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Seedy Canadians hiding cash in offshore banks, beware: the CRA is coming

The Caymans could be losing their luster as a safe haven for Canadian millionaires to stash their funds.

This week, the Royal Bank of Canada and Citibank, N.A. both agreed to hand over seven years of account information between Canadian residents and the Cayman National Bank.

The Canada Revenue Agency has given the banks 120 days to pass off the info, which includes statements, deposit slips, cheques, bank drafts and wire transfer orders, and plans to rake through it for signs of Canadians stashing taxable income in accounts on the Caribbean island.

Canadian lawyer Martin Kenney, one of the world’s leading authorities on international fraud and asset recovery, told Yahoo Canada Finance that the aggressive campaign against tax evasion is likely inspired by President Obama’s signing of the Foreign Account Tax Compliance Act south of the border. FATCA requires offshore banks to report data of U.S. taxpayers with accounts as a condition of being able to access U.S. dollar wire system in New York.


“The Canadian authorities realized these investigative tools are out there and they’re requiring Canadian banks to begin to turn over the same data,” he explained from his corporate headquarters in the British Virgin Islands. “The tools have been available for a long time but it’s taken a while for (authorities) to understand how the system works and how to undertake investigations across national borders.”

It’s the second time the federal government has used a court order to investigate offshore tax evasion since the so-called Panama Papers leak in April which aired the dirty laundry of more than 200,000 offshore bank accounts including 625 Canadians.

In May, federal prosecutors asked for 40 years of records on hundreds of the bank’s clients as part of an investigation into tax evasion. The bank acquiesced saying: “We respect the confidentiality of our clients within the bounds of the law, and we co-operate with all of our regulators.”

Although the CRA hasn’t pointed to a specific Canadian suspected of dodging taxes, in an affidavit filed with the federal court David Letkeman , an auditor with the agency’s offshore compliance section, said the agency got wind of the Caymans ruse from a Canadian woman who handed over her information via the CRA’s Voluntary Disclosures Program. Apparently, no one at the CRA has seen a gangster film or listened to hip-hop lyrics about “stashing millions in the Caymans.”

Ultimately, the Canadian woman was required to pay more than $1.2 million for unreported capital gains.

Kenney says at this point, there’s no doubt the CRA has some targets in their crosshairs.

“I’m sure that there are live cases of large value where the Canada Revenue Agency will have a list of suspected tax evaders (and) the names of companies or relatives associated with them,” he says. “They’ll run them through a database of wire transfer information to identify offshore accounts and their balances.”

The legal motions filed by the federal prosecutors are part of a wider crusade by the Liberal government to get tougher on tax evasion announced during Prime Minister Trudeau’s campaign.

In April, the Minister of National Revenue, Diane Lebouthillier, announced that the Government of Canada planned to invest more than $444 million to boost the CRA’s toolbox for tracking tax evaders at home and overseas including upping scrutiny of high-risk Canadian taxpayers from 600 a year to 3,000 and bringing on 100 additional auditors to focus on high-risk multinational corporations.

It’s a changing world for tax evaders, says Kenney.

“This whole era of anonymity surrounding dealing with values is beginning to end,” he says. “It’s going to become harder and harder for criminal tax evaders, drug traffickers and fraudsters to operate.”