Industry Committee on June 12th, 2023

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Masse.

We now go to Mr. Williams.

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

I'll give it to Mr. Perkins for now, Chair.

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

Thank you, witnesses.

I know we focus a lot on a beneficial registry around financial transaction issues in organized crime and money laundering. In another committee I sit on, fisheries, we're dealing with the issue of trying to understand who is a beneficial owner of a fisheries licence that is granted by the Department of Fisheries and Oceans. Fisheries and Oceans, in the end, doesn't actually know. That's why, for 17 months, it's been doing a separate beneficial registry survey, which now requires part of it to go through a forensic accountant.

I don't know if it's Ms. Ryan or Mr. Caldera, or which witness wants to speak to the issue of a broader application of this beyond the obvious money laundering issues.

Go ahead, Mr. Cohen.

[Sasha Caldera]

I'll defer to my colleague Mr. Cohen.

[James Cohen]

Thank you very much for that question.

Indeed, the issue of beneficial ownership transparency in government procurement, licensing, permits and grants is a very serious issue. While we've been pushing for a registry all these years, if the government were to adopt beneficial ownership transparency as part of the due diligence process for procurement, grants, licences and permits, the power of the person and the power of the government to issue those various processes would be incredibly powerful in compelling a lot of companies to come forward with that information and deterring those who want to exploit our system.

I've looked a bit at the recent news on your committee's work on beneficial ownership in fisheries. We have to frame that while keeping in mind—I'm sure you've seen plenty of articles about it—the impact of illegal fishing and overfishing in our oceans. If we're connecting corruption as an underpinning issue to some of our society's greatest ills, whether they be conflict, societal inequality or environmental degradation, there's always an element of corruption there. If we want to get at these issues of illegal fishing and illegal trawlers, and people trying to exploit Canada's own fisheries, I would say it's incumbent on the government to know whom we're issuing these permits to.

In next steps, I would advise the government to start expanding who needs to apply—

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

Yes, and it goes along on that, even on the question of, for example, how DFO has a policy that no company is supposed to have a monopoly in any particular species, but they don't know how to enforce that, through the fact that they don't know who the companies are. Also, we don't know the state of the foreign ownership of our fishery, for example.

I think Ms. Ryan has some comments.

[Annette Ryan]

Thank you.

If I may speak on behalf of FINTRAC, the anti-money laundering agency, I would point to recent work we've done with international partners in the area of wildlife trafficking. That effort was really geared towards giving indicators to our partners in the financial sector so that they could build on some of these interlocking blocks in the money-laundering space.

As we make progress on the beneficial ownership of corporations, this work would give them essentially a line of sight to what they should be looking for in terms of patterns of financial transactions that are problematic and that they should report to us so that we, in turn, can do our work and report to others within the overall regime.

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

Thank you.

Mr. Caldera, you have a number of proposals. Hopefully, I'm going to propose some amendments a little later today when we get through this. Could you explain the importance in such a registry of having things such as were written in the letter about ID numbers from non-expired government-issued ID as part of that, and country of residence and name of corporation—some of the other detail you asked for—added to the bill, so that it's more than a numbered company and who the directors are and there is some sort of verification, presumably, behind this as to who the ultimate owner is?

[Sasha Caldera]

Absolutely, and thank you for your question.

Let's start with the ability for anyone to search by country of residence and the name of the corporation. This is information that would already be collected by the registry itself. It would be part of the service address. We want to differentiate that information field from jurisdiction of residence, which is solely for tax purposes. We're not recommending that this field be publicly accessible, due to privacy considerations.

On being able to search by country of residence, if you would imagine yourself in the global south, for instance, and you suspect that the nephew of a mayor or the nephew of an official is perhaps involved in money laundering or has a really poor reputation of stealing from national treasuries, you can search beneficial owners by the country of residence and where their service address might be, which would be really powerful as a tool.

Searching by the name of the corporation is a function that the U.K. registry has, and it allows for reverse searching. If you don't know the name of the beneficial owner, you can look up the name of the corporation, for instance. That would be incredibly helpful. In some of our other recommendations, we just want to ensure that all publicly accessible data is searchable. We included some specifics on that. We believe that this is in line with the minister's vision for this bill.

Adding hybrid offences as well is something that we heard from committee members. In fact, this is a position we've long had at Publish What you Pay Canada and Transparency International Canada. We think a hybrid offence can be used in those instances when you're dealing with really sophisticated criminals who have the ability to financially absorb penalties. We're talking about large organized crime or terrorist organizations where $200,000 is something that they can absorb absolutely. We think this will be a measure just for those offences where they are knowingly committing that offence.

With the ID numbers, we just think this is a progressive measure. It would be in line with what the United States is doing. We aren't asking companies to hold the government-issued ID itself, but rather the ID number, so it minimizes any privacy and information intrusion.

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

Mr. Chair, I think I have time for one more question for Mr. Beaudoin.

One of the challenges, as my colleague pointed out, which you know, is that 90% plus of registered companies in Canada are provincial, so this gets to a small portion of it. We have an amendment proposal here that would at least allow I think the linking, on agreement with the provinces, of a provincial registry.

Wouldn't it be more helpful to be able to search all in one database, where you have an agreement for a provincial and a federal registry, rather than all of these independent jurisdictions across the country that make it more difficult not only for law enforcement but for individuals who want to do a search?

[Supt Denis Beaudoin]

It's a short answer, but yes, it would be much easier to search one database instead of searching 14 databases.

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

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you.

It is now Mr. Gaheer's turn.

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

Thank you, Chair.

Thank you to all the witnesses for making time for this committee.

My questions are for Ms. Ryan from FINTRAC. We know that the bill sets the threshold at 25% for what beneficial ownership is. We've heard testimony, and I think some colleagues have actually suggested that they would prefer a lower threshold, and 10% is a number that's been thrown around.

Could you speak a little bit about what the international standards are and what Canadian provinces are doing?

[Annette Ryan]

I might start first with the international standards. If further study allows, I would refer the committee to the requirements of the Financial Action Task Force, which is the international peer standard-setting body that has put forward conditions in respect of beneficial ownership. I am looking at the requirements now.

I would view the need for Canada as being to move forward on establishing the registry, more so than the threshold percentage itself.

In terms of the moving forward with the provinces and territories, as my colleague from the RCMP has said, it would be incredibly helpful to have interlocking sets of registries so that we can search them all on a common basis, which is built from work that's been done to set them on the same definitions.

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

The 25% number is comparable to peers—the U.K., the EU, the U.S. Is that right?

[Annette Ryan]

Yes.

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

It is, okay.

For the gentleman from the RCMP, we know that the bill also includes protections for whistle-blowers. Could you elaborate on that and why you think that should be brought forward?

[Supt Denis Beaudoin]

I remember reading it. Maybe I could get back to you.

In general, protection for whistle-blowers is extremely important, whether it's a different type of financial crime.... However, we need people to come forward with allegations in order to start a specific investigation. Any legislation that would allow for better protection and foster a willingness for people to come participate as witnesses to a financial crime would be extremely well received.

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

Back to the individuals from FINTRAC, will the government be able to verify the information that's being provided? How so?

[Annette Ryan]

I would share the answer with my colleague from the Department of Finance, which is leading on the policy side, but I'm also happy to speak to how it works in practice.

[Justin Brown]

Thank you.

As part of the bill, Corporations Canada maintains the responsibility for the registry and is being provided a tool kit to ensure its integrity. From an anti-money laundering FINTRAC perspective, we have reporting entities, which are entities that have existing anti-money laundering requirements. Under existing requirements, they already have to verify beneficial ownership information.

Part of this bill is to require those entities to notify Corporations Canada while they're conducting their business if they notice any discrepancies between the information that they're receiving from their corporate clients and what's available in the public registry. Corporations Canada would then exercise their tools to conduct the proper follow-ups.

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

I'd like more information on the provinces and territories about why it's important for them to play ball here, and possibly more information about how that can be facilitated.

[Justin Brown]

Sure. I'd be happy to build on whatever's been said. Incorporation is a shared jurisdiction in Canada, and federal incorporation is less than 15% of all corporations of Canada. This bill would represent an important step by implementing a federal registry of corporations. However, 85% of corporations would not be covered.

The government is committed to continuing to work closely with the provinces and territories to create a pan-Canadian solution, a pan-Canadian approach to this issue. That could include provinces and territories joining the federal registry, or it could include provinces and territories incorporating their own registries and then making them interoperable with the federal one.

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

Thank you so much.