Ontario Premier Doug Ford and Alberta Premier Danielle Smith in Saskatoon in June.Nayan Sthankiya/Reuters
Ontario is promising to reveal the ultimate owners of nearly half a million private companies, a measure to thwart the flow of dirty money into the province by organized crime groups.
Premier Doug Ford’s government announced its plan to implement a beneficial ownership registry by 2027 as part of its recent fall economic statement, pledging to provide police, securities regulators and tax authorities with a new tool to catch financial criminals who use secret companies.
“Ontario’s proposed approach aligns with efforts under way in other provinces and at the federal level and would contribute to a co-ordinated national framework that strengthens Canada’s overall economic security and resilience against financial crime,” says the province’s fall economic statement.
I often write columns criticizing political inaction on financial crime, but the Ford government deserves kudos for taking this step because it advances a national goal of creating a pan-Canadian corporate registry.
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Ontario is now the third major province, after Quebec and British Columbia, to make such a commitment to fight money laundering through anonymous corporate entities. It will intensify pressure on Alberta, a notable holdout, to play catch-up or risk becoming a stronger magnet for illicit financial flows.
Private corporate entities, such as shell companies, are routinely exploited by criminals to launder illicit profits because they can be used to access the banking system while concealing their true owners.
Although a beneficial ownership registry already exists for an estimated 458,000 federally-registered companies, the vast majority of private businesses are actually incorporated at the provincial level.
Ontario has roughly 450,000, the largest share of private corporations in the country. There are approximately 257,000 in Quebec, 191,000 in British Columbia and 162,000 in Alberta. (Saskatchewan and Manitoba each have 41,000, while the four Atlantic provinces collectively have an estimated total of 78,000.)
Quebec is the only province with an operational corporate registry to date.
B.C. is continuing work on its corporate database, but it previously launched a separate land ownership transparency registry that includes properties owned by companies.
All provinces, except Alberta, have existing bare-minimum measures that require privately-held corporations to collect and maintain beneficial ownership information.
“Alberta stands out as the only province that doesn’t have any kind of beneficial disclosure rules, and that’s a big eyesore,” said Sasha Caldera, campaign director of the beneficial ownership project at IMPACT, an Ottawa-based natural resource governance organization that does work on illicit financial flows.
“It’s a risk for the country.”
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As Mr. Caldera points out, when a province such as Alberta resists requiring basic ownership transparency from private companies, it “attracts the worst kind of money.” That, in turn, boosts prices for homes and other assets.
It also harms economic productivity. That’s because law-abiding companies end up paying higher commercial rents or mortgages because of inflated property values, leaving them with less capital to invest in machinery and other technology, he added.
What’s more, Alberta’s obstinance is sure to be identified as a deficiency in Canada’s broader efforts to combat financial crime.
A team of assessors from the Financial Action Task Force (FATF), a global body that sets standards to combat money laundering and terrorist financing, is conducting an on-site evaluation this month and is scheduled to release a final report next June.
“They’re going to name subnational risk and Alberta, for sure, is going to be one of those provinces that will be named,” Mr. Caldera added.
The Globe and Mail has reported extensively on the abuse of shell companies by criminals, including some incorporated in Alberta.
Indeed, corporate structures are being increasingly exploited for illicit financial activity, according to a confidential report prepared by Canada’s financial-crimes watchdog.
The strategic intelligence backgrounder, titled “Use of Corporate Structures to Facilitate Financial Crimes,” was prepared in March, 2023, by the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC).
A redacted version was obtained by Ottawa-based researcher Ken Rubin through a request made under the Access to Information Act and then shared with The Globe.
“An estimated 70 per cent of all money laundering cases in Canada involve the misuse of corporate legal entities,” it states.
Shell corporations (businesses that exist purely on paper), shelf companies (dormant companies with inactive shareholders and directors that are acquired by criminals for their perceived corporate history) and front companies (active businesses that conceal illegal activity) are most commonly used by money launderers, according to the report.
FinTRAC’s analysis found that suspected shell companies sent approximately $10.8-billion in electronic funds transfers to Canadian entities and received some $9.6-billion from Canadian bank accounts between 2012 and 2021.
The report also notes that Canada’s beneficial ownership transparency is “particularly relevant” to the current FATF review, stressing that abuses of corporate nominee arrangements also constitute “a major vulnerability.”
Although there are legitimate reasons for a corporation to name nominee shareholders and directors, they can also be used to obscure ownership.
“Beneficial ownership registers will not achieve their aim unless care is taken to ensure the transparency of nominee arrangements,” added the FinTRAC report.
To be sure, all provinces must do more to disrupt money laundering. But given its economic importance to Canada, Alberta cannot afford to be seen as the weakest link.