27/07/21

CANADA: Province asks for feedback on adopting more corporate transparency.

As published on cbc.ca, Monday 26 July, 2021.

The New Brunswick government is asking for feedback on proposed changes to corporate legislation that would force companies to reveal who really controls and benefits from them.

By signalling a desire to adopt beneficial ownership transparency, the province is following the lead of the federal government, as well as at least six other provinces that have already amended their corporate laws.

It's all in an aim to discourage bad actors across the globe from using Canada's corporate registries to hide "dirty money," according to Sasha Caldera.

"[The money] perpetuates drugs, it perpetuates other types of crime, forced labour and counterfeit goods," said Caldera, who is the beneficial ownership transparency campaign manager at Publish What You Pay Canada, which advocates more accountability from the oil, gas and mineral sector.

"It has no benefits, in my view, for Canada. It does nothing but distort housing prices, but also make communities less safe."

Because the money flows are global, "they will always find the weakest link to exploit" and provinces don't want to be the last one standing, Caldera said.

"That would be my response to the New Brunswick government, and I would urge them to take this very seriously and to be proactive in creating the most transparent and accessible beneficial ownership registry."

In New Brunswick, the corporate registry includes some basic information about companies, such as names and addresses of directors, but does not force companies to reveal their beneficial owners.

"Beneficial ownership refers to the natural persons who exercise ultimate ownership or control over a corporation through direct or indirect means, such as through an ownership interest or control over decision-making," according to a white paper issued by the province on beneficial ownership this month.

Proposed changes would see the law amended to clearly define a person with "significant control" in a corporation. Businesses would also have to "create, maintain and hold a registry of individuals who are considered to have 'significant control' at their corporation headquarters," and explain how the information is to be stored, accessed and updated.

The proposed changes may also include penalties for not complying, though the government doesn't indicate what those penalties could be.

The province committed to adopting beneficial ownership last year, not long after a CBC News/Radio-Canada investigation, in partnership with the International Consortium of Investigative Journalists (ICIJ) and BuzzFeed News, found New Brunswick has lax corporate rules that make it hard to tell who really controls a corporation.

In December, the Minister responsible for Service New Brunswick, Mary Wilson, said the coming changes will "increase ownership transparency and assist in exposing activities such as money laundering and tax evasion."

The province's paper on beneficial ownership doesn't indicate the scale of that problem in New Brunswick, but does say "more must be done to reduce the risk of corporations being misused for illicit activities, such as money laundering and tax evasion."

"The availability of timely and accurate data on the ultimate beneficial owners of companies is crucial for allowing law enforcement, tax and other competent authorities to identify the natural persons who may be implicated in suspicious activities," the paper says.

The paper asks for stakeholders' feedback on whether they support the changes, whether they believe there will be a cost to businesses to comply with potential new rules and whether there should be situations where corporations are exempt from having to reveal information on beneficial ownership. People have until Aug. 20 to respond.

Requiring corporations to keep the information on hand is a first step, but may not be the best tool to discourage crime like money laundering, according to James Cohen, the executive director of anti-corruption organization Transparency International Canada.

It's not clear whether the information in New Brunswick will be shared in a public registry. Just sharing the information with law enforcement and tax authorities without a warrant may not be effective, Cohen said.

"We need this information to be on a Pan-Canadian publicly accessible registry, not just held by companies, so that there's scrutiny conducted by everybody: journalists, civil society groups, other businesses who want to know who they're doing business with."

This year's federal budget set aside $2.1 million over two years to develop a publicly-accessible corporate beneficial ownership registry by 2025, something Cohen described as "a win."

"I hope that the government of New Brunswick, now that they are already working on this step, they'll really be open to collaborating and cooperating with the federal government and other provinces like Quebec, who's already made their beneficial ownership information transparent, that New Brunswick will see the benefits and want to get on board with this plan," Cohen said.

The paper released by the province says officials will continue to sit on a working group with the federal government and other provinces and territories, and will monitor the progress of the creation of that registry.

While the paper asks about the cost for businesses to implement the rules, Cohen said the United Kingdom, an early adopter of beneficial ownership transparency, found the tougher rules had a negligible impact on cost to businesses.

The Saint John Region Chamber of Commerce is in the process of looking at the government's proposals "to better understand its ramifications for [New Brunswick] businesses," according to Chamber CEO David Duplisea.

"Until I understand it better, I would not be comfortable discussing," Duplisea wrote in an email. "We are currently looking at the possible outcomes."

No one from the government was made available for an interview about the proposed changes.

"We are not going to do interviews at this point because there is not much to say until we receive the feedback and the amendments are finalized and then introduced into the Legislature," Service New Brunswick spokesperson Valerie Kilfoil wrote in an emailed statement.

"There will be more to say later in the fall."