Potential home buyers in this country’s hottest real estate markets have been frustrated by soaring prices. But they don’t always bid against other potential owners. Sometimes they bid against criminals who seek to hide money in real estate.
This is the case in British Columbia, where a government commissioned report It is estimated that money launderers parked $ 5.3 billion in real estate in 2018 alone, enough to push house prices up 5%.
The real buyers behind most of these transactions are difficult to determine, thanks to lax financial reporting laws in Canada that allow people to hide their identities behind numbered or shell companies.
British Columbia hopes to change that with a new database ready to go online Friday with information on the actual owners or “beneficiaries” of properties in the province to deter money laundering.
And now Ottawa is tackling money laundering and other financial crimes as well.
Finance Minister Chrystia Freeland pledged in last week’s budget to do something that crusaders and white collar crime experts have been calling for: create a publicly accessible database of homeowners. ” beneficiaries “of companies.
“To ensure the fairness of our system, this budget will invest in the fight against tax evasion, highlight beneficial ownership agreements and ensure that multinational corporations pay their fair share of tax in Canada,” said declared Freeland in French in the House of Commons.
WATCH | Freeland delivers the 2021 Budget Speech:
But some transparency experts say the change won’t be toothless without the support of provinces and territories, which all have their own laws to incorporate and regulate businesses. CBC News found that they were largely surprised by the federal government’s announcement; most have not made a commitment to participate.
Provinces could be a stumbling block
Sasha Caldera of Publish What You Pay Canada, a group that advocates for greater transparency among resource companies, says all 10 provinces and three territories should commit to the same principles as the federal government.
âIf you’re a criminal, you’ll just pick a jurisdiction with the least regulation and just park your money there,â Caldera told CBC News. “You end up with the same problem.”
James Cohen, executive director of Transparency International Canada, said that harmonized legislation in all jurisdictions is “extremely important”.
âWe don’t want people playing between provinces,â he said in an interview.
Federal, provincial and territorial governments discussed whether and how best to track beneficial ownership in 2016. Their last meeting was in April 2020, and the federal government released a report summarizing the public consultations earlier this month.
In the report, the federal government was wary of the fact that the register of beneficial owners was public, instead of being accessible only to law enforcement agencies, such as the police and tax agencies.
“Public access was not seen by the majority of stakeholders as essential to achieve the policy objectives,” the report says.
Then, without further explanation, the Liberals pledged to create a public registry in last week’s budget, baffling transparency advocates who previously had criticized the recent report.
âYour guess is as good as mine,â Caldera said of the government’s motives. “There are deadlines ahead like the G7 in June and pressure from the G20. We know that some countries were preparing to ask Canada to engage on this issue.”
Cohen said this may be the first time most provincial governments have heard that the federal registry will be available to the public.
CBC News asked the federal Department of Finance if it coordinated with the provinces before making the decision. The government did not respond on Tuesday evening.
Most provinces do not commit
CBC News has reached out to each province and territory for their position on the federal government’s plans. They said they were determined to keep businesses transparent, but only two have concrete plans to reflect Ottawa’s decision.
The Quebec government of the Coalition Avenir Quebec go ahead with a law create a public register of beneficial ownership of businesses.
In New Brunswick, the Progressive Conservatives were the only provincial or territorial government to commit to harmonizing trade legislation with everything the federal government does. The province “remains committed to the values ââof corporate transparency as a means of reducing illegal activity in Canada,” said a spokesperson for Service New Brunswick.
British Columbia, where the NDP government established its first land ownership registry, said it plans to introduce the concept to private companies in the province as well. A spokesperson for the provincial finance ministry said that “establishing this type of registry is a key tool in combating financial crime.”
And Prince Edward Island, noting that it is one of the few jurisdictions in Canada to include shareholder information in its company register, said he was committed to adopting a “coordinated approach” among governments to enhance transparency.
But that’s where the rush ends.
Ontario, Alberta, Manitoba, Saskatchewan and the Yukon have said they are weighing their options but will not commit to taking further steps to lift the veil of secrecy on anonymous companies.
“The [Ontario] The government will continue to review and assess the best approach to improve transparency without creating unnecessary burdens on Ontario businesses, âa Ministry of Finance spokesperson told CBC News.
The other provinces and territories either said they expected more from Ottawa or had no immediate plan to put beneficial ownership registers in place.
“There are too few details at this time,” wrote Cate Macleod, press secretary to Nunavut Premier Joe Savikataaq.
‘Less worried than I would be in the United States’
Drago Kos, chairman of the working group on corruption at the Organization for Economic Co-operation and Development, the association of 37 countries based in Paris, said the need to harmonize rules like this between jurisdictions is still a problem with federal government systems. But he said he was “less worried than I would be in the [United] States âbecause Canada has so many fewer governments that have to come to an agreement.
If some provinces do not initially sign greater transparency, they will feel compelled to do so, Kos said.
“I’m sure these provinces would soon realize that they agree to a hiding place or a safe haven for all types of criminals, people who hide their money and so on,” he said. .
“And I don’t see any sane province that would like to continue to be a safe haven for those kinds of people who want to hide their money.”