The Federation of Law Societies of Canada supports the creation of a beneficial ownership registry for federally incorporated companies as an appropriate, necessary and welcome measure to combat money laundering, terrorist financing and other illicit activities.
In a submission responding to the consultation paper issued by the Department of Innovation, Science and Economic Development and the Department of Finance, the Federation says a critical issue will be access rules for the proposed registry, which must enhance efforts to fight money laundering and the financing of terrorism. The Federation submission says legal professionals and other reporting entities must be given access to the registry from the start “to ensure that they have an objective, reliable means of fulfilling their obligations to identify beneficial owners.”
The Federation acknowledges there are competing public policy interests in determining access rules. Careful consideration must be given to how to balance the goal of greater corporate transparency with the need to respect the reasonable privacy interests of individuals whose information would be accessible through a registry.
The Federation also notes that a registry must not, directly or indirectly, require legal professionals to report information protected by solicitor-client privilege or professional secrecy to government authorities. The Federation submission says it is “thus imperative that the registry regime be designed and implemented in a manner that respects the constitutional protections for solicitor-client privilege and professional secrecy recognized by the Supreme Court of Canada.”
It is the Federation’s position that access to the registry must be provided both to competent authorities (e.g. law enforcement) and all persons with due diligence obligations under federal anti-money laundering and terrorist financing legislation or provincial/territorial law society rules.
“Access to reliable beneficial ownership information is essential if the obligations on reporting entities under federal regulations, and those imposed on legal counsel by the law societies are to be meaningful and effective” the Federation submission states. “In the absence of access to reliable information in a central registry, legal counsel and others obliged to identify beneficial owners as part of due diligence requirements are left with no choice but to rely on information provided by their clients or the entities themselves with limited means of verifying the accuracy of the information.”
The Consultation Paper issued by the Department of Innovation, Science and Economic Development and Department of Finance states the primary goal of a central registry would be to ensure authorities have immediate access to corporate ownership information. This would allow for faster investigations with reduced risk of “tipping off” those under investigation. The Federation submission says restricting access to government authorities “would significantly limit the registry’s utility and effectiveness.”