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Canada being marketed as a place to hide dirty money

Ottawa (28 March 2022) — A report released earlier this month shows how Canada is being marketed to criminals and tax-dodgers as a place to hide their money. As the report, Snow-washing, Inc: How Canada is marketed abroad as a secrecy jurisdiction, makes clear the secrecy around who controls companies registered in Canada has resulted in companies and partnerships registered in Canada being promoted as a way to hide dirty money.

Snow-washing a threat to Canada’s international reputation

The problem of companies and partnerships registered in Canada being used to hide dirty money has reached the point that it is now known as “snow-washing.” The report was produced by the End Snow-Washing Coalition, which consists of Canadians for Tax Fairness, Transparency International Canada and Publish What You Pay Canada and has been campaigning for measures that would make it harder for criminals and tax-dodgers to use Canada to hide money. 

Snow-washing provides no economic benefit to Canada as shell companies don’t employ people and generate little or no tax revenue. Instead, our international reputation suffers as people start to see Canada as a place where criminals and tax-dodgers hide dirty money.

Russian oligarchs among those believed to be using Canada to hide money

As the report outlines, the use of Canadian registered companies and partnerships have been promoted as a way to hide money in Russia. While the secrecy around corporations and partnerships registered in Canada makes it hard to establish the extent to which Russian oligarch are using Canadian corporations and partnerships to hide money, leaks and records in other countries make it clear that it is a problem. One example is six Alberta limited partnerships which are described as part of “the Russian transnational laundromat.”

At a time when Canadians are appalled by the Russian invasion of Ukraine and demanding tougher sanctions, there’s a good chance that the secrecy around who owns companies and partnerships registered in Canada is being used by Russian oligarchs trying to hide their assets.

Publicly accessible beneficial ownership registry an important tool for ending snow-washing

There are 3 conditions that make companies or partnerships registered in Canada attractive for hiding money: 

  • the secrecy around who owns them,
  • the ability to set them up and control them from outside Canada;
  • and the lack of reporting requirements.

For that reason, the report recommends implementing a public beneficial ownership registry, which would show who really controls companies registered in Canada, as soon as possible.

Speeding up the implementation of a publicly accessible beneficial ownership registry was part of the recent Liberal-NDP agreement. However, co-operation from provincial and territorial governments will also be needed. 

Governments need to oppose any attempt to weaken the reporting requirements for the planned registry or reduce transparency by hiding the information behind paywalls. To be expective registries, provisions need to include the names of people who really control companies or partnership (as opposed to only including the names of nominees acting as front people), strong reporting requirements, independent verification of information supplied and strong enforcement of the rules.