Anti-corruption group calls for more disclosure on owners of Canadian companies, trusts

The federal government should require all companies and trusts in the country to identify their beneficial owners, according to recommendations contained in a new report from the Canadian division of Transparency International, a global anti-corruption organization.

The government should then publish the collected information in a central registry that is accessible to the public in an open data format, TI Canada said in its report, which was released Friday.

The lack of ownership disclosure makes Canada's real estate market attractive to those looking to invest the proceeds of crime, the group said.

Weak disclosure requirements in property ownership facilitate tax evasion, TI said, adding that it seems to be a growing problem in Canada that has gone largely unpunished.

The Canadian real estate sector is vulnerable to money laundering, critics say.

TI Canada issued the recommendations as it looked, in part, at the ownership of some of the top value luxury homes in the Greater Vancouver area, one of the hottest real estate markets in the country before recent government action took away some of its steam. An influx of foreign money and buyers was believed to be a contributing factor for the rapid ascent in residential home prices in the city.

TI Canada concluded that the use of shell companies to create a veil between beneficial owners and their properties is more common in Canada than might be expected.

In its report, TI Canada said Canadian land title offices do not hold information about beneficial owners of property, but only record the titleholder, which can be a shell company, a trust or a nominee.

"Beneficial owners of Canadian property can therefore remain anonymous. This anonymity is particularly prevalent in the luxury market," the group said.

A beneficial owner is a person who enjoys the benefits of ownership even though land or property titles are in another name, according to Investopedia.com.

TI Canada said its research shows that 29 of the 100 most valuable residential properties in Greater Vancouver are owned by shell companies, four of which are registered in offshore jurisdictions.

"Most of those companies are registered in Canada, so the identities of their directors and officers are a matter of public record, but their ownership cannot be ascertained," TI Canada said, adding that shell companies were used in 30 per cent of the titles of luxury homes in the area registered over the past 10 years.

Of the remaining properties examined for TI's report, at least 11 are owned through nominees, and six are held in trust for anonymous beneficiaries.

TI Canada said the use of nominee titleholders — an individual or entity appointed to act as a director or hold shares on behalf of a beneficial owner — is becoming more common.

Nominees should be required to disclose that they are acting on another's behalf, and the beneficial owners they represent should be identified, TI Canada recommends in its report.

The group said trusts also appear to have been used more by luxury property buyers in recent years.

Titles for five of the six properties owned through disclosed trusts have been registered since 2011. As there is no requirement to register trusts or disclose their existence, it is impossible to know how widely these arrangements are used, TI Canada said.