Canada’s provinces are not resisting Ottawa’s efforts crack down on international money launderers and tax evaders. They just don’t appear to care, according to a senior source in the federal finance ministry.

Ever since the Panama Papers and Paradise Papers leaks detailed how dirty money from abroad is “snow washed” through anonymous companies in Canada, the federal government has been working with the provinces to tighten up their corporate registries that lack any information on a corporation’s true “beneficial” owners. But there has been little progress on the file.

Each time the finance ministers get together for their biannual meet, they’re more interested in talking about issues like public pensions than corporate disclosure rules, said the source who was present at the meetings and spoke to the Star about the confidential proceedings on the condition that they were not named.

There is so little urgency around the issue that when the conversation turns to collecting beneficial ownership information, provincial ministers take bathroom breaks, the source said.

In Canada it’s possible to register a corporation, open a bank account, and send and receive money overseas all without disclosing your name. It’s the same kind of legal shroud offered by traditional tax havens that facilitates financial crime, money laundering and corruption.

Federal Finance Minister Bill Morneau pledged to improve corporate transparency in last year’s budget.

“We’ve got to do this in concert with the provinces if we want to be effective,” Morneau told the Star in an interview.

Morneau needs the provinces to buy in to his plan because 93 per cent of all companies in Canada are registered at the provincial level.

In December, the ministers struck a deal requiring companies to keep records of their beneficial owners on hand, which will enable police and tax follow illicit funds during an investigation.

Morneau said he was pleased with the agreement.

“By the end of this year, the (Canada Revenue Agency) will have the ability to actually follow through and find out if people are hiding stuff,” Morneau said. “It will make a big difference.”

Critics, however, said the deal was too timid and pointed to the U.K., where beneficial ownership information for all corporations, big and small, is posted in a free searchable online database. The EU recently committed to establishing a public registry in the next 18 months.

“Canada stands out as the laggard,” said James Cohen, director of policy at Transparency International Canada. “No doubt the finance minister is feeling pressure at the international level. He needs to make it felt at the domestic level.”

While the Canadian federal corporate registry is currently available free online, it contains only the most rudimentary data. Many of the provinces are even less transparent.

Ontario, for example, requires a paid subscription to access basic company information and charges $24.05 per search. In this province, beneficial owners are not required to divulge their identity to government, let alone the public.

Canada committed to greater transparency at the G20 summit in Australia in 2014. Since then, Canada and Japan are the only countries in the G7 that have not changed their business laws to follow through on the commitment, according to a Library of Congress report.

“The Government of Canada should lead by example, as the EU member states have done, and have public beneficial ownership registries, which can be used as a model for all the provinces and territories,” said Richard LeBlanc, a professor of corporate governance at York and Harvard Universities.

Last year, a Star/CBC investigation chronicled how dozens of websites around the world offer to register companies in Canada to avoid tax.

Loading... Loading... Loading... Loading... Loading... Loading...

Documents in the Panama Papers revealed how Peruvian lawyers used an anonymous company in Quebec to evade taxes on more than $3 million.

The reports also revealed how one woman in Scarborough was listed as the director of over 200 companies. She didn’t know who was behind any of them because she was paid $100 per year to sign legal documents, no questions asked.

In 2016, Canada was identified as at high risk for money laundering by the Financial Action Task Force, an international body that evaluates risk in individual country’s financial systems. The anonymity provided by numbered companies in Canada has attracted international money launderers, the FATF report stated, and authorities are underestimating “the risk emanating from tax crimes and foreign corruption.”

“Law enforcement agencies generally suffer from insufficient resources and expertise to pursue complex money laundering cases,” states the international evaluation. “Criminal sanctions applied are not sufficiently dissuasive,” with sentences of one month to two years imprisonment “even in cases involving professional money launderers.”

This week, Canada was ranked 21st in the world for financial secrecy, two spots worse than its last ranking in 2016, before the release of the Panama Papers.

By looking at the amount of money that flows through a country and the ease with which its true owner can be disguised, the Tax Justice Network ranked Canada worse than both Russia and China. Even traditional tax havens like Cyprus, Bermuda, and Barbados provide less cover for money laundering and corruption, according to the group of international accountants, academics and researchers.

This repeated raising of red flags hasn’t reached all the provinces, which remain unaware of the pressing need for reform, said Sasha Caldera, a member of Canadians For Tax Fairness who has been meeting with provincial and federal politicians on the issue of beneficial ownership.

“There isn’t a good understanding of why a registry is needed and how it works to curb money laundering,” Caldera said.

“We just have to boost the knowledge and bring the issue of beneficial ownership down to earth so government officials understand it and commit to getting it to work.”

While optimistic that progress could be made with the provinces, Ottawa expects Canada will not be able to implement a national beneficial ownership registry like the UK.

Because the provinces have jurisdiction over business registration and are unlikely to give up that power, Ottawa is pushing for a national standard for transparency the provinces will all agree to abide by, the source said.