British Columbia has taken a major step to prevent money laundering with its proposed registry of beneficial owners of land by lowering the threshold at which shareholders of a property-owning corporation must be disclosed from 25% to 10%.
The move comes as Vancouver faces an property price boom, artificially triggered by foreign speculators who bought homes either to let them out or just to accumulate capital gains.
For a relevant partnership or relevant trust, all partners and beneficiaries with a direct or indirect interest in the property must be identified in the report. For a relevant corporation, individuals who directly or indirectly own 10% of the shares or 10% of the voting rights, must be disclosed.
Our housing market should be used for housing people, not for laundering the proceeds of crime"
Originally, the ownership threshold at which beneficial owners were regarded as having a significant interest was set at 25%, the same as for existing company ownership registration.
Vancouver house prices soared 316% since January 2002. Most of the homes in the Canadian city are well out of reach of the typical homebuyer and buying even a bungalow would eat up nearly half the median family income - more than double the national average.
In May this year, a report commissioned by the BC government estimated that billions of dollars of illicit money were laundered through property sales in the province in 2018, most of it in Vancouver.
More than C$7bn in dirty money was laundered in BC in 2018, hiking the cost of buying a home by about 5%, according to British Columbia's Expert Panel on Money Laundering in Real Estate.
"Our housing market should be used for housing people, not for laundering the proceeds of crime," said Carole James, Minister of Finance. "The amount of money being laundered in B.C. and through real estate is much more than anyone predicted. Our government is tackling the housing crisis head-on and taking action to combat the money laundering that has been allowed to drive up housing costs for British Columbians for far too long."
The panel's report, which was released along with the remaining chapters of Peter German's review into money laundering in real estate, luxury cars and horse racing, estimates that a total of C$7.4bn was laundered in BC in 2018. The panel estimates that C$5bn was laundered through the real estate market.
Several non-governmental organisations, including Transparency International Canada, Canadians for Tax Fairness, and PWYP, have also been critical of Canada for its lack of a public registry of beneficial ownership for corporations and trusts operating across the country.
A 31 January, 2019 letter to the Expert Panel on Money Laundering by Transparency International Canada Executive Director James Cohen and Canadians for Tax Fairness Executive Director Toby Sanger claimed that a registry "would reduce the administrative burden for Canadian reporting entities, businesses, land registries and government procurement offices carrying out due diligence procedures across multiple sectors and would also facilitate the work of tax authorities and law enforcement when conducting investigations".
The reporting threshold for shareholders of private companies under other legislation is being left at 25%.
According to the Ministry of Finance, the proposed Land Owner Transparency Act (Bill 23-2019, LOTA) is expected to be made effective sometime in 2020.