Thank you, Mr. Chairman.
I would like to thank the committee for this invitation.
My remarks will be in English, but I will be pleased to answer questions in French.
Again, thanks for the opportunity to be heard by video conference. I think the technology is wonderful, and I appreciate the committee's efforts in using it in this way.
With me, present in Ottawa today, is Denis Meunier, a member of Transparency International Canada and of our beneficial ownership working group. He will have a few remarks at the end as well.
I'd like to make a few opening remarks about our recommendations with respect to Bill C-25, but first, here are a few words about who we are.
Transparency International Canada is the Canadian chapter of Transparency International, the world's leading non-governmental anti-corruption organization, with more than 100 chapters worldwide and an international secretariat in Berlin. Through advocacy, research, and capacity-building work, Transparency International strives toward a world that is free of corruption. Our chapter here in Canada has been at the forefront of the national anti-corruption agenda for more than 20 years. Our chapter's main concern related to Bill C-25 is on beneficial ownership of companies and the transparency of that beneficial ownership.
We welcome the Government of Canada's measure to reform current legislation that affects this area through the proposed amendments. However, we believe that Bill C-25 can go further to address the negative impacts of opaque beneficial ownership of companies in Canadian corporate registries.
To provide a bit of context, public expectations about transparency are changing and increasing. Whistle-blower disclosures like the Panama papers have provided concrete examples of how anonymous companies and legal entities are abused by those seeking to avoid taxes and launder the proceeds of crime and corruption, among other nefarious aims. The abuses exposed through these leaks and others have triggered widespread interest in what was once dismissed as a rather mundane or sleepy legal topic.
Governments around the world are also recognizing the threats posed by underregulated legal entities and arrangements. In 2014, recognizing this, the G20 issued its high-level principles on beneficial ownership, acknowledging the importance of transparency in protecting the integrity of the global financial system. In 2016 the European Commission mandated its 27 member countries to collect and publish information on the beneficial owners of companies registered within the union. More recently, the U.K. has already enacted legislation and implemented new disclosure rules, and other countries are following suit. That is not so much the case in Canada.
As more countries put up barriers to the criminal and corrupt, those looking to game the system will gravitate to jurisdictions with weaker standards. A recent Transparency International report, of which we're very proud, was titled, “No Reason to Hide: Unmasking the Anonymous Owners of Canadian Companies and Trusts”. We submitted the executive summary of this report to the committee clerk. In it, we highlight a 2015 Transparency International analysis that found Canada's performance was either weak or very weak in seven of the 10 G20 principles on beneficial ownership. In September of last year, the international Financial Action Task Force published a highly critical evaluation of Canada's corporate secrecy regime. The task force called on the government to make beneficial ownership information accessible as a matter of priority.
These reports demonstrate that Canadian companies are particularly vulnerable to abuse. Beneficial owners can remain entirely anonymous, their identities concealed even from the government agencies entrusted with enforcing laws and regulations—and collecting taxes, by the way. Anonymous ownership creates unnecessary obstacles for our law enforcement and tax authorities, fostering a climate of impunity due to low perceived enforcement risks.
Recently the Toronto Star and CBC showed how financial consultants abroad have a specific term for facilitating tax dodging and funnelling illicit funds in Canada. They call it “snow washing”. This is a stain on Canada's reputation that we have to clean up. By stripping anonymity from companies, Canada would make financial crimes and corruption easier to detect and prosecute, thereby deterring them.
Beneficial ownership reform presents an opportunity for Canada to adapt to emerging international standards and avoid becoming a beacon for the corrupt. To this end, we submitted recommendations to the committee in the executive summary of our report to address the negative impacts of anonymous beneficial ownership of companies. As a priority, we recommend that the Government of Canada adopt measures to require all companies in the country to identify their beneficial owners. The government should then publish this information in a central registry that is accessible to the public in an open data format.
We recommend that Parliament also conduct a study into such a public registry, but TI Canada believes that either way it will be a low-cost, high-impact way of preventing corporate beneficial ownership misuse and would improve the effectiveness of law enforcement and tax authorities. It would help the private sector comply with regulations and make better business and investment decisions by facilitating due diligence and know-your-client exercises. It would also bolster Canada's reputation for fairness and transparency both at home and abroad.
Nominee directors and shareholders should be identified as such in corporate filings. They should be required to name the natural person on whose behalf they are acting. Nominees should keep contact details of that individual and ensure that they are accurate and up to date.
Federal and provincial corporate registration authorities should be given adequate resources and a mandate to independently verify the information filed by legal entities, including the identities of directors and shareholders. Registries should be granted authority to apply sanctions for non-compliance with these requirements.
Additionally, TI Canada welcomes Bill C-25's measures to eliminate anonymous ownership of bearer shares. We noted that change, and we applaud the government for bringing it; however, we recommend that existing bearer shares should be converted to registered shares automatically upon a company's knowledge of the identity of the bearer of the certificate warrant or other instrument. In addition, we recommend that the holder of a bearer share who tries to receive dividends or exercise voting rights using the bearer shares should automatically have those bearer shares converted to registered shares.
The Government of Canada should establish and apply dissuasive and proportionate sanctions for non-compliance with beneficial ownership disclosure rules. These sanctions should include both criminal and civil penalties, and should be applied to ensure that beneficial ownership information is truthful, accurate, and filed in a timely manner. Reporting obligations and sanctions for non-compliance should focus on those in control of legal entities and arrangements, as well as beneficial owners themselves.
The Government of Canada should lead in the implementation of these recommendations, while also working with the provinces to develop supporting legislation at the provincial level.
I want to thank you for your time today. That was a very quick summary of our views and recommendations on Bill C-25 and beneficial ownership transparency.
I'd now like to pass it over to Mr. Meunier to introduce himself and say a few additional words before we make ourselves available for questions.