By Ian Burns for The Lawyer's Daily
A Canadian think tank is calling one of the marquee initiatives of British Columbia’s fight against money laundering largely toothless and is recommending a major revamp in order to have it do what it was actually set up to do.
In 2018, B.C.’s NDP government brought in the Land Ownership Transparency Act (LOTA) as part of its efforts to fight money laundering in the province, which it says has driven up the price of real estate in the province. In B.C., the land title office records the legal owners of all land parcels in the province, but it does not record beneficial owners — those individuals who ultimately own the land in question. For example, if a house is owned by a numbered company which is controlled by a drug trafficker the land title registry will list only the company, allowing the drug trafficker to remain anonymous.
The legislation attempts to correct that problem by requiring companies, trusts and partnerships to publicly disclose their beneficial owners on a new land owner transparency registry. The primary purpose of such a registry is to help law enforcement agencies detect, investigate and prosecute money laundering by providing quick access to critical information, but a report from the C.D. Howe Institute said it will be a “paper tiger” unless key changes are made.
Author Kevin Comeau said the fundamental flaw with the registry is the fact that it does not require verification of the beneficial owner’s identity.
“You can simply make up a name, any name, because nobody is checking to see if you actually exist,” said Comeau, a corporate lawyer and member of Transparency International Canada’s working group on beneficial ownership transparency. “Ordinary people have nothing to hide, but if you are John Gotti you are going to lie.”
Comeau is urging the province adopt an identity-verification system and require filers to submit copies of government-issued photo identification, such as passports and driver’s licences, and to bring in sanctions for providing false information. Other recommendations include the ability to enable keyword searches to see if money is coming from sources outside Canada, implementing a confidential tip line to pass along information to law enforcement and scrapping the registry’s $5 user fee.
“If you bring in these changes it will catch, or greatly deter, a huge number of money launderers who would otherwise come to B.C., because money launderers make their decisions based on risk and they would flee to another place where it is much easier to not get caught,” he said. “As it currently stands, the information on the registry will be unreliable, difficult to access, difficult to process and, even if it helps a searcher spot a falsely declared beneficial owner, the ability to communicate that discovery to Canadian law-enforcement officials and their ability to leverage it to catch criminals will be curtailed. The good news is that all these flaws can be fixed and in doing so the B.C. government will revolutionize the way we combat money laundering.”
But others are not as sold on the benefits of a registry. Joven Narwal of Vancouver’s Narwal Litigation LLP said the creation of beneficial ownership databases are a “symptom of the international movement toward increased corporate transparency to combat money-laundering, terrorist financing and tax evasion.”
“The models adopted in B.C. for real estate and corporate beneficial ownership are deeply concerning, but also not entirely shocking given the promotion of B.C. as the epicentre for money laundering,” he said. “In B.C., the legislation creates in essence a right for investigative bodies and regulators to access information without any oversight.”
Creating a publicly accessible beneficial ownership for real estate is a significant erosion of privacy that other provincial and international jurisdictions have not endorsed, said Narwal.
“For instance, much of the policy literature suggests that if public registries are to be implemented that there should be tiered access to the governmental versus public access, and other measures designed to ensure that access to information is properly regulated,” he said.
A spokesperson for the B.C. Ministry of Finance said the LOTA is a “leading transparency measure and the first of its kind in Canada.”
“This groundbreaking law has been recognized by leaders in anti-money laundering policy as a key measure for preventing tax evasion and tackling money laundering,” the spokesperson said. “As with the development of every critical legislative change, we implemented an extensive stakeholder engagement process, including experts in the field.”
But the spokesperson said the work on tackling the money laundering issue has not stopped.
“The launch of the registry is an important first step. It will take time to collect information from beneficial owners and that data will help inform next steps,” the spokesperson said. “The Cullen Commission is also looking into money laundering in British Columbia, including, but not limited to, where money laundering touches on the province’s real estate market.”
Filings on the land owner transparency registry are scheduled to commence Nov. 30, with public searches available as of April 30, 2021.