Q&A from Beneficial Ownership Rules: Global and Canada Perspective

March 2, 2020

James Cohen, executive director of Transparency International Canada hosted a webinar with CaseWare RCM’s Alessa recently to discuss the state of beneficial ownership requirements globally and in Canada.

Here are the questions and answers from our attendees:

Q: What is that Transparency International Canada is asking for?

A: We want to see a centralized, publicly accessible registry of beneficial ownership within Canada where all jurisdictions can feed their information. We would also like to see beneficial ownership disclosure in real estate transactions. We want to see verification of that information. Any registry would need strong enforcement and sanctions within it. We also want to see strong sanctions that criminals don't see is just the cost of doing business.

Q: Why a public registry? Why does it need to be accessible?

A:  We believe it is a deterrent effect and an example of this is Scottish limited Partnerships within the UK that up to 2015 were not required to disclose ultimate beneficial ownership.  They were being used by a number of entities coming from known secrecy jurisdictions such as Cyprus or Malta. But the second they became public, there was an 80% drop off in registry of Scottish limited Partnerships.

Q: One of the questions that came in was as a publicly traded company regulated by number of organizations.

A: I would say yes for board members of publicly traded companies. This is often a public information. And the idea is that this is to distinguish between individuals. This is why we would call for unique identifier numbers so that people on a registry can be more easily identified with less and less of their information being known.

Q: How do you feel about public registries having confidential information available to relevant authorities, i.e. kidnapping and other safety concerns in vulnerable countries?

A: In a country like Canada, there is a low expectation of privacy under the Charter of Rights for the information that we are asking be disclosed. We believe in following the example set by the U.K. that on a case-by-case basis people can apply for their information to be withheld for safety reasons. We’d note that in the UK with thousands of companies, only a few hundred applied for exemption and only about three actually got an exemption. There has not been a spike of kidnappings in the UK. For a publicly traded company, much of this information has been disclosed already.  Why should information not be disclosed just because you are in a private company?

Q: This is a Canadian question. How does the beneficial ownership requirements impact credit issuers who issue credit cards for a commercial business?

A: The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) has updates on credit cards. There are a number of law firms who have been posting reviews of the PCMLTFA. I would encourage you to look through their posts to get the credit card information updates. There is also a lot of information on the FINTRAC guidance website.  And I also know that there are updates coming on cryptocurrencies.

Q: Where can we find out more on beneficial ownership?

A: For Canada, the definition of beneficial owner is listed on Finance Canada's website and with FINTRAC. So at least for Canada you can find it on the government's website and that would be your working definition for regulation compliance.

Q: Do you think that having the definition on the website would be the same for almost every regulator?

A: I would search for beneficial ownership at each regulator. I would start there as that explains what is the percentage ownership. For Canada, there is a 25% threshold.

Q: Coming back to the corruption index, someone asks if the 2019 results are available as it would be interesting to see where Russia landed?

A: Everything is available for the CPI, which you can find at transparency.org. It is a composite index that comes from a number of different sources. So sometimes there can be a lag if issues were implemented in 2019, they might be reflected in the 2020 index that would come out next year.

Q: Will the Land Owner Transparency Act (LOTA) in B.C. expose money laundering or proceeds of crime?

A: It's not in implementation yet. We're still waiting for it to go online. However, there's some initial numbers showing that price of housing prices have cooled in Vancouver.

I believe its reports on anonymous ownership have gone down and that not just because of LOTA coming in but also because of taxes on foreign ownership. There are reports of criminals moving to Ontario casinos to conduct the exact same operations.

Q: Do you foresee properties being repossessed possibly by the government if washing is confirmed?

A:  Yes, if the cases can be made as potentially money laundering, we could see asset seizure there.

Q: Are there third party vendors that collect and provide beneficial ownership information in Canada?

A: There are some third party vendors that investigate information to confirm it. There is no one who holds on to beneficial ownership information, but there are companies that will review it and verify it if possible.

Note: Some of the questions that were sent in were not answered as they were very specific to some financial industries or specific job-related tasks.

For more information on Transparency International Canada, visit the TI Canada website to learn more about the organization and their campaign to push for a national beneficial ownership registry and ways to shine a light on “snow washing.”  For those of you who want to support Transparency International Canada, you can also become a member or donor.

CaseWare RCM’s Alessa website features a number of articles, videos and best practices surrounding beneficial ownership, including our white paper on complying with the FinCEN final rule - stay tuned for more updates!

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