Wednesday, October 21, 2020

Canada missing 99.9 per cent of money laundering because of weak rules, expert estimates


Canada is likely missing 99.9 per cent of money laundering because of loose requirements and lenient penalties, according to the author of a C.D. Howe policy paper released Monday.

“Among Western liberal democracies, we’re down there with the weakest countries,” said Kevin Comeau, a retired lawyer and a member of Transparency International Canada’s working group on beneficial ownership transparency.

Canada has become a safe haven for dirty money and risks becoming even more attractive to criminals if provincial and federal governments don’t move quickly to introduce the same laws and regulations some European countries have adopted, Comeau said.

The International Monetary Fund estimates that two to five per cent of world gross domestic product is laundered money. Applied to Canada’s 2018 gross domestic product, Comeau estimates that between $100 billion and $130 billion a year is laundered through Canada.

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A 2005 analysis of U.S. Treasury Department statistics shows that U.S. law enforcement agencies did not catch money launderers 99.9 per cent of the time. Comeau pegs the amount of money laundering that Canada doesn’t catch at about the same amount.

“There is no reason to suspect Canada’s failure rate is any better, although we do not know for sure,” Comeau wrote in his policy brief.

More: Chinese cash fuels vast luxury car laundering scheme in Canada

Money laundering is hard to catch and prosecute because it is an invisible crime committed by anonymous people, Comeau said. That’s because under Canada’s current laws, anyone can create a corporation or a trust and conceal who truly owns it.

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For instance, some of Vancouver’s most expensive residential properties are held by corporations whose directors are lawyers; those lawyers are protected by solicitor-client privilege from revealing who their client is.

British Columbia introduced Canada’s first public land ownership registry after revelations that billions in “dirty money” from the proceeds of crime were likely laundered through the province’s casinos for years. The province is now probing the extent of suspected money laundering in the real-estate industry.

Comeau said B.C.’s new land-ownership transparency law is “terrific” but the public registry needs to be extended across Canada and should cover all companies and trusts, not just property ownership.

He’s calling for the creation of a publicly available registry of beneficial ownership for corporations, trusts and real estate, similar to the registry for companies the United Kingdom created in 2016, and a mandatory declaration of the beneficial owner (that is, the true owner) of corporations and trusts.

He’d also like to see strict penalties if people are caught making false declarations to the registry, similar to fines and jail time for Canadians who evade income tax.

The federal government did recently amend the Canada Business Corporations Act to require federally incorporated companies to collect and record beneficial ownership information.

However, Comeau points out in his policy paper, “not only is that information not accessible by the public, it is not even accessible by law-enforcement agencies and competent authorities such as FINTRAC (Canada’s financial intelligence agency for money laundering) and the Canada Revenue Agency.”

In an interview with the Toronto Star, B.C. Finance Minister Carole James warned that B.C.’s land-ownership registry could push more dirty money into other jurisdictions, such as the Toronto real-estate market, which experts say is already vulnerable to money laundering.

“As other countries strengthen their laws, we’re at risk,” Comeau said. “If you put in fines and meaningful prison time … the money launderers want to stay away from jurisdictions with strong enforcement.”


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