are bad actors using corporate shells.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

For those bad actors—and thank you for making that distinction—is it up to $200,000 and up to six months in prison per error, or is it in general for being a bad actor?

If someone is purposely trying to falsify information, if they're laundering money and the extent of that.... Is that a maximum or is there some discretion involved there for the prosectors?

[Mark Schaan]

The courts and the Public Prosecution Service would be those who would interpret the penalty scheme, but it's essentially for intentional non-compliance. If they were able to articulate before the courts that they felt that there were multiple counts of intentional non-compliance, for each entry or other factors, the courts may be in a position to adjudicate that there's warrant for multiple penalties of a similar offence.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

Thank you for following up on the report of the Standing Committee on Finance on this subject. Although this falls short of the committee's expectations, it's still a step in the right direction.

My first question concerns the registry maintained by investigative bodies. It isn't specified how long the investigative bodies must maintain the registry of requests, which records all the details of each request and the follow-ups.

First, what's the purpose of this measure?

[Mark Schaan]

Investigative bodies must prepare a report each year. The first bill, the 2018 budget bill, stated that the registry spoke for companies. It's necessary to maintain an annual registry containing all the changes made.

On a going forward basis, corporations will have to maintain their registry of significant control, including any changes that are brought to their attention.

In terms of the investigative bodies, they'll have to file annually as to the number of records they've requested. In terms of how long they would keep them for, that would be subject to the particular laws that they're subject to on information management.

In this context, if an investigation continues, it's necessary for investigative bodies to maintain these documents.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

You referred to the significant participation in the company. I think that we're talking about 20% or 25% in this case. Is that correct?

Why did you choose this figure for the significant participation? It seems fairly high. People who may have bad intentions could quite easily bypass this 25% rule.

[Mark Schaan]

Thank you for the question.

Your question has two important points.

First, the definition of control rating has two aspects. The first aspect is the percentage of shares that a person holds and that give the person control, which is 25%. The bill also includes a definition of a person who controls a company with less than 25%.

We think we've captured that because we have both aspects. There's also an important linkage to other aspects of our total approach to money laundering, terrorist financing and proceeds of crime, in that enterprises already, under FINTRAC regulations, when they utilize a Canadian financial institution, are required to deposit with their financial institution any beneficial ownership information related to the exact-same percentage. We see this as boots and suspenders in that it also provides ease for the corporation in that the same requirements they're subject to for banking purposes are the same requirements they're subject to for corporations. We think that parallel actually builds a strong system.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I have a question about the registry, and not necessarily the registry maintained by the investigative bodies.

Is the ultimate purpose of this measure to create a central registry of beneficial ownership of companies registered at the federal, provincial and territorial levels? Will there be a central registry of all this information?

My personal idea would be to make it public. I'm not talking about all of it, of course, but some of it. I know that the government doesn't support this position. Will there at least be a central registry?