Tackling Money Laundering in Canada Through Beneficial Ownership Transparency

• Author: James Cohen
• Profession: Executive Director, Transparency International Canada
• Pages: 251-276

251

eleven

Tackling Money Laundering in

Canada rough Benecial

Ownership Transparency

JAMES COHEN*

A. INTRODUCTION

Anonymous companies are often referred to as the “getaway cars” of crime.

Whether illicit funds are obtained through theft, fraud, bribery, tax eva-

sion, tracking, sanctions busting, or kleptocracy, eventually the people

who commit those crimes would like to enjoy their spoils in the legitimate

economy. However, taking a bag full of cash into a bank, or trying to make

a major purchase like property, can raise suspicions from a bank teller or

real estate agent, leading them to report the transaction to authorities. If

a ag is not immediately raised by the nancial or commercial sector, then

at a minimum the crook has left a paper trail.

Enter the anonymous company or shell company. While there is noth-

ing inherently illegal about someone establishing an anonymous company,

the legal mechanism, along with other tools like trusts and nominee dir-

ectors and shareholders, are lynchpins in facilitating a global network of

illicit nancial ows. ese tools hide the true legal owner, or the ultim-

ate benecial owners (UBO), of a company. rough a practice known

as layering, whereby one shell company owns another shell company, a

* Executive Director, Transparency International Canada. e author holds a Master

of International Studies degree from the Graduate Institute of International Stud-

ies, Geneva.

 

252

criminal can create a maze for law enforcement trying to trace the origins

of dirty money. is is particularly the case if shell companies are spread

across dierent jurisdictions.

With the reporting of a number of data leaks since , notably the

Panama Papers in , Paradise Papers in , and the Pandora Papers

in , the public has gained direct insight into how anonymous com-

panies are abused in a global network of illicit nancial ows. ese rev-

elations have subsequently put pressure on governments and international

organizations to stop the exploitation of anonymous benecial ownership

through companies and trusts. While some states moved quickly in recent

years to increase benecial ownership transparency, Canada addressed the

issue slowly at rst, but by  was beginning to gain momentum.

In this chapter, I will () prole the international norms and standards

around benecial ownership transparency and Canada’s performance in

upholding them; () review Canada’s laws relating to benecial owner-

ship and anti-money laundering and what changes these laws have gone

through; () discuss the idea of a transparent benecial ownership registry

as means to ghting money laundering; and () outline how Canada could

adopt a publicly accessible benecial ownership registry to ght money

laundering.

B. INTERNATIONAL NORMS AND STANDARDS OF

BENEFICIAL OWNERSHIP TRANSPARENCY

e FATF Recommendations, the main global standards used to guide

anti-money laundering and terrorist nancing, include recommendations

on benecial ownership transparency. However, the recommendations on

benecial ownership transparency concerning corporations and trusts

have not been updated since . While the recommendations are under-

going review in , a number of global standards have emerged that

increase the threshold for transparency on benecial ownership beyond

requirements set out by the Financial Action Task Force (FATF).

 FA TF, International Standards on Combatting Money Laundering and the Financing

of Terrorism & Proliferation: e FATF Recommendations (, as amended )

at , online: www.fatf-ga.org/publications/fatfrecommendations/documents/

fatf-recommendations.html [FATF Recommendations].