As U.K. moves to shut down tax-haven secrecy, Canada seen lagging

The U.K. passed legislation on Tuesday that aims to remove the cloak of secrecy shrouding many of the British tax havens, with activists hailing it as a major victory in the fight against corruption and tax dodging.

Amendments added at the last hour to a sanctions and anti-money laundering bill will compel jurisdictions like the Cayman Islands, Bermuda and the British Virgin Islands to create public databases setting out the real owners of all companies registered there. It's a step long sought by critics, who say the anonymity offered by offshore shell companies often permits people to hide vast illicit sums.

"It will stop them exploiting our secret regime, hiding their toxic wealth and laundering money into the legitimate system, often for nefarious purposes," said Margaret Hodge, the opposition Labour member of Parliament who introduced the amendment.

"With open registers we will then know who owns what and where, and we will be able to see where the money flows, and then we will be better equipped to root out dirty money."

The legislation affects the so-called British Overseas Territories and requires them to create public beneficial-ownership registries by the end of 2020, failing which the U.K. government will impose them. Just one of those territories, the British Virgin Islands, was the locale of half the 210,000 companies exposed in the Panama Papers leak in 2016.

The amendments do not touch the jurisdictions known as Crown dependencies Jersey, Guernsey or the Isle of Man which Parliament left to future discussions.

The Conservative government was forced to accept the amendments because it does not hold a majority of seats.

Naomi Hirst, with the anti-corruption organization Global Witness, said: "Today's announcement is a huge win in the fight against the corruption, tax dodging and money laundering."

'Canada even further behind'

In Canada, the federal government has repeatedly vowed to increasing transparency around the real owners of corporations, but has not committed to a publicly searchable registry of beneficial ownership. Finance Minister Bill Morneau has said progress could be slower than hoped because there are parallel regimes governing private companies at the federal, provincial and territorial levels.

Currently, only oneprovince, Quebec, provides a free public databasethat includes information on the shareholders of private companies registered there. But the shareholders on file are not necessarily the ultimate, real owners of a company; they can be stand-ins known as "nominees."

"With the passage of this legislation to create greater transparency of beneficial ownership of the U.K. overseas territories, this puts Canada even further behind the leaders of the pack and also shows that challenges over beneficial ownership transparency even within the most difficult jurisdictions can be overcome," said James Cohen, programs director at Transparency International Canada.

Chlo Luciani-Girouard, a spokesperson for Morneau, on Tuesday evening called the new U.K. legislation an "important new agreement." She said the provincial and territorial governments have concurred with Morneau on the need to make corporate ownership more transparent, to "help prevent webs of Canadian or international companies from concealing ownership information in order to facilitate tax evasion, money laundering and other criminal activities."

Roughly 3.5 million corporations are registered in Canada at the federal, provincial and territorial levels.