Canada slowly pushes for corporate transparency as part of anti-corruption push
A registry, coming into force in June, requires corporations to disclose who has "significant control" of an entity
TORONTO – The veil of Canadian corporate secrecy that helps fuel global corruption is slowly lifting, but not fast enough for some critics.
Canada, criticized in the past by the Organisation for Economic Co-operation and Development (OECD) and others as a laggard on anti-corruption policies, has taken steps in recent years to catch up to its more advanced peers, including new measures set to come into force in June.
The recent changes and initiatives have been encouraging to those working to stamp out bribery and other forms of corruption.
“We’ve made a number of strides in the last few years,” said Pat Poitevin, who investigated corruption with the RCMP before co-founding the Canadian Centre of Excellence for Anti-Corruption.
“I should be the biggest pessimist in the world, 35 years in the RCMP dealing with a whole bunch of crimes, but I see a change.”
One of the biggest areas Poitevin and others have been calling for action on is a beneficial ownership registry, so investigators can better track the money and find out who is benefiting from bribes, money laundering and other illicit activity.
That registry is coming into force in June, when corporations have to start disclosing who has “significant control” (or more than 25 per cent control) of the entity, rather than use a nominee name that can be easily be bought to hide true ownership.
The registry, however, will mostly be restricted to regulator access, falling short of the public registry pioneered by the U.K. and that the EU has mandated, said James Cohen, executive director of Transparency International Canada.
“The current amendments will do a little bit, but not very much.”
The registry, which will require trusts to start disclosing ownership in 2021, is part of “tepid” action and resources devoted to stamping out corruption by Canada, said Cohen.
“Our capacity is still short, and our general interest tends to be not sufficient in combating the issue.”
He said too often bribery is seen as a victimless crime, when the cost is quite high. The UN estimates global cost of corruption is at least US$2.6 trillion, or five per cent of the global gross domestic product
Canada has moved slowly on some files in the past. It was only in 2017 that small-scale “facilitation” bribes were added to what’s banned by the Corruption of Foreign Public Officials Act.
There have been efforts to increase disclosures in the resource sector, including the Extractive Sector Transparency Measures Act enacted in 2014.
The act, which requires resource companies to disclose what they pay to governments, has been somewhat effective in identifying some suspicious gaps in money trails, said Jamie Kneen at MiningWatch Canada.
But the push for transparency only goes so far in a fight against complex international financial schemes and a high bar for convictions, Kneen said.
“The bar is very high, and investigations are very difficult, especially if the RCMP have to go to another country and gain the co-operation of police there.”
The challenge in conviction is part of what motivated the federal government to introduce the deferred prosecution agreement (DPA) option that came into force last year, that would allow companies to avoid a criminal trial and allow for quicker resolution.
DPAs have been mired in controversy since it was revealed that federal officials had pressured former attorney general Jody Wilson-Raybould to grant one to SNC-Lavalin, but anti-corruption campaigners hope the government will go further to allow administration and civil enforcement options for even more flexibility, and encourage more self-reporting by companies on an issue that is notoriously difficult to prosecute.
“Ultimately, corporations can’t do jail time,” said Joanna Harrington, a law professor at the University of Alberta.
“So if it is difficult to prove, difficult to find out about, typically investigators are relying on someone within the company telling or disclosing, and that leads to the situation of what can you offer in return.”
Non-trial is certainly the norm for OECD countries, with close to 80 per cent of the nearly 900 cases that have come up in the last 20 years resolved through non-trial resolutions.
However, the effectiveness is questionable.
Last year, Kinross Gold Corp. settled with U.S. regulators for about US$1 million for repeatedly failing to have enough safeguards in place to prevent corrupt activity in its Mauritanian subsidiaries, which, given the company spent billions of dollars investing into country, raises concerns on the potential leniency of the system, Kneen said.
“It does have its upsides; whether it’s an adequate deterrent I don’t know,” said Kneen.
Companies themselves are, however, seeing the importance of stamping out corruption as hits to reputation, insurance, financing and other costs rise on mere accusations of wrongdoing, said Poitevin.
“I’m looking at the change in the corporate mentality. So there’s more people and corporate entities that are recognizing well, it’s actually costing me money to get ensnared in corrupt conduct.”
Junior resource companies, meanwhile, need to show active compliance programs to make sure they satisfy risk assessments by the majors they hope to be acquired by, Poitevin said.
He said that much like it took time and effort to curb habits around drunk driving, perceptions around bribery and corruption will take time to change, and while slow and frustrating, the push for transparency is helping.
“With corruption, it’s going to take a while to change the corporate social norms, the corporate organizational norms, around corruption. Because before 1999, bribery was tax deductible.”