Despite the existing stringent measures put in place by governments to eradicate it, money laundering has been around the block for eons and can be defined as the (illegal) concealment of the origins of illegally obtained money (drug or human trafficking, embezzlement, terrorist funding) by passing it through legitimate sources (banking transfers, commercial transactions). It can almost be said that like most chronic health challenges, money laundering is a socioeconomic disease that can only be curbed, managed, but never treated. Long before the COVID-pandemic, money laundering was a tumour in need of resecting for fear of it spreading all through and taking control of the body, society. What was, and still is, the most frustrating thing about it is not just the very act of deception but its far-reaching effects.
As is commonly said, “only he who has something to hide shuns the light.” People only engage in money laundering because there is something nefarious about the money’s origin. These nefarious actions are almost always executed at the expense of innocents who are either too weak to defend themselves (human trafficking), do not know any better (drug trafficking), or were too trusting (embezzlement of funds) of the perpetrators. As a result, persons are continually exploited to pad the pockets and wallets of others. Recently, some of the most prominent effects of the pandemic-induced lockdown were an increase in unemployment and the resulting idleness. Couple that with the technological advancements attained in this age, many people find themselves victims to various forms of financial crimes, most affected without the victims’ knowledge and with a few keystrokes by the perpetrator(s).
As the name denotes, once acquired, this “dirty” money needs to be “laundered” to render it clean, at which point a second or the very same set of victims are again exploited. A short example is a secondary school teacher, Ms. B, who is careful about her expenses, saving as much as possible whenever it is possible. Her hope is to buy a house in the next three years, and based on her current saving plan, that is feasible. Come in her bank’s manager, Mr. C, who does the heinous act of embezzling funds from the bank before disappearing. The first and most immediate impact on Ms. B. is that she has lost her funds. Having succeeded thus far, Mr. C, in need of a place to stash and multiply (yes, because his greed dictates that he should support his unmerited lifestyle) his acquisition, invests it in real estate, hiding his identity behind numbered or shell companies. Of course, because he has more funds than those he has defrauded, Mr. C. can bid on an unlimited number of real estate and for longer, even when the housing prices rise. This is another adverse impact to Ms. B, for not only did she lose her savings to him, but she is also losing her dream home, and there is nothing she or anyone else can do because his identity is hidden. Such has been the case in Canada, which offered anonymity to tax evaders and money launderers until recently.
Despite the cry of the masses about the need to respect privacy laws, the recent overflow of conspiracy theories surrounding the pandemic and other seemingly financial-motivating schemes worldwide, and their apparent impact of distress on the public as a whole has propelled government bodies to reinforce their fight against white-collared crimes in the least invasive manner possible. In Canada, the anti-money laundering (AML) regime has tightened financial reporting laws to be implemented come June 1st, 2021. The most prominent of these laws, introduced to mitigate corruption and money laundering, is the know your client or KYC rule, now effective in all sectors. Per the KYC rule, all business entities are mandated to demand and confirm the accuracy of client identification by collecting the beneficial ownership information of the companies with whom they do business.
The purpose of the know your client rule is to implement a beneficial ownership registry for businesses and corporations, available to and accessible by the public. This way, individuals and businesses can investigate who they are “getting into bed with” in business. Although several studies show that this is going to be a costly venture (thus questioning its viability), several other studies have demonstrated that for, and to the layman and model citizen, it is a long-awaited and assuring response, and a demonstration that necessary action is being taken by the governing bodies to simultaneously protect them and arrest those who attempt to commit financial crimes like evade taxes and launder money. This anti-corruption measure is corroborated by the United States’ recently-instituted non-public beneficial ownership information registry.
The need to censor the propagation of financial crimes is without a doubt at the forefront of prerequisite measures to improve standard and quality of life on a global scale as many reports posit that tax dodging and money laundering bleed national economies of a significant amount (in the range of billions of dollars, annually). With Canada taking its place as one of several nations striving to boost corporate transparency, there is no doubt that many other countries will follow suit to embrace and institute such crime-repelling measures. By doing so, it is posited that a beneficial ownership registry will enable economies to recover significant tax revenues, support law-abiding citizens and businesses, and ensure that the more daring of companies that wield their power and influence to exploit others are curtailed.
Canada’s budget introduces long-awaited beneficial ownership registry to combat money laundering: https://www.osler.com/en/blogs/risk/april-2021/canada-s-budget-introduces-long-awaited-beneficial-ownership-registry-to-combat-money-laundering
Federal pledge to publicly disclose who owns some private companies catches provinces off-guard: https://www.cbc.ca/news/canada/federal-private-ownership-registry-1.6004004
NGOs Praise Canada’s New Corporate Ownership Registry: https://www.occrp.org/en/daily/14277-ngo-s-praise-canada-s-new-corporate-ownership-registry
Canada’s budget introduces long-awaited beneficial ownership registry to combat money laundering: https://www.lexology.com/library/detail.aspx?g=f2e8081a-0220-46ae-aa7d-f5773898252c
Money laundering funded $5.3B in B.C. real estate purchases in 2018, report reveals: https://www.cbc.ca/news/canada/british-columbia/laundered-money-bc-real-estate-1.5128769
New land registry will increase transparency in real estate market, says finance minister: https://www.cbc.ca/news/canada/british-columbia/bc-land-registry-open-1.5822630