What is Snow Washing?
When criminals and tax evaders use legitimate Canadian investments like real estate to ‘clean’ dirty money, it is called snow washing. Canada has become an international destination for setting up secret companies to “snow wash” illicit funds from all over the world. It is easier to set up a secret company than it is to get a library card! This is because in Canada, the true owners of companies and properties can remain entirely anonymous – their identities can be concealed even from the government agencies entrusted with enforcing laws. This makes it easy for criminals, tax evaders and those financing terrorism to hide and launder money in Canada and makes it hard for law enforcement, tax authorities, and financial institutions to enforce Canada’s existing anti-money laundering and anti-terrorist financing laws.
A study by Transparency International Canada found that 25% of the wealthiest mansions in Vancouver sold last year were owned by ‘nominees,’ particularly “students.” Furthermore, the RCMP estimates that up to 15 billion dollars of illegal drug trade and terrorist financing is laundered in Canada each year.
What should Canada do?
Canada needs to create a publicly accessible, centralized, registry of true (e.g., beneficial) owners of companies in an open, searchable format. This would serve as a deterrent to criminals and would facilitate access to information for law enforcement, tax authorities, financial institutions, civil society, and journalists.
Canada is among the few G7 countries without a law requiring disclosure of beneficial owners, let alone a registry. Emerging economies such as Argentina and Brazil have registries, whereas the UK has a publicly accessible registry. In December 2017, the EU committed all of its 28 member states to a public registry of beneficial owners of companies. Canada is behind and needs to catch up to its international partners to stop snow washing.