Royal Bank ordered to reveal who is behind 97 offshore accounts

Royal Bank of Canada has been ordered to disclose the beneficial owners of 97 offshore companies that have used its services, but a critic questions why it took the Canada Revenue Agency six years to acquire a source of money. information that could help detect tax evasion.

The companies involved are all registered in the Bahamas, a tax haven, and were originally revealed as part of a financial document leak called Bahamas Leaks.

In submissions to the Federal Court of Canada, the CRA says most companies have used tactics to “obfuscate the identity of the people who actually control these entities and are the beneficial owners”, and it wants to verify whether the real owners are Canadians hiding money in tax havens.

“The CRA is concerned that any or all of these 97 Bahamian companies may be controlled and/or beneficially owned by persons residing in Canada,” the agency said in a court filing.

Canadian individuals and corporations have 23 billion dollars in declared and known funds held or invested through the Bahamas – more than France, Spain and Portugal combined. A ARC study 2018 suggested that Canadians have between an additional $76 billion and $241 billion in hidden, unreported wealth hidden in all offshore jurisdictions combined, but he did not break it down by country.

In May, a judge granted the federal government’s request to order Royal Bank and its subsidiary RBC Dominion Securities to provide any information that would help the CRA identify the owners of the 97 Bahamian companies. The bank did not oppose the government.

The CRA says in its court documents that all of the companies had investment accounts with Royal Bank or RBC Dominion at some point, “suggesting that they may be or may have been controlled by persons residing or located in Canada”.

It is not inherently illegal for Canadians to have an offshore account or business, but any assets over $100,000 and income must be declared for tax purposes.

ARC mom on other banks

CBC/Radio-Canada originally reported in 2016 that the Bahamas Leaks revealed that three Canadian banks had provided services to nearly 2,000 offshore companies in the Bahamas since 1990. The banks were what are known as “registered agents” – licensed intermediaries who pay annual fees to the registry Bahamian companies, handle the paperwork and in many cases also incorporate the offshore companies.

The leaked files showed Royal Bank acted as agent for 847 Bahamian companies listed in the leaked data, companies whose names range from Abbatis 1 Inc. to Yellow Jacket Holdings Ltd., while CIBC registered or administered 632 and Scotiabank managed 481.

Royal Bank did not respond to questions from CBC News about Bahamian companies, but provided a statement saying that in general it has “high standards and an extensive due diligence process to detect and prevent illegal activity. occurring through RBC”.

Neither the CRA nor RBC explained how the number of offshore companies of interest was reduced to 97 from 847. Part of this reduction is likely due to the fact that even in 2016 almost half of these companies were already inactive or dissolved. It is possible that the CRA also determined that many of the companies did not have Canadian shareholders or other ties to Canada that could trigger tax liability.

Toby Sanger of Canadians for Tax Fairness says the Bahamas is a notoriously secretive jurisdiction where people often funnel money in order to hide. (Radio Canada)

There is no indication in the Federal Court docket that the CRA also prosecuted either of the companies run by CIBC or Scotiabank. It is possible that the tax agency obtained information directly and confidentially from these two banks using powers under the Income Tax Act it doesn’t require him to get a court order first, but it wouldn’t tell.

“The CRA generally does not disclose information related to our compliance approaches, as it may provide a roadmap for non-compliance,” the agency said in a statement to CBC News. “As such, we are unable to confirm whether the CRA will seek permission to retrieve third party data from CIBC and Scotiabank.”

‘Very frustrating’

Toby Sanger, senior policy adviser at the advocacy group Canadians for Tax Fairness, said the lack of transparency doesn’t help create the impression that the CRA “seems to be more focused on soft targets, small people”. rather than the larger and more complex offshore tax evasion and evasion cases.

“We shouldn’t just write these carte blanche checks allowing wealthy corporations and individuals with money in the jurisdiction where they decide to park it to avoid taxes,” he said in an interview.

The CRA, which proclaimed following other leaks, such as the Panama Papers and the Paradise Papers, that he has been crack down on offshore tax shenanigans, would also not explain why he is only looking for the ownership records of 97 offshore companies now – six years after the Bahamas Leaks exposed them.

“It’s very frustrating and disappointing that it’s taken the ARC so long to respond to these leaks,” Sanger said. “The slow action in this case on the Bahamas Leaks means they’re just kind of a crying wolf, and it’s more of a bark than a bite.”

The Bahamas Leaks recordings were obtained by Sueddeutsche Zeitung, the same German newspaper that leaked the Panama Papers, which then shared the files with the Washington-based International Consortium of Investigative Journalists and its network of global media partners, including including CBC/Radio-Canada. .

The Panama Papers surfaced a few months earlier in 2016, but the CRA has yet to bring criminal charges against anyone named in that leak. Other countries have already brought hundreds of charges and obtained convictions.

The CRA received nearly $1 billion in additional funding between 2016 and this year to fight tax evasion and avoidance. In an email to CBC, the agency could not point to a single criminal conviction obtained in the 4½ years that related to offshore tax evasion.

The agency said last week that at one point it had five open criminal investigations stemming from the Panama Papers, but later dropped three. The remaining two cases appear to be ongoing investigations into $77 million in suspected withholding tax fraud in Vancouver, and a Alberta oil financier investigated.