Accountants offer valuable views in beneficial ownership registry discussion with new international report
CPAs responsible for collecting and maintaining a corporation’s beneficial ownership data will want to keep reporting costs and outputs to a minimum (Getty Images/xavierarnau)
As countries boost efforts globally to combat money laundering and terrorist financing, one trend is gaining momentum: the introduction of national beneficial ownership registries to improve corporate transparency.
Recording the identities of the beneficial owners of private corporations, these registries allow competent authorities, such as law enforcement, access to information to assist with investigations while helping other entities, including financial institutions, lawyers and accountants, comply with anti-money laundering (AML) obligations.
In the U.K. and in France, Germany and other European Union member states, governments are making headway implementing registries that are fully open to the public or have tiered access restricting some information to certain groups.
As Canada looks abroad for best practices in beneficial ownership transparency, the federal, provincial and territorial governments have begun to consult with Canadians about the “look and feel” of a centralized registry and public accessibility.
As a timely contribution to these discussions, CPA Canada shares insights in a new joint report with the International Federation of Accountants (IFAC)—Approaches to Beneficial Ownership Transparency: The Global Framework and Views from the Accountancy Profession—and via its submission in response to the federal government’s consultation report—Strengthening Corporate Beneficial Ownership Transparency in Canada. Both pieces recognize the public interest importance of enhancing corporate transparency and highlight policy and implementation options.
Here are three things accountants in Canada and abroad are highlighting as beneficial ownership developments continue.
1) ACCESS TO INFORMATION
As of June 2019, under the Canada Business Corporations Act, federally incorporated private corporations must record and maintain a register of individuals with significant control (ISCs) of the business. Penalties apply if the information is not recorded, up-to-date or available on request. Some provinces, including B.C., Manitoba and Saskatchewan, are also requiring provincially incorporated private corporations to do the same. Reporting this information to a centralized beneficial ownership registry or registries is the next anticipated step.
When establishing a national registry and based on international models, CPA Canada recommends the federal government evolves its approach gradually, in phases and with tiered access to information. Recommended access to a registry would be given in tiers to authorities such as law enforcement; other entities including financial institutions, lawyers and accountants; and then to the public in stages, limiting access to certain information, depending upon the particular group. The recommendation is for relevant stakeholders to have access to necessary information, while also addressing privacy concerns.
“Appropriate access for those who are required to comply under the AML regime is very important, and public accessibility has to be balanced with Canadians’ expectations of privacy for their own information,” says Michele Wood-Tweel, CPA Canada’s vice-president of regulatory affairs.
“It’s critical that the upfront decision-making be around what information will remain behind screens and accessible only to some parties and not others.”
2) ACCURACY AND VERIFICATION
An accurate registry with verifiable, up-to-date information is essential, CPA Canada says, if a registry is to be a useful resource.
The U.K., for example, ran into issues with its fully public registry after several cases were filed reporting inaccurate data and false information. New measures, yet to be implemented, were proposed to verify identities, improve compliance and deter misuse.
To avoid this, CPA Canada recommends the integration of identity validation or verification and ongoing monitoring to ensure information provided by companies is accurate, comprehensive and up-to-date. Third parties, such as the public or reporting entities, could also flag deficiencies to be followed up by officials.
“A beneficial ownership registry has to contain credible information,” says Wood-Tweel. “Participants in the anti-money laundering and terrorist financing regime can then look to the registry as a place where they can not only get information to begin their work and compliance, but it also encourages the regime participants to contribute towards a registry that is up-to-date and is valued, as opposed to an unreliable repository.”
Accuracy and consistency of information is also pertinent considering Canada’s 13 provinces and territories, all potentially feeding information into the national registry, adds Scott Hanson, principal, public policy and regulation with IFAC. Having different systems that do not interact with each other is a “worst-case” scenario, he says.
“That is not going to get us where we want to go,” says Hanson. “It’s got to be singularly accessible and usable as one system. Otherwise, if accountants must pull [information] from several different systems when they’re doing customer due diligence, that’s not an ideal situation.”
3) COST TO IMPLEMENT
Compliance costs and administrative burdens on businesses, including additional reporting requirements, are another concern when creating beneficial ownership registries, says CPA Canada.
In some cases, the reporting costs have apparently been kept low. According to a 2019 U.K. government survey, the estimated upfront median costs to corporations submitting their ownership details through a public registry was £125 (approx. C$214) and were much lower for information updates.
Those responsible for collecting and maintaining beneficial ownership data stored in the corporation will likely be interested in keeping reporting costs and outputs to a minimum.
“Private company size and complexity will likely create a range of costs and administrative burden of maintaining a company register and reporting to a beneficial ownership registry,” says Wood-Tweel.
Maintenance costs, including verification efforts, to ensure the integrity and reliability of the national registry and its information, are another issue, Hanson adds, based on the international research by IFAC and CPA Canada. The resources and technology available, and the ability to integrate with systems storing similar information, will impact the amount spent by government when implementing and maintaining a registry.
“The whole system is going to have to be run and that’s going to cost money and there’s potentially going to be problems with it. It’s not a small deal,” he says. “For smaller countries, it may be less of a challenge, but if you look at the United States or Canada, we’re talking about a significant undertaking. Even more so, if different parties have different levels of access—someone will need to ensure that credentials remain current and in the right hands.”
INTO THE FUTURE
As Canada’s beneficial ownership registry or registries unfold, it’s important that CPAs stay abreast of the impact on accountancy roles and the profession overall, CPA Canada says.
If executed well, a registry could prove useful, easing day-to-day activities for those with reporting obligations under federal legislation and regulations governing Canada’s AML regime. More generally, it could also enable business and the public to better understand the private companies that they are engaging or transacting with.
“When we look at the beneficial ownership requirements and a registry going forward and who it affects within the profession, it potentially touches upon many roles regarding private companies,” says Wood-Tweel. “Whether a CPA provides professional services, works for, owns or is on a board of a private company, the requirements of a registry will become must-know information.”
MORE ON CPA CANADA AND BENEFICIAL OWNERSHIP
For more on CPA Canada’s contribution to the national beneficial ownership conversation read its latest report—Approaches to Beneficial Ownership Transparency: The Global Framework and Views from the Accountancy Profession—and its submission in response to the federal government report—Strengthening Corporate Beneficial Ownership Transparency in Canada.