Industry Committee on June 5th, 2023

[Mark Schaan]

I'll pair your first question with your second, because it's important to look at it holistically.

We're adding tools to the overall tool kit for coming at white-collar crime, including terrorist financing and money laundering. The 25% standard is the standard that's been adopted internationally, and it's the standard, as noted, that's already in the proceeds of crime and money laundering and terrorist financing act. This is a “belt-and-suspenders” mechanism by which organizations and corporations, when they enter into financial arrangements with their financial institutions, are obligated to provide their beneficial ownership information to their financial institution.

By also then subsequently providing it to Corporations Canada, we're adding yet another mechanism by which law enforcement can continue to understand discrepancies and can look for organizations that are potentially not holding up to their transparency obligations.

Added to that are the efforts that my colleagues at the Department of Finance are far better able to speak to, which are the evolution of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the evolution of FINTRAC. What we're adding here is one very important kind of tool kit, particularly in terms of international collaboration. We will essentially be joining the world in having a beneficial ownership standard that uses the same code and the same threshold.

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

All parties agreed that the applicability of this bill, if passed into law, will largely be dependent on the participation of provincial and territorial jurisdictions. The minister indicated today in his opening comments that he wrote a letter, but so far we do not have any assurances, despite the minister's best wishes and despite the best wishes of Canadians and even of some provinces, that there will be full participation and that a beneficial ownership registry will in fact be pan-Canadian.

In his comments, the minister alluded to this as a first step, and then we'll see which provinces may opt in after that. According to that comment, what time frame has the department set to reach agreements with provinces and territories for their possible participation under this bill?

[Mark Schaan]

Mr. Chair, if you'll permit me, I'll back up slightly and say that increasing the overall transparency of ownership information related to corporations has been an ongoing, multi-year journey with the provinces and territories. Obviously, incorporation in Canada is a split jurisdiction. You're able to incorporate provincially, territorially or federally. It's not for us to be able to dictate that corporations have to incorporate in one place or another.

That being said, at the very beginning of this process we started by getting an agreement with all of the ministers of finance of the provinces, territories and federal government. The agreement was to ban bearer shares, first, and second, to collect beneficial ownership information at the level of the corporation. We then got a secondary agreement from all of the provinces and territories and the federal government to ensure that there was lawful access to that information at the place in situ, which is the corporate headquarters.

We've consulted with the provinces and territories about the beneficial ownership registry portion of that. There is no deadline set at this point for the beneficial ownership registry portion, but so far we have concurrence with step one, which is holding the information, and step two, which is getting law enforcement access to it in situ. Now we are advancing step three, which is the holding of the registry and making it public. We are committed to working with the provinces and territories on step three.

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

I have one final quick question, Mr. Chair.

One of the registries that has been talked about during the debate and referenced in our chamber is the U.K. registry. One thing that's happened in the U.K. as it relates to exemptions is celebrities or wealthy people.... It's very easy to get an exemption from access to the information on a public registry.

What assurances can the department provide to Canadians that this will in fact be a rigorous registry? Will there be a set of published guidelines for possible exemptions, and who will ultimately make that decision?

[Mark Schaan]

The ultimate determinant of the exemption will be the director of Corporations Canada, who currently has the authority already to be able to make exemptions for other aspects of the Canada Business Corporations Act. The only automatic exemption is for those persons under the age of 18, for the protection of their privacy.

The other exemptions will be required to.... What we imagine under that is, potentially, blind trusts, because the purpose of a blind trust is defeated if you can publish the information related to it.

The director will need to make public, on an annual basis in their annual report, how many exemptions they've provided.

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

That's good for today.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thanks very much, Mr. Vis.

Go ahead, Mr. Longfield.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Mr. Chair.

Mr. Schaan, it's great to see you again. It was the 42nd Parliament when I was on INDU, and it's good to see some of my colleagues around the table from that time as well.

Back in those days, a few parliaments ago, this issue came up from time to time. We looked at money laundering in particular, and the exposure Canada has to actors from other countries coming in and taking advantage of Canadian laws, which at the time weren't as strong as we are now making them.

I'm thinking about how the regulations work with the act—the PCMLTFR, the proceeds of crime and money laundering and terrorist financing regulations—and how those regulations would be improved by using this act.

What happens to those regulations following this act being enacted?

[Mark Schaan]

Thank you for the question.

I appreciate being back at INDU again.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act is the act that essentially binds the financial community in the way it helps root out money laundering, white-collar crime and various other aspects.

The regulations have an important crosswalk over to the beneficial ownership transparency provisions of the Canada Business Corporations Act as proposed, in part because, essentially, we're asking for similar information under the two statutes. One is under a regulatory framework, because it requires banks to collect a whole series of different information, and it evolves as we understand the nature of financial transactions, whereas this will be a legislative obligation on corporations under the Canada Business Corporations Act, which we feel comfortable legislating, in part because we know distinctly what information we're looking to collect.

We've kept ourselves a certain amount of regulatory flexibility to add to it over time, but by collecting the information at the level of the corporation and then also through the regulations at the level of the financial institution, we allow for those discrepancies to emerge and we allow for law enforcement to have yet another element by which they can start to piece together all of these different aspects to get at the ultimate money launderer or white-collar criminal.

[Lloyd Longfield, Liberal, Guelph, ON]

Is there a mechanism with which this act could then retroactively look at corporations that might have been suspect under CRA investigation? How would this be looked at going forward, once the act is in place?

[Mark Schaan]

There are two verification mechanisms that are imagined under the course of the act—well, more than two, but there are two substantive crosswalk ones.

One, as noted, is that we do have a regulatory obligation for discrepancy reporting, to be determined under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, that will look across the two.

There's also a modest feedback loop between our information and that of the Canada Revenue Agency, simply to allow for such things as whether or not there are obvious discrepancies between the information that was filed under the beneficial ownership registry and the information provided to the CRA. It's a “ping” system, essentially, so it's not a transfer of information, necessarily; it's a mechanism by which Corporations Canada can have early detection in some ways.

At this stage, it's not imagined to pool all of that data. That's a further consideration that I think is down the road as we continue to evolve our posture with relation to money laundering and terrorist financing.

[Lloyd Longfield, Liberal, Guelph, ON]

That's great. I'm thinking that with CRA in particular, since 2015 we've invested a lot of money in collecting offshore taxes that were due to the Government of Canada that we hadn't been collecting. They've been tightening the net around offshore activities like illegal tax avoidance. When you couple that with this act, it seems like we're going to be really tightening up in addressing companies that want to launder money in illegal ways outside the country as well as inside the country.

[Mark Schaan]

Yes. I think there are a number of ways you can look at it.

On the one hand, a number of organizations now are adding to their tool kit with respect to the rooting out of this noxious behaviour. Second, we have capacity for some of those systems to, in minimal ways, speak to one another. Then we have the international co-operation through using the international standard and through more and more countries adopting this, which essentially starts to make it increasingly challenging and ideally very inconvenient to try to be in the business of money laundering.

[Lloyd Longfield, Liberal, Guelph, ON]

That's great. Thank you.

Finally, I have about 45 seconds, and I'm thinking of how we disseminate this information.

I've been on the boards of a few companies, and we have fiduciary responsibilities that we generally find out through our auditors and through accounting firms. Have we been engaging with auditors and accounting firms in terms of being able to roll this information out to boards of directors?

[Mark Schaan]

We've consulted quite widely, including with transparency organizations, lawyers and accountants, and the corporate community, including small businesses. We also imagine quite a robust outreach capacity to ensure people understand these obligations as they come into force, because a registry of individuals of significant control isn't necessarily something that's obvious to every business owner.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

As always, those are great answers. I appreciate it.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Longfield.

Before giving Mr. Lemire the floor, I need the committee's unanimous consent for us to continue for 10 minutes or so before the vote, when the bell will ring.

Do I have unanimous consent? Yes?

Great.

Go ahead, Mr. the Meyer.

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

That's great. I'm going to try to figure out how much time that gives me to be fair with my colleague Mr. Masse.

Mr. Schaan, thanks for being with us, first of all.

How much do you think money laundering currently costs the country? Is there a cost to taking no action and letting matters play out?

[Mark Schaan]

I don't know. I don't know the exact figure, despite the many estimates that have been made. We'll be able to clarify that for the committee later on.

[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?

[Mark Schaan]

Bill C‑42 provides an additional tool to the agencies responsible for enforcing the act in order to combat money laundering and the financing of terrorism. It's not a miracle solution, but it is a tool that helps obtain information and that's another means to ensure that business corporations are required to provide information. Then it's possible to combine that information with other intelligence to combat money laundering and terrorism financing.

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

I think the lack of transparency leads to fraud, money laundering and laundering of proceeds of crime.

Does the government also aim to combat crime through transparency, or does it favour a laissez-faire approach instead?

[Mark Schaan]

I apologize, but would you please repeat the end of your question?

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

Is transparency a priority for the government? It seems to me transparency makes it possible to combat crime. Has the government adopted that same philosophy?

[Mark Schaan]

Some 30 to 40 amendments have been made to statutes since 2018 to expand, step by step, Canada's capacity to really combat money laundering and the laundering of proceeds of crime. I think that suggests that it's a priority for the government. That includes the changes made to the

Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

I don't know the French title.