With global pressure for more transparency and compliance when it comes to tax evasion, anti-money laundering and financial crime, Canada, both provincially and federally, has taken steps to create initiatives and legislation to keep ahead.
While much of the focus, particularly in the press, has been the traditional off-shore jurisdictions, the on-shore world is not immune to the same problems and pressures of trying to stop abuses surrounding taxation and monetary compliance.
Canada Business Corporations Act
Starting in June 2019, federally incorporated private companies will be required to keep a register of individuals who indirectly or directly have significant control over the corporation to determine the ultimate beneficial owners (UBO). The Canada Business Corporations Act's purpose is to combat money laundering and terrorist financing in Canada.
The definition of "significant control" in this act refers to an individual whose shares equal 25% or more of the voting rights or 25% or more of market value of the company. It also covers an individual that has direct or indirect influence that would result in control of the corporation.
Companies must register all the personal information of the UBOs and at least once a year must make sure they have identified and documented any changes to the list. If a company does not comply and produce as well as maintain the UBO information, then there will be liability on the part of the director. While this is a federal requirement, it is anticipated that provinces will look to adopt similar legalisation for businesses that are incorporated only on the provincial level.
This act has the potential to affect all business across all of Canada, ones that are already operating and companies that are coming into the country. They will need to be fully transparent about who they are and where their money has come from in order to participate in the Canadian economy. If the company is not fully compliant with these requirements, there are proposed penalties and fines that can be imposed on the UBO or the directors.
Property registry legislation in British Columbia
British Columbia is the first provincial government in Canada to introduce property registry legislation that requires corporations, trusts and partnerships that own or buy land to disclose their beneficial owners. The aim of this legislation is to identify the people behind the entities that are purchasing the land, which will increase transparency around ownership and cut down on money laundering and tax evasion. British Columbia will enforce the collection of the ultimate beneficial owners (UBO) of property and the information will be publicly available. The fines for not disclosing the UBO could be up to CAD100,000 or 15 percent of the assessed property value.
Anti-money laundering call to action
Previous anti-money laundering legislation in Canada had many deficiencies that were identified by the global Financial Action Task Force, such as customer identity due diligence requirements. As a result, amendments to the regulations are coming into in effect in Canada. Canadian financial institutions will have to increase their practices and procedures around the collection of KYC and the monitoring of transactions. They will have to update requirements for business dealing in virtual currencies and work to close loop holes for money services business and foreign exchange dealers. The new regulations will help to uphold the integrity of the financial system in Canada.
We can help
TMF Canada can help existing business already operating in Canada as well as new businesses looking to set up in the country stay compliant with these regulations. Some of these new rules only affect specific provinces while others are federally mandated and our experts know and understand the steps your business must take to not be penalized. TMF Canada's professional team can help with updating and maintaining all the changes to the public registries to ensure that the UBO and KYC information is correct. Talk to us.
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