18 June 2013
Enniskillen, Northern Ireland
Recognizing the importance of transparency of corporations and trusts in the fight against domestic and international crime, the Government of Canada has implemented measures to prevent and detect the illicit use of corporations and trusts and will continue to review the effectiveness of its transparency measures.
Current Measures
Canada’s anti-money laundering and anti-terrorist financing (AML/ATF) regime is based on several laws including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the Criminal Code. The PCMLTFA and its regulations, as well as the Canada Business Corporations Act (CBCA) and its regulations, are the key federal laws that contains provisions relating to corporate transparency. The CBCA recognizes that transparency contributes to good corporate governance. Given that entities in Canada can also incorporate provincially, laws similar to the CBCA also exist at that level.
Basic Information on Corporations
When federally incorporated under the CBCA, entities can operate in any Canadian province and must comply with several requirements, including:
- Providing basic information to Corporations Canada[1] when submitting a request to incorporate (i.e., name and address of the corporation office, names and addresses of directors);
- Providing to Corporations Canada, within 15 days, any changes to the board of directors and/or the address of the registered office;
- Maintaining and keeping a registry of shareholder information in Canada, or which is accessible from Canada;
- Having a registered office in Canada; and
- Ensuring that at least 25 per cent of the directors are resident Canadians.
The basic information provided to Corporations Canada, with the exception of the directors’ addresses, is publicly available on the Corporations Canada website. Directors’ addresses can be provided by Corporations Canada upon request. The CBCA provides that shares shall be in a registered form. The CBCA contains a number of measures to ensure compliance, including inspections and sanctions.
Public disclosure of shareholders who own directly or indirectly, or control or direct, 10 per cent or more of the voting rights of a company listed on a stock exchange in Canada, is currently required, among several measures, by provincial securities regulators.
Beneficial Ownership Information on Corporations
The PCMLTFA includes several measures applicable to financial institutions and intermediaries (e.g., banks, trust companies, securities dealers, money services businesses) and non-financial businesses and professionals (e.g., real estate brokers, accountants), which are commonly referred to as reporting entities. In particular, reporting entities must conduct customer due diligence on their clients, including corporations. Since June 2008, the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR) have required financial institutions and intermediaries to implement a number of customer due diligence measures in relation to beneficial owners of corporations and other types of legal persons.
The PCMLTFR were amended in January 2013 to further strengthen customer due diligence measures. These amendments, which will be in force on February 1, 2014, include improvements in respect of:
- the identification of the beneficial owners of clients that are corporations and trusts (i.e., obtaining, taking reasonable measures to confirm the accuracy of, and keeping records of the information);
- the requirement to obtain information on the purpose and nature of a business relationship when entering into such a relationship with a client;
- the ongoing monitoring of business relationships with clients, using a risk-based approach; and
- the application of enhanced measures when dealing with high-risk customers.
The PCMLTFR further identify “beneficial owners” as all individuals owning or controlling, directly or indirectly, 25 per cent or more of the shares of a corporation. Regarding trusts, the identification includes information on all trustees and all known beneficiaries and settlors of the trust.
The PCMLTFA also contains a number of measures to promote compliance, including inspections and sanctions.
Domestic and International Access to Basic and Beneficial Ownership Information of Corporations
Competent authorities in Canada can access publicly available basic information of corporations through federal and provincial government websites, upon request or by sourcing commercial databases. Competent authorities, such as law enforcement, can also obtain beneficial ownership information from reporting entities subject to the PCMLTFA, through production orders or other mechanisms. Similarly, international access to information not publicly available is done through the usual Mutual Legal Assistance Treaty procedures.
Commitments
In order to combat money laundering, terrorist financing and other crimes such as tax evasion and drug trafficking, it is important that law enforcement and other government agencies continue to have access to accurate information on individuals who own and control corporations. Therefore, the Government of Canada is committed to further improving its AML/ATF regime as follows:
Risk Assessment
To better understand the money laundering (ML) and terrorist financing (TF) risks associated with its AML/ATF regime in general, and particularly in relation to corporations and trusts, the Government will:
- develop a new ML/TF risk assessment framework;
- conduct, by 2014–2015, its first formal assessment of ML/TF risks including risks related to legal persons and trusts in Canada; and
- use the results to better inform the development and implementation of effective policies and operational approaches to mitigate the identified risks.
Accuracy and Update of Basic and Beneficial Ownership Information of Corporations
Starting on February 1, 2014, reporting entities subject to the PCMLTFA will be required to comply with the new customer due diligence measures in the amended PCMLTFR, including with respect to corporations and trusts. The Government will also issue guidance for the new measures prior to that date.
Public Consultation on Corporate Transparency
As part of a broader consultation on the CBCA, the Government will consult stakeholders on the issue of corporate transparency, with a focus on:
- the improved access to accurate and timely information by competent authorities such as law enforcement on beneficial ownership of corporations;
- the disclosure of ownership information regarding bearer shares and bearer share warrants;
- the disclosure by nominee shareholders of information on the individuals for whom they are acting; and
- the possibility of establishing a central registry for entities incorporated under the Canada Business Corporations Act.
Following these consultations, the Government will consider options to further improve its corporate transparency framework.
[1] Corporations Canada is Canada’s federal corporate regulator.
