Industry Committee on June 12th, 2023

[Brian Masse, NDP, Windsor West, ON]

Thank you.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Thank you for your expertise and for enlightening this committee, and for your advocacy as well. This has been a long time coming. You're helping us get closer to finally having a registry here in Canada, so many thanks to all of the witnesses today.

This concludes our third round.

We'll suspend briefly, and then at 6:30, we'll resume this meeting for clause-by-clause.

The meeting is suspended.

[The Chair, Liberal, Joël Lightbound]

Colleagues, I call this meeting back to order.

Again this week we are blessed with the presence of Mr. Schaan, who's now almost a permanent member of this committee. He's always here.

Thank you very much for being here with us to answer our questions as we go through clause-by-clause on Bill C-42.

He's accompanied by Martin Simard, who is the senior director, strategy and innovation policy sector at ISED.

Thanks to both of you.

Without further ado, dear colleagues, we will begin clause-by-clause consideration of Bill C‑42.

There is a new clause, clause 0.1.

Go ahead, Mr. Perkins.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I'd like to move CPC-1. I believe that's the order I should go in.

CPC-1 changes the threshold. Regardless of where the threshold is set, it's our view that criminals will attempt to circumvent it. By reducing the threshold to 10%, we limit their ability to do so. We believe that having 10% as the threshold for shareholder reporting and disclosure, as we discussed with the recent witnesses, is a better level.

I don't know if you want to do comments. I know we're trying to be short on time. I'll just introduce CPC-1.

[The Chair, Liberal, Joël Lightbound]

That's perfect. Thank you very much, Mr. Perkins.

Are there any comments on CPC-1?

Mr. Gaheer.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

We've heard testimony on this already. I think questions were asked earlier.

If you look at what's in line with our international counterparts, it's a different threshold. The threshold is 25%. I think with 10% we would be an outlier. Again, we've heard testimony from multiple individuals earlier today on the same fact.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Perkins.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I don't think we would be an outlier. I would call it being a leader.

We heard the RCMP say that they thought it would be much more beneficial to them and what they're doing if it was reduced to 10%, rather than at the current 25%. It would give them greater insight. As we know, in lots of other different types of industries, we've used 10% as a shareholder limit rule over the years, whether it's banking or other things. I believe this would provide us with greater tools.

It doesn't take much. There are lots of companies that are around 20%, and 20% can be an influential part of that. Depending on how widely held the corporation is, a 20% owner may be the largest shareholder.

[The Chair, Liberal, Joël Lightbound]

Thank you.

Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

I struggled with this a little bit too. We have a similar amendment. We're wanting to be, obviously, somewhat in line with others. At the same time, this is why I referenced Bill C-25. Its disastrous repercussion led us here to this day because the previous bill by then-minister Bains was so deficient. I think we can go with the 10% and I think we'll be fine. We're known so poorly, so this is catching up.

[The Chair, Liberal, Joël Lightbound]

I’ll recognize Mr. Fillmore, who will be followed by Ms. Lapointe, then Mr. Williams.

Mr. Fillmore, you have the floor.

[Andy Fillmore, Liberal, Halifax, NS]

Thanks very much, Chair.

Just on this point, by way of example, we're building the next generation of naval ships here in Halifax. A tremendous amount of debate and energy has gone on around the interoperability of our systems with our Five Eyes and other NATO partners.

Inventing a new language at the very time we should be creating a common language to discuss funding terrorism and other things.... It is just absolutely the wrong time. I think we heard very clearly from Mr. Brown that it's not only within Canada that we are seeking a nationwide standard on this, which has essentially been established now by the provinces and territories at 25%. We're also seeking an international common language.

I agree with Mr. Gaheer's phrasing that we would, in fact, be making ourselves an outlier here at a time in the world when we need to be able to communicate clearly and quickly and share data and interpretation of data for the maximum impact on the shortest turnover possible.

I would strongly urge members to consider keeping the common language that's already been established.

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Fillmore.

Go ahead, Madam Lapointe.

[Viviane LaPointe, Liberal, Sudbury, ON]

Recognizing that the 25% threshold has been adopted by most major areas, or the G20, to our officials, what would be the impact of this proposed change?

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

I'll speak to three areas of impact that we would note.

First, as noted, this has been a collective exercise over the course of successive rounds of legislative amendments to try to ensure a cohesive approach with the provinces and territories across the country. The 25% standard was what was agreed to with the provinces and territories. That's what they are working to hold their beneficial ownership standard to as they build out their legislative requirements.

The differential between those potentially does a couple of things. One is that it may shift people out of the Canada Business Corporations Act and into a provincial or territorial incorporation. The second is obviously that it doesn't create a unified national standard.

The second is, as you have noted, the comparability across regimes in terms of the ability to be able to look across and actually understand they are comparing apples to apples.

The third is probably more of an implementation issue. This is premised on the the notion of belts and suspenders, in many ways. There is a corresponding obligation in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act for financial institutions to collect information related to 25% beneficial owners and to discrepancy match that information against the information that is contained in our registry.

They will be collecting different information from what we will be collecting in our registry, so the capacity for the efficiency of the discrepancy matching becomes both administratively burdensome and inconsistent.

[The Chair, Liberal, Joël Lightbound]

Mr. Williams, the floor is yours.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Mr. Chair.

Mr. Schaan, the argument is that we are already an outlier, because it seems, based on prior witnesses, we are being touted or advertised as a place to money launder. It seems to be that we would want to push the international standard and perhaps be a leader.

In your opinion, would going under 10% dissuade business in Canada? That is for either one of you.

[Mark Schaan]

There are two things I would want to make sure that people understand.

One is “control in fact”. The rule is 25% or control in fact. Obligations related to the organization actually provide for control in situations where they live under the 25% standard. They would still be decreed as beneficial owners and be required to report the natural person in that particular regard.

The second is obviously the complexity of either having multiple standards at play or the degree to which individual organizations will be now required to provide further information regarding the makeup of their corporations. Given that we have 99% small and medium-sized enterprises in this country, that is obviously something we would contemplate.

[Ryan Williams, Conservative, Bay of Quinte, ON]

In term of the provinces, have any provinces advocated for less than 25%?

[Mark Schaan]

To date, the commitment from the provinces and territories is the 25% standard set up by FATF.

[The Chair, Liberal, Joël Lightbound]

Thank you.

Mr. Masse, you have the floor.

[Brian Masse, NDP, Windsor West, ON]

I am willing to bet they were asked to be at 25%, whether or not they were even offered 10%. I'm wondering whether legislative-wise.... Here's what I'm worried about. They have to come back here to look at altering the percentage. Is there a way, legislatively, we can give the minister the power to do that through regulation, and/or is there a way to allow the minister to go to 10% unilaterally, to start at 25% and go with that? That is my big concern.

I get the concept that you want to do something a little easier here. I listened very carefully to your response in terms of what the commitment was, what they were asking and who has advocated for what, but that's what I'm concerned about. We already wasted time with Bill C-25. Many of these things.... We had motions that were voted against on these very problems.

Is there a way for us to legislate some flexibility here that would allow the minister, again, to go down to 10% unilaterally through regulations and/or perhaps mandate a review of that every year, for example?

[Mark Schaan]

I'm not a legislative drafter. All I can offer would be that right now we are building on the legislative building blocks that came through both in the Budget Implementation Act and then subsequently. The requirement for organizations to hold information about individuals with significant control was set out in precedential legislation. We would need to both shift the legislation to suggest that the minister would set out what an individual with significant control is in the regulations and then get those regulations through the system.

That's my elementary understanding of what would be required if you needed to move this out of the legislation. Right now, it is in legislation, and it's the requirement that corporations are already upholding right now, because they maintain registries of individuals with significant control set at 25%.

[Brian Masse, NDP, Windsor West, ON]

I'm wondering, Mr. Chair, whether there's any appetite to push this one amendment to later on or whether we need to go clause by clause to see—if we don't finish today—whether or not we could actually get the legislative solution that I'm suggesting. If not, I'm going to stand with my similar.... I assume that voting on this makes NDP-1 irrelevant.

[The Chair, Liberal, Joël Lightbound]

It does make it moot. I suggest that we....

No, we have to go clause by clause, Mr. Masse, so this is sequential—