Federation of Law Societies backs proposed beneficial ownership registry

The Federation of Law Societies of Canada is supporting the proposed establishment of a beneficial ownership registry for federally incorporated companies.

The Federation indicated its support of the government’s attempts to curb money laundering and terrorist financing in written comments responding to a consultation paper released by the Department of Innovation, Science and Economic Development and the Department of Finance, which discussed corporate beneficial ownership transparency in Canada.

According to the Federation’s news release, law societies across Canada have, for over 15 years, expressed their commitment to fighting money laundering and terrorist financing through the implementation of certain regulatory requirements, professional conduct rules and financial accounting rules.

One such measure adopted by all Canadian law societies is the client identification and verification rule, which requires lawyers to record basic information about their clients and to verify the identities of their clients. The rule was adjusted in 2018 in accordance with federal regulatory changes relating to the identification of beneficial owners of organizations.

Access to a beneficial ownership registry would help legal professionals, as well as law enforcement and other relevant authorities, in complying with due diligence obligations to identify beneficial owners, as required by anti-money laundering and terrorist financing legislation or by law society rules across provinces and territories, the Federation said.

Without such access, legal counsel will be forced to depend upon information given by their clients or by the entities themselves, without any other objective and reliable means to acquire or to verify the information, the federation said in a news release.

However, the Federation stressed that lawyers should not be obligated to disclose information safeguarded by solicitor-client privilege or by professional secrecy, in breach of constitutional protections.

The Federation also recognized that the creation of the proposed registry would require a balance between two competing public policy interests: the enhancement of corporate transparency and the protection of individual privacy interests. It then suggested options for the government to consider in implementing the registry, such as a tiered or a phased approach.

The Department of Innovation, Science and Economic Development and the Department of Finance should consider collaborating with their counterparts across provinces and territories so that they can create a national and unified system, or a series of linked registries that operates via a single portal, the Federation added in its news release.

Aside from providing authorities with access to corporate ownership information, the proposed beneficial ownership registry is also expected to speed up investigations and to decrease the risk of entities discovering that they are under investigation.