November 9, 2020 — BC’s new anti-money laundering effort will be a paper tiger unless key changes are made, according to a new report from the C.D. Howe Institute.
In “BC’s Public Registry to Combat Money Laundering: Broken on Arrival” Kevin Comeau notes the province's new public land registry, created under BC’s Land Ownership Transparency Act (LOTA), has significant flaws that greatly undermine its ability to help investigators detect money laundering in BC real estate. This report lays out the changes that should be made to the registry to give it the teeth it needs to be a serious deterrent to criminals.
When the British Columbia government announced in 2018 that it would implement a publicly accessible registry, hopes were high that it would effectively combat the province’s money laundering problem.
However, in the ensuing months, the BC government stripped the highly touted public registry of almost all its potential power and functionality. The final product, scheduled to be launched this fall, will likely do little to stop money laundering in BC real estate. And, once again, Canada will have failed to show it is serious about combatting money laundering.
If the key recommendations in the report are adopted, the BC public registry would become a powerful tool to combat money laundering in BC real estate. It would help reduce upward pressure on housing costs, generate significant government revenue, undermine the principal foundation upon which international money-laundering systems are built, and provide added safeguards against international money laundering, including from authoritarian regimes.
The report makes a number of recommendations, including:
- Implement a proactive, identity-verification system and require that filers submit copies of government-issued photo identification (e.g., passport and drivers licences) to ensure the beneficial owner actually exists and they are whom they say they are. At present, filers can simply use fictitious names with minimal chance of being caught, rendering the BC registry effectively useless.
- Impose meaningful sanctions that include prison sentences for filing materially false information. To criminal organizations, fines alone are simply the cost of doing business. Adding prison sentences would not only deter criminals from laundering their dirty money in BC real estate, it would increase the ability of law-enforcement agencies to negotiate plea deals with frontmen and false declarants in exchange for information to prosecute and convict perpetrators of the crimes predicate to money laundering (e.g., drug trafficking, human trafficking; political corruption and tax evasion).
- Enable keyword searches so Canadian searchers can easily identify the foreign countries where the money is coming from and foreign searchers can easily identify false registrants from their home country that are connected to criminal organizations and corrupt government officials.
- Implement a Confidential Tip Line to enable searchers to pass along critical information to Canadian law-enforcement agencies and designated regulators such as the Canada Revenue Agency.
- Remove the $5 user fee. User fees, even small ones, deter searches and reporting, which is counterproductive to the fundamental purpose of a public registry of beneficial ownership.
“As it currently stands,” said Comeau, “The information on the registry will be unreliable, difficult to access, difficult to process and, even if it helps a searcher spot a falsely declared beneficial owner, the ability to communicate that discovery to Canadian law-enforcement officials and their ability to leverage it to catch criminals will be curtailed. The good news is that all these flaws can be fixed. In doing so, the BC government will revolutionize the way we combat money laundering.”
For more information contact: Kevin Comeau, corporate lawyer and member of Transparency International Canada’s Working Group on Beneficial Ownership Transparency; or David Blackwood, Communications Officer, the C.D. Howe Institute 416-873-6168, firstname.lastname@example.org
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.