Pre-launch changes strip highly touted program of potential power and functionality, says C.D. Howe
A provincial program that was proposed to clean up Canada’s reputation as a global laggard in anti-money laundering efforts is now looking more like an empty enforcement gesture, according to a new paper published by the C.D Howe Institute.
Kevin Comeau, the report’s author and a member of Transparency International Canada’s Working Group on Beneficial Ownership Transparency, slammed the BC government for taking away the potency of an upcoming public registry of beneficial ownership for land, which was touted as an antidote to a widespread money-laundering problem linked to real estate in the province.
“[A]s the enabling Land Owner Transparency Act(“LOTA”) moved through the legislative process, it became evident that even the most basic lessons learned from existing public registries were being ignored,” Comeau said. “The final product, scheduled to be launched this fall, will likely do little to stop money laundering in BC real estate.”
The most gaping gap in the LOTA registry, he said, is the absence of a requirement for registry officials or any other persons to independently verify identification information filed on the registry, nor a requirement for filers to submit copies of government-issued photo ID.
While the LOTA does require a transferee or a reporting body to certify a transparency declaration or transparency report, he said that still leaves the possibility that criminal organizations and their frontmen would certify their own declarations and reports. Registry administrators or designated enforcement officers are also given discretionary power to demand verification to determine compliance with the act, but such demands would likely not go far beyond spot checks or cases where non-compliance can be reasonably suspected.
“[I]f the identification information filed on the registry is false or misleading, particularly if the name is fictitious, it minimizes the ability of law-enforcement agencies and public searchers to identify criminal frontmen with connections to the perpetrators of crime,” Comeau said.
Holes in the registry’s identity-information verification would also be problematic for BC real estate brokers and real estate representatives, he said. Because they have no expertise in identity verification and often lack the financial means to establish or access proper verification systems, those professionals were hoping to use the LOTA registry as a tool to meet know-your-client obligations that will come into effect for them on June 1, 2021.
Another barrier to anti-money laundering efforts comes from the sanctions attached to false declarations, which under the LOTA are limited to fines and not prison sentences. That’s in contrast to the BC Securities Act, under which a person who makes a materially false or misleading statement in a filing with the province’s securities commission would face a fine of up to $5 million and five years in prison.
Among “numerous barriers to efficient searches of the registry,” Comeau said, is a fee of $5 per search, a figure that “nonsensically applies to all law-enforcement agencies and government regulators such as the RCMP, the Canada Revenue Agency and the Canada Border Services Agency.” Likewise, he said the lack of keyword searches – the registry only allows the public to search for a specific person’s name or the land parcel identifier for a property – is an impedance as it does not allow broader queries for information, such as a country name search to turn up names of all persons with a connection to that country.
“That restriction makes no sense given that a key objective of the registry is to enable the public to connect criminal frontmen and falsely declared beneficial owners to the perpetrators of predicate crimes,” Comeau said.
