They’ve been called the “puppet masters” by the World Bank. Indeed, the Panama Papers shed light on how beneficial owners, or the real people who own/control companies, sometimes go to great lengths to keep their identities hidden. And according to Transparency International, Canada’s opaque laws on beneficial ownership make it an ideal breeding ground for tax evaders and money launderers.
Canadian law permits the use of nominees—essentially custodians—for directors and shareholders, thereby masking the beneficial owners of a company. For in-house counsel, navigating this environment can be complex, especially within a company’s due diligence program.
According to the World Bank, anonymous companies are the most common way US$1-$2 trillion are lost to money laundering each year. They are also used to finance terrorist activities and line the pockets of drug traffickers and corrupt politicians. While no company means to aid those with illicit intentions, the absence of any sort of national registry of beneficial ownership can make it very difficult to determine who you are actually doing business with. (more...)