Canada is being taken advantage by criminal organizations who launder dirty money from drug trafficking, smuggling, corruption and fraud, according to a report by the C.D. Howe Institute.
And the feds have failed to enact the proper legislation to stop it, the Canadian research institute says.
Money laundering in Canada is estimate to be between $5 billion and $100 billion, Denis Meunier writes in the study. Taxes evaded on these illicit funds become a burden for those honest, hardworking individuals who pay their taxes as they have to cover the bulk of government costs, it states. Canada is a hotbed for this illegal activity because of a lack of transparency in beneficial corporate ownership, Meunier explains.
Simply put, a beneficial owner is someone who owns 25% or more of a company or corporation. Other countries, especially in Europe, require corporations to have publicly accessible registries for beneficial ownership. But here, these registries aren’t public and the onus is on the financial service provider, such as a bank, to verify the accuracy of the information of the beneficial owners and directors.
However, the study states, they generally rely on customers for this information. This is a lower bar than is required for buying a car or getting a library card which often require photo identification, proof of address, email and phone number.
Canada is ranked 21st worst in the Tax Justice Network’s 2018 Financial Secrecy Index of 112 jurisdictions, the study notes.
“There is a clear link between money laundering and hidden beneficial ownership,” Meunier writes. “The abuse of corporate vehicles and camouflaged beneficial ownership is a recognized means of laundering money — and a worldwide problem.”
It points to a World Bank study that in 85% of 150 grand corruption cases (more than US$1 million) reviewed, companies were used to launder money.
“In more than half of these cases, corrupt officials used nominees, shell corporations and trusts to disguise their beneficial ownership and the proceeds of their crimes,” it states.
The report recommends the feds create a central, publicly accessible beneficial ownership registry and make corporations and trusts to “truthfully and fully disclose” information for that database.