Beneficial Ownership Transparency
February 19, 2019
The Honourable Senator Kim Pate :
I want to take this opportunity to publicly thank you and Algonquin Anishinabeg Elder Claudette Commanda and colleagues for opening this new chamber today in a good way.
Honourable senators, I rise to speak to the inquiry initiated by Senator Wetston regarding numbered companies and the dangers that arise when businesses are not required to name their beneficial owners.
When he brought this issue to our attention in October, Senator Wetston described a system in which beneficial owners — individuals who own 25 per cent or more of the shares in a company or entity, who are trustees and known beneficiaries and settlors of a trust — can hide their identity. He told us that the rules in place in Canada allow individuals to operate unobserved and support all sorts of activities, including organized crime and tax evasion.
One of the many travesties associated with the status quo when it comes to beneficial ownership in Canada is that it enables and obfuscates the identities of those behind human trafficking.
The National Task Force on Trafficking of Women and Girls in Canada estimated that in 2012 alone, about 3,000 women and girls were trafficked and over 19,000 women and girls were sexually exploited in Canada. Victims of human trafficking and sexual exploitation are robbed of their freedom, their dignity, their human potential and, too often, their lives. They are manipulated, coerced, abused and isolated, all as they are sold and resold for purposes of sexual exploitation or forced labour.
Chillingly, FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada, recently noted that one reason sexual exploitation is so pervasive is that it is a high-value business. Unlike drugs or weapons that can only be sold once, people — especially women and girls — can and are sold repeatedly over an extended period of time.
Many are aware that Canada is a source, transit and destination point for trafficked persons. Less well known, however, is that the majority of trafficking victims in Canada come from within Canada, not from other countries. When we look at who within Canada is victimized, we see the effects of the systemic intersections of misogyny, racism and other forms of discrimination. Human traffickers consistently target and prey on those who have experienced poverty, isolation and past abuses.
Following a recent visit to Canada, the UN Special Rapporteur on Violence Against Women singled out Indigenous women and children in particular as over-represented among victims of human trafficking.
As testimony at the National Inquiry into Missing and Murdered Indigenous Women and Girls has demonstrated and as the House of Commons Justice Committee’s report on human trafficking outlines, trafficking is part of the wider crisis of marginalization and victimization of Indigenous women and girls, a crisis that is firmly rooted in our legacy of racism and colonialism.
The work of our colleague Senator Sinclair on the Thunder Bay Police Services Board Investigation cites the research of our colleague Senator Boyer and makes this link. The investigation identified Thunder Bay as a hub between the United States and Manitoba with extensive connections to human and sex trafficking, particularly of Indigenous women and girls. As of 2013, the average age of Indigenous women sexually exploited in Thunder Bay was not the age of a woman. In fact, it was the age of a girl, 14, but some girls were as young as 10.
Human trafficking persists because it is considered a low-risk, high-profit crime. It often goes undetected under the guise of legitimate businesses. These businesses have been set up and registered in accordance with the law. They are structured as numbered companies, with no disclosure of their owners, a reality which undoubtedly contributes to the apparent sense of impunity of those who seek to profit from human trafficking and sexual exploitation.
Body rub parlours, massage businesses and holistic centres are all known to serve as covers for human trafficking operations. This is not a point of question or contention. Indeed, this reality has been confirmed by survivors of human trafficking, law enforcement, front-line service providers and municipal policy-makers. Trafficking victims are too often brought to work in such businesses and subsequently coerced or forced to provide sexual services.
Toronto police working on this issue have gone so far as to suggest that every victim of sex trafficking has been forced to provide sexual services in legitimate body rub parlours or illicit massage businesses at one time or another.
Barbara Gosse, CEO of the Canadian Centre to End Human Trafficking, explained to the Justice Committee in the other place that such businesses are relatively easy to identify on the major thoroughfares of most large and mid-sized cities in Canada, particularly once you know the telltale signs such as advertising prices significantly below market value, primarily serving male clientele, locked front doors, covered windows and, at times, women appearing to live in the establishments.
Last year, Toronto’s Auditor General released a report indicating that more than a quarter of the city’s holistic centres were advertising sexual services in violation of city bylaws, noting the heightened risk of human trafficking where businesses offered such services. Furthermore, there are certain types and patterns of transactions and other contextual factors that financial institutions can be alert to in order to recognize when a registered business may be a front for human trafficking.
Far more difficult to identify, however, are the beneficial owners responsible for and profiting from the business of sexual exploitation. In different jurisdictions throughout Canada, it remains perfectly legal to register a business with the owner’s name left blank or given as a registered agent; that is, someone paid to be the front person or point of contact or an anonymous shell company such as another business that exists in name only. As a result, Ms. Gosse characterizes corporate ownership secrecy as “fuelling human trafficking in the country.”
In this respect, recent changes to federal law through Bill C-86 are a step in the right direction. Beginning in June of this year, private companies will be required to keep a register of any individuals controlling 25 per cent or more of their shares, including their name, date of birth, address and residence for tax purposes, and other information that is to be set by regulation. The legislation is, however, far from being a complete solution. Notably, its requirements do not extend to companies falling under provincial or territorial jurisdiction.
As I hope goes without saying, I’m not suggesting that every massage parlour or holistic centre is a hub or a front for illegal activity. However, those that are benefit from a regime that does not require the beneficial owner to be named or associated with their registered business. When we allow traffickers to take shelter in legal registered businesses, we are creating an environment for illegal activity to thrive.
We know that human trafficking is increasing. Between 2013 and 2014, reports of human trafficking doubled, though rates of reporting still remain extremely low. Rather than making it more difficult for human trafficking and sexual exploitation to persist, however, government responses have tended to focus on the aftermath, but only in those circumstances where victims manage to escape.
Worse still, the Canadian Centre to End Human Trafficking reports that without information about owners, law enforcement activities against illicit businesses have too often focused on entering the premises and arresting those present but rarely, if ever, the owners.
Such operations generally result in the apprehension of the victims of the exploitation themselves or low-level managers, some of whom were previously exploited women themselves.
To put an end to human and sex trafficking, we need to do more than respond. We must prevent it from happening in the first place.
Truly ending human trafficking will require a host of concerted actions to dismantle and remedy the systemic inequalities and discrimination that essentially facilitate such victimization of women and girls, especially those who are racialized, who are poor, who have disabilities, who have addictions, who have experienced abuse, who grew up in the care of the state and who are trying to settle in Canada.
We must implement the Truth and Reconciliation Commission calls to action to truly begin addressing the particular and pernicious legacy of colonial violence against Indigenous women and girls. We must also consider measures — such as guaranteed livable incomes and better universal access to health care, including mental health care, dental health care and pharmacare, as well as education — that could support women and girls in their communities and truly address current systemic inequalities.
Another key step, however, is addressing some of the loopholes that make it easier for human and sex traffickers to go undetected. Despite the changes to federal registration requirements in Bill C-86, much more remains to be done and the federal government has a particular opportunity to demonstrate leadership in standing against human and sex trafficking, including by urging provinces and territories to do the same.
In addition to registration requirements for beneficial owners under provincial and territorial legislation, Senator Wetston has outlined further steps to explore, including harmonizing provincial and federal beneficial ownership information by issuing unique identifiers for corporate entities and the individuals who own them.
As we assess the effectiveness of the new federal registration and requirements, and consider other proposed solutions, it is worth bearing in mind some of the recommendations made by the Canadian Centre to End Human Trafficking. These include the need for registration of unique and verifiable personal information of owners, such as the requirement of identity verification documentation via passports or provincial drivers’ licences, as well as the need to ensure that relevant authorities have timely and sufficient access to such data.
The connection between numbered companies and human trafficking is just one particularly compelling and distressing example that exemplifies why greater transparency regarding beneficial ownership requires the action and attention of all levels of government to ensure that confidentiality concerns regarding beneficial ownership are no longer used to enable human and sex trafficking.
We must frankly acknowledge the pervasiveness of human trafficking in Canada, and we must shine a light on the anonymous corporate structures that enable it. Upholding the human rights of all women and girls, particularly those who are most targeted in Canada, demands no less. Thank you. Meegwetch.