Industry Committee on June 5th, 2023

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

One thing that is interesting is that some people have compared that with what you find in securities law, for example, but this is about natural persons. The positive obligation on the directors and officers of the corporation is to identify the ultimate beneficial owner, the individual who has significant control. That needs to be a natural person.

Whether people are stacking or, to the earlier question, using different shell companies or registering in a trust or other things, it is incumbent upon the directors and officers to publish or to provide the information about the beneficial owner, who is a natural person.

To your point on different corporations, at the end of the day there needs to be a natural person whom you identify as having more than 25% ownership of the company. I think that is the main difference.

I truly understand what you mean. As a lawyer, I can see why this registry is so important. As you know, under securities law, you need to list people who own more than 10% when it's a legal person, but this is about beneficial ownership, and the name you give needs to be for a natural person.

In terms of searchability, you'll be able to search for the name of that person. If you want to know if an individual owns a company, you'll be able to search for the name of that person, save for a minor under 18 who has an exemption or people exempted for security reasons. Otherwise, their name would be searchable in the database.

I think that's a powerful tool for banks, for law enforcement agencies, for anyone who is concerned about providing or making sure we have integrity in the system.

[Ron McKinnon, Liberal, Coquitlam—Port Coquitlam, BC]

To carry on with that, they may have officers and directors who are not necessarily, but probably are, shareholders of those other companies. They may be appointed by people. It seems to me that they would have an influence on the behaviour of the company that their company owns a part of. Is there a mechanism, or is it relevant, to be tracking the directors and officers of the companies that own a given company?

[The Chair, Liberal, Joël Lightbound]

Give a brief answer, please, Minister.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

First of all, we make sure that we verify the person providing the information. The officer and director of the Canadian corporation that is subject to the law have a positive obligation, so it's upon them to provide accurate information.

As I was saying to Mr. Masse beforehand, that's why it's so relevant. As a director or officer of a Canadian company that is subject to the law, if you wilfully provide information that is false, you're exposing yourself to six months in jail. The onus is on the director and officer of the Canadian corporation to provide accurate information about the beneficial owner of the company.

[The Chair, Liberal, Joël Lightbound]

Thank you.

Go ahead, Mr. Lemire.

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

Thank you, Mr. Chair.

As regards money laundering, Minister, can you provide us with any details on offences and the additional powers granted by the registry director?

Do you think these corporations can meet those time frames?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I'd say yes. The amended act would come into force on an annual basis, which means that we would use the incorporation date to determine obligations. It wouldn't be the same date for all corporations. There would definitely be a date of coming into force, but the information would be provided in the corporations' next annual reports.

The other financial system stakeholders would thus have access to that information and could alert us if incorrect information were detected here and there in order to ensure the registry's integrity.

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

Will it be possible to search the registry for a business by its activity sector, such as entertainment or sports betting?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

As far as I know, searches, for the moment, will be done by the name of the business or that of the owner. It may be possible to search in different ways based on the future database. However, for it to be interoperable, we have to ensure that what we're doing is consistent with what's being done in Quebec and elsewhere in the country.

[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?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

We've cooperated with the Quebec government so far. As you know, it often demonstrates leadership. There are no downsides as far as I know. The crucial issue was interoperability. Now that British Columbia, Quebec and the federal government have adopted this kind of registry, I think we've encouraged the other provinces and territories to do the same. It's really worthwhile to have a pan-Canadian regime, provided interoperability is possible.

That's where the data issue comes in. The reason for limiting ourselves to gathering or publishing only certain data is precisely to guarantee interoperability. When one of the stakeholders in the chain decides to operate differently, interoperability disappears. That's why we follow international best practices and why the platform will be similar to those of the federal government and Quebec.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Go ahead, Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

To continue with that, how do we compare with the United States in this process? They're obviously one of our biggest trading partners.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Well, I would think the biggest difference that I'm aware of is that their registry will not be publicly available. That is a policy choice for our friends in the United States. Their registry will be available to law enforcement uniquely.

We made the choice in Canada, like other jurisdictions—the U.K. and others—to make it publicly available. We heard through consultation that people wanted that availability. One of the tenets of what we do is about transparency, and I think having a publicly searchable registry is of benefit to Canadians.

[Brian Masse, NDP, Windsor West, ON]

Yes, I agree, and I commend the legislation for that.

Obviously, with our system of electoral politics versus theirs, I think their getting a public registry is probably impossible. That's not related as much to practical elements as it is to political elements and campaign financing, quite frankly, as I know from experience over there.

I have one last quick question.

Is the Senate prepared for this bill if we're able to move it quickly through the House? Are there any discussions going on there?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I think so. My sense, at least, is that the Senate is as enthusiastic as the House is.

Mr. Chair, I know you've been able to do great things in the past. If we could get unanimous consent to move the bill along, I think the only ones who are going to benefit are Canadians at the end of the day. It will allow us to show that we lead internationally as well.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Minister.

Members, as you see, we're reaching the vote, so we'll have to suspend briefly. As soon as the vote is over, we'll come back for the second hour with officials.

Thank you, Minister Champagne.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Are you done with me?

[The Chair, Liberal, Joël Lightbound]

Yes, we are done with you.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I had another half hour for questions. That's okay, Mr. Chair. That's fine. I just wanted to be fair to Ed.

[The Chair, Liberal, Joël Lightbound]

Okay. The meeting is suspended.

[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.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you, Mr. Chair.

I have a couple of follow-up questions from the last round.

A comment to start is that it seems that the positive obligation on behalf of corporations and the individuals running those corporations is where we're going to see, as I see it, the most vulnerability in this legislation. What comes to mind as well, in the context of positive obligation and putting all of that on individuals or corporations, is that corporations, under the bill, are only liable for a summary conviction with a fine not exceeding $5,000.

Why is there the discrepancy between the $200,000 fine for an individual, but an individual working under a corporation is only subject to $5,000?

[Mark Schaan, Senior Assistant Deputy Minister, Strategy and Innovation Policy Sector, Department of Industry]

Thank you, Mr. Chair, for the question.

It is important to understand that the individual is not actually exempt from the $200,000 fine if they are working under the corporation. We need to make a distinction between the fine that's levied against the corporation itself versus the officers and the directors of that corporation.

When there are actually contraventions of the act, there is the possibility of a $5,000 fine against the corporation, which in many cases may be assetless or potentially able to dissolve quite quickly, and/or the opportunity to be able to come at the officers and the directors of that corporation for the contravention of the act, and they have a penalty of up to $200,000 and six months in jail.

In the rooting out of bad behaviour by corporations, the corporation itself is not a natural person, so going at the corporation with stiff penalties when they have the capacity to dissolve is not necessarily seen as efficacious, whereas going at the individuals who are behind those corporations, even when they dissolve, is the effective way of ensuring that they actually come into compliance.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you. That is helpful.

In respect to our conversation on thresholds, the minister referenced the need for this bill, and subsequently the act, to be in line with the act that deals with the proceeds of crime and money laundering and terrorist financing.

Especially in my province, I believe there is general understanding that the law is not strong enough and has not led to enough convictions for money laundering and other white-collar crimes.

If we're adopting the standard, under that bill, of a 25% threshold, are we not limiting our ability to really get at the heart of money laundering and white-collar crime in Canada?