- Risk key
- MODERATELY LOW
- MODERATELY HIGH
Canada’s judicial system is transparent and free from corruption (HRR 2016; FitW 2016). Businesses report that Canadian courts show high levels of independence and state decent confidence in the efficiency of the legal system in challenging regulations and settling disputes (GCR 2016-2017). Irregular payments and bribes for obtaining favorable judgments are rare (GCR 2015-2016). In one controversial case, a judgment against the energy giant Chevron in an Ecuadorian Court was ruled admissible in a Canadian Court against Chevron’s Canadian subsidiaries who were not involved in the case, despite that the case was thrown out in the United States on the grounds that the judgment in Ecuador was obtained using bribery (Financial Post, Feb. 2017); the case was ultimately defeated.
Canada is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and it is a member state of the International Centre for the Settlement of Investment Disputes (ICSID).
There is no significant risk of corruption within the Canadian police force, which has one of the highest levels of reliability in the world in relation to their capability to protect companies from crime (GCR 2016-2017). Companies attribute little cost to crime and violence (GCR 2016-2017).
There is a very low risk of encountering corruption when dealing with Canadian public services. Irregular payments or bribes are rarely encountered (GCR 2015-2016). Canada is the second easiest country in which to start a business, requiring only two procedures to register a firm (DB 2017). Notwithstanding, businesses rank inefficient government bureaucracy as the second most competitive disadvantage of investing in the country (GCR 2016-2017). Information on doing business with the Government of Canada is available on Buyandsell.gc.ca.
There is a moderate risk of corruption in Canada’s land administration. The construction sector is particularly vulnerable to fraud in the form of bid-rigging, collusion and money laundering (GrantThornton, 2013). Construction and real estate companies seeking to invest should take note of the Grant Thornton white paper on construction fraud. Foreign investors enjoy full and well-protected property rights, limited only by the right of the government to establish monopolies and to expropriate for public purposes (ICS 2016). Dealing with construction permits takes 249 days; 100 days longer than the OECD average (DB 2017). Registering a property takes 16 days, which is lower than the average of 22 days in OECD countries (DB 2017).
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) identifies the real-estate sector to be susceptible to money laundering by people with offshore accounts (CBC News, Sept. 2016). A lack of reporting by realtors and lawyers about suspicious deals give reasons for concern about non-transparency and non-compliance in the real estate industry (Vancouver Sun, Nov. 2016). FINTRAC has ramped up scrutiny on money-laundering activities, particularly in British Columbia’s heated real-estate market; it found that out of 220 real estate firms examined, 112 had ‘significant’ and five ‘very significant’ non-compliance issues (Vancouver Sun, Nov. 2016). Companies and trusts in Canada are not required to disclose their beneficial owners, which has led companies to base shell-companies in Canada for tax evasion purposes (Transparency International, Dec. 2016).
The Charbonneau Commission, a public inquiry into corruption in the construction industry, resulted in the arrest of several persons including mayors (FitW 2016). Several people have since been convicted on corruption charges (Montreal Gazette, Jan. 2017). The final report (in French) revealed that corruption, organized crime, collusion and influence peddling are widespread in Quebec’s multi-billion public construction industry (The Globe and Mail, Nov. 2015). In November 2016, a watchdog committee found in a follow-up to the report, that a year later only fifteen out of sixty recommendations had satisfactorily been implemented by the Quebec government (Montreal Gazette, Nov. 2016).
Incidents of corruption sometimes occur in the Canadian tax administration, but are not considered a concern by companies (GCR 2015-2016). Tax rates and tax regulations are ranked as the fourth and fifth most problematic factors to doing business, respectively (GCR 2016-2017). Preparing, filing and paying taxes is easier and faster than the OECD average (DB 2017).
In another instance, a six-year-long investigation into the Canadian Revenue Agency (CRA) led to 36 fraud and bribery charges against seven auditors of whom one has been convicted for corruption (Montreal Gazette, June 2015). The charges concern senior auditors who received bribes in exchange for turning a blind eye to millions of dollars in unpaid taxes and fraudulent tax credits, and CRA officials who tried to pressure company owners to pay bribes in exchange for a reduction of their tax responsibilities (The Globe and Mail, Feb. 2014). Another tax auditor was found guilty of trying to extort CAD 90,000 from a restaurant owner in exchange for waiving a fine; he was sentenced to 20 months in jail (CBC News, Jan. 2016).
Canada’s customs administration does not constitute a barrier for trade and is considered efficient and transparent presenting companies with low corruption risks. Companies identify high tariffs and burdensome import procedures as the main impediments for importing goods, but few businesses point to corruption at the border as being an obstacle to trade (GETR 2016). Companies spend significantly more time on border documentary compliance than in other OECD countires (DB 2017).
There is a medium risk of corruption in Canadian public procurement. Bribery is not widespread in the procurement sector, but it does occasionally occur (GCR 2015-2016). One in five companies report having experienced fraud in the procurement procedures in Canada (pwc 2016). Companies identify vendor selection, vendor contracting, and invitations to bid as the stages of the procurement process most susceptible to fraud (pwc 2016). Corruption is especially problematic in the Quebec construction industry, which is influenced by the close connections between the construction industry, organized crime, and political parties, leading to bid-rigging cartels and corrupt politicians accepting gifts and kickbacks (Globe and Mail, Nov. 2015). More detail on corruption in the Quebec construction sector can be found in the land administration section. Procurement of goods and services to Canada’s public sector is carried out and supervised by the Public Works and Government Services Canada (MWGSC) agency. The Office of Small and Medium Enterprises (OSME) helps SMEs understand the basics of government procurement and meet formal requirements.
In 2016, ex-Quebec deputy premier Nathalie Normandeau was arrested on charges of corruption and bribery filed against her by Quebec’s anti-corruption bureau in connection with the award of a contract to construct a water-treatment plant to the firm Roche. She allegedly overruled senior bureaucrats to award the contract (CBC News, Mar. 2016). As of April 2017, her trial remains pending (CBC News, Apr. 2017).
A significant number of the World Bank’s list of firms blacklisted are from Canada; they are forbidden from bidding on its global projects, with SNC-Lavalin and its affiliates representing 115 of the 117 Canadian entries (World Bank, May 2017). In 2015, the Montreal-based construction giant SNC-Lavalin agreed to pay a CAD 1.5 million settlement to resolve a corruption case brought forward by the African Development Group that former employees of SNC-Lavalin International Inc. ordered illicit payments to public officials to secure two contracts in two African countries (CBC, Oct. 2015). Former SNC-Lavalin CEO Pierre Duhaime is currently facing charges of bribery and fraud amounting to CAD 22.5 million in connection to the construction of the McGill University Health Centre in Montreal (Montreal Gazette, Aug. 2016). SNC-Lavalin is pushing for Canada to implement deferred prosecution agreements to avoid a guilty verdict which would cause it great reputational harm and bar it from bidding on government contracts for 10 years (Corporate Crime Reporter, Jan. 2017). Companies convicted of corruption face a ten-year ban from bidding on public contracts in Canada; which may be reduced to five years if the company can show that the causes of corruption have been addressed (ICS 2016). Companies charged with corruption face an eighteen-month suspension (Lexology, Feb. 2017). To minimize risks, companies should use a public procurement due diligence tool when doing business in Canada.
Risks of corruption in the Canadian natural resources sector is low. However, Canadian companies frequently face allegations of engaging in corrupt practices in mining projects abroad (The McLeod Group, April 2016). To minimize corruption, the Extractive Sector Transparency Measures Act (ESTMA) requires businesses involved in the exploration or extraction of oil, gas or minerals to publicly report each year specific types of payments made to all levels of government in Canada and abroad. Companies active in this area are advised to consider the Guidance and Technical Reporting Specifications (revised March 2016) provided by the government of Canada in order to understand the requirements imposed by the law. In order to promote and showcase ethically sound behavior of companies operating in the natural resource industry, Canada publishes the CSR practices of Canadian companies active in the extractive and mining sector abroad.
Canada has a comprehensive and well-enforced legal anti-corruption framework in place. The Criminal Code of Canada criminalizes active and passive bribery, facilitation payments, influence peddling, extortion and abuse of office. Bribery of foreign public officials is addressed by the Corruption of Foreign Public Officials Act (CFPOA). See summary and compliance guide for the CFPOA. Five years’ imprisonment is the maximum criminal penalty for corruption crimes committed in Canada, while foreign bribery is punishable by a maximum jail term of 14 years. Heavier sanctions exist in case of bribery involving judges and law enforcement officers. No limit is imposed on financial penalties for corruption. Civil resolution for bribery such as a non-prosecution agreement is not possible under Canadian law. Facilitation payments are currently not criminalized in the CFPOA, but these will be illegal under amendments introduced to the act (Lexology, Feb. 2017). Gifts are only allowed under the CFPOA to build a business relationship and as long as it is a reasonable expenditure (Lexology, Feb. 2017). Private sector bribery is criminalized under the Criminal Code. Money laundering is criminalized under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). The Conflict of Interest and Post-Employment Code for Public Office Holders requires public officials to disclose their financial assets and regulates conflict of interest; however, certain financial and personal assets are exempted from the publication requirement. All public sector employees are required to adhere to a code of conduct: the Values and Ethics Code for the Public Sector. Canadian anti-corruption legislation is supplemented by the Canada Business Corporations Act, which criminalizes accounting practices that require manipulation of a company’s accounts. The Federal Accountability Act provides for accountability and transparency in the government and addresses conflicts of interest, electoral financing, and lobbying. Public sector employees reporting on corruption or other misconduct are protected by the Public Servants Disclosure Protection (PSDP) Act. Companies are advised to consider FINTRAC’s guide and operational brief to assess and mitigate money laundering risks in Canada. Unlike the private sector, whistleblowers in the public sector are protected from retaliation under the Criminal Code. The Code of Conduct for Procurement applies to all vendors and public officials involved in the public procurement process.
Canada has ratified the UN Convention Against Corruption and the OECD Anti-Bribery Convention. Canada is a party to the Inter-American Convention Against Corruption (IACAC Convention). Companies are advised to review the locally applicable legislation, since anti-corruption legislation may differ between Canadian provinces.
The constitution of Canada protects freedoms of expression and of the press, but the government has the authority to restrict free speech if it is considered hate speech, the definition of which remains loose (HRR 2016; FotP 2016). Defamation is punished by up to 5 years in prison, but journalists can avoid liability for defamation if they are able to show that they acted responsibly in covering an issue of public interest, regardless of whether their statements were ultimately true or not (FotP 2016). The confidentiality of sources is not legally protected; courts decide whether to protect sources on a case-by-case basis (FotP 2016).The Access to Information Act gives citizens the right to access federal government records. There are concerns about roughly half of all Canada’s media being privately owned (FotP 2016). Citizens enjoy free and unrestricted access to the internet, and the country’s media environment is considered ‘free’ (FotP 2016).
Civil society organizations (CSOs) generally act without restrictions (FitW 2016) and frequently work in partnership with public agencies (HRR 2016). One cause for concern is a report by four UN special rapporteurs alleging that the National Energy Board and the Canadian security apparatus were involved in the systematic monitoring of various NGOs preparing to participate in hearing about a proposed oil pipeline (FitW 2016). The Canadian government responded by saying that the agencies had acted in accordance with the law (FitW 2016).
- World Bank & IFC: Doing Business 2017.
- World Bank: “List of Blacklisted Firms”, accessed 8 May 2017.
- CBC News: “Ex-Quebec Deputy Premier Nathalie Normandeau’s Trial Could Start Sooner Than Planned”, 15 April 2017.
- CBC News: “Justice Robin Camp Resigns after Judicial Council Recommends Removal”, 9 March 2017.
- The Globe and Mail: “First Nations Coalition Demands B.C. Inquiry into Mining Practices”, 7 March 2017.
- Financial Post: “Why Did Canadian Courts Even Consider A Case that a U.S. Court Originally Ruled Was Corrupted?”, 21 February 2017.
- Lexology: “Anti-Corruption & Bribery in Canada”, 8 February 2017.
- Corporate Crime Reporter: “SNC-Lavalin Pushes for Deferred Prosecution Agreements in Canada”, 31 January 2017.
- Montreal Gazette: “Former Montreal Mayor Michael Applebaum Found Guilty of Corruption and Fraud Charges”, 27 January 2017.
- World Economic Forum: The Global Competitiveness Report 2016-2017.
- World Economic Forum: The Global Enabling Trade Report 2016.
- US Department of State: Investment Climate Statement – Canada 2016.
- US Department of State: Human Rights Practice Report – Canada 2016.
- Freedom House: Freedom in the World – Canada 2016.
- Freedom House: Freedom of the Press – Canada 2016.
- Transparency International: Beneficial Ownership Report Canada 2016.
- pwc: Global Economic Crime Survey 2016 – Canadian Insights.
- Montreal Gazette: “Charbonneau Commission: Quebec has Implemented Only 15 of 60 Recommendations, Watchdog Says”, 23 November 2016.
- Vancouver Sun: “Money-laundering Watchdog Cites ‘Significant’ Deficiencies at 100-plus B.C. Real Estate Firms”, 18 November 2016.
- CBC News: “Fintrac Finds ‘Very Significant’ Deficiencies at Realtors in Money Laundering Probe”, 14 September 2016.
- Montreal Gazette: “SNC-Lavalin CEO Tried to Thwart Internal Probe Into MUHC Bribery Allegations: Affidavit”, 10 August 2016.
- The McLeod Group: “The Extractive Sector and Development”, April 2016.
- CBC News: “Nathalie Normandeau, ex-Quebec Deputy Premier, Arrested by UPAC”, 17 March 2016.
- The Globe and Mail: “Mauritian Firm Target of Kinross Probe, Documents Say”, 13 March 2016.
- CBC News: “Ex-Canada Revenue Agency Auditor Gets 20 months for Extortion, Fraud”, 19 January 2016.
- World Economic Forum: The Global Competitiveness Report 2015-2016.
- Charbonneau Commission: Final Report of the Granting and Management of Public Contracts in the Construction Industry (in French), 24 November 2015.
- The Globe and Mail: “Quebec corruption report flags ‘culture of impunity’ in construction industry”, 24 November 2015.
- CBC News: “Charbonneau commission finds corruption widespread in Quebec’s construction sector”, 24 November 2015
- CBC News: “SNC-Lavalin to pay $1.5M in African Development Bank corruption case”, 1 October 2015.
- CBC News: “Real estate bought with offshore cash raises money laundering concerns”, 24 August 2015.
- National Post: “Cash buys and illicit money: Federal audit probes Vancouver’s real estate industry for money-laundering”, 24 August 2015.
- Financial Post: “SNC-Lavalin Group Inc fraud case postponed again until October”, 3 July 2015.
- Montreal Gazette: “Canada Revenue auditor convicted of soliciting a bribe”, 12 June 2015.
- The Globe and Mail: “RCMP lays charges in alleged Canada Revenue Agency fraud scheme”, 10 February 2014.
- Grant Thornton: “Fighting Construction Fraud in Canada“, 2013.
- Grant Thornton: “Construction Fraud in Canada – Understand it, prevent it, detect it” 2013.