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May 7 – The fight against money laundering in Canada will require tougher measures that shine a light on the perpetrators who now operate in the shadows, says a new report from the C.D. Howe Institute. In “Why We Fail to Catch Money Launderers 99.9 percent of the Time,” author Kevin Comeau supports the creation of a publicly accessible registry of beneficial ownership, and mandatory declarations of beneficial ownership with meaningful sanctions for false declarations.

Canada’s anti-money-laundering protections (particularly as they pertain to real estate) are among the weakest of those of the western liberal democracies, he writes, so Canada likely receives a significant amount of international dirty money. “While it is impossible to estimate the exact amount of money laundering, a realistic estimate of the magnitude of dirty money laundered in Canada each year likely lies in range of $100- $130 billion,” says Comeau. 

Unfortunately, neither the House of Commons Standing Committee on Finance in its November 2018 report on money laundering, nor the December 2018 amendments to the Canada Business Corporations Act, included either of the two tougher measures.

Working from first principles, Comeau explains why those two measures are instrumental to combatting money laundering.  He identifies three unique advantages money launderers enjoy over those tasked with investigating and prosecuting their crimes — the effective invisibility of the crime of money laundering, the anonymity of its perpetrators, and the legal obstacles to following their dirty money — from which he derives the objectives and legislative initiatives needed to reduce those advantages.

“Anonymity and invisibility could be reduced by implementing a publicly accessible registry of beneficial ownership of companies, trusts and real estate. Structured properly, a public registry would offer a two-way flow of information – communication of beneficial ownership information to the world and communication of foreign-based information to Canadian authorities – which would bring more bad guys into the light of day, “ he explains.

Comeau says that privacy concerns are critically important.  That’s why he recommends that a public registry should divide filed information into publicly accessible and strictly confidential compartments. Basic information needed to connect perpetrators of crimes to their registered nominees would be publicly accessible. Sensitive information, such as passport numbers and full residential addresses, would be protected as strictly confidential and accessible only by the registrar to verify filed information and by law enforcement agencies on a need-to-know basis.

He also notes that the public registry would only require disclosure of beneficial ownership.  It does not involve any disclosure of financial information or business operations, thereby minimizing intrusion on privacy.

“Obstacles to following the dirty money could be reduced by creating a new criminal offence: a false declaration of beneficial ownership, whether made on a public registry or submitted by a customer to a Reporting Entity. Not only would such an offence bring more integrity to the beneficial-ownership information being disclosed; it would also provide a solid base from which law enforcement agencies could conduct investigations of suspicious transactions,” explains Comeau.

Implementation of these two recommendations should fundamentally improve Canada’s ability to combat money laundering and reduce the harm it inflicts upon Canadians and other global citizens. Perhaps then Canada will no longer fail to catch money launderers 99.9 percent of the time.

Read the Full Report

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

For interviews or more information, contact: Kevin Comeau or Laura Bouchard, Communications Manager, C.D. Howe Institute. Phone: 416-865-9935. Email: lbouchard@cdhowe.org