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Bahamas leak reveals Canadian banks' offshore dealings

BERLIN, GERMANY - APRIL 13: Activists wearing suits throw fake money into the air while demanding greater trasparency in new legislation following the ongoing Panama Papers affair on April 13, 2016 in Berlin, Germany. Police in Panama have reportedly raided the offices of Mossack Fonseca, the law-firm accused of facilitating large-scale offshore tax evasion for thousands of its clients. (Photo by Sean Gallup/Getty Images)
[BERLIN, GERMANY – APRIL 13: Activists wearing suits throw fake money into the air while demanding greater trasparency in new legislation following the ongoing Panama Papers affair on April 13, 2016 in Berlin, Germany. (Photo by Sean Gallup/Getty Images)]

Big Canadian banks are once again in the spotlight for their involvement with tax havens, this time in the Bahamas, an island nation synonymous with offshore banking secrecy.

According to a cache of leaked internal documents from the corporate registry in the Bahamas, since 1990, RBC, CIBC and Scotiabank have provided services to nearly 2,000 offshore bank accounts, trusts and foundations throughout the database of 175,500.

While the data doesn’t indicate any wrongdoing from the banks, RBC registered 847 companies, CIBC registered 632 and Scotiabank registered 481 on the island nation between 1990 and May 2016. The findings were leaked through Germany’s Sueddeutsche Zeitung newspaper – the first outlet to release the Panama Papers – and the Washington-based International Consortium of Investigative Journalists, which includes CBC and the Toronto Star.

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Canadian lawyer Martin Kenney, one of the world’s leading authorities on international fraud and asset recovery, told Yahoo Canada Finance that when contrasted with the Panama papers, which included 11.5 million documents, the leak is “minor” both in scope and information.

“The data on the corporate registry is already publicly available,” he says, adding that they typically consist of ground-level data, names of the companies, creation dates, addresses and in some cases they’ll have director or owner names. The documents can be accessed for a $10 fee per document but the ICIJ released the documents en masse for free.

Kenney points out that only a small percentage of those companies may be involved in criminal activities.

“There are situations like a husband trying to hide money from his wife in a divorce or something like a wealthy family trying to protect their wealth in trusts in the case of a kidnapping,” he says, adding that there are also “lots of legitimate reasons for setting up a bank account in the Bahamas.”

Dennis Howlett, executive director of Canadians for Tax Fairness – an organization that frequently lobbies the government around policies to close the loopholes that make places like the Bahamas attractive to wealthy individuals and corporations, says that although the volume of findings in the Bahamas leak is smaller than the Panama Papers, it has more relevancy to Canadians.

“The Bahamas is a much more (prominent) Canadian destination of investment then Panama,” he says. “What’s most striking is the huge involvement of federal Canadian banks… that’s what jumps out at me.”

Howlett told Yahoo Canada Finance that the CTF estimates one third of the offshore investments are wealthy individuals.

“Which is, for the most part, completely illegal tax evasion and most of that is totally secret… it’s unreported,” he says. “Two thirds of the offshore activity is corporate and a lot of it was able to be done legally although there is the problem of companies crossing the line knowing they can get away with it.”

Bahamas ranks sixth on the list of destinations for Canadians’ money legally going abroad. According to Stats Canada’s latest numbers, Canadians have more than $33 billion parked there.

“It continues to go up every year,” says Howlett. “And that’s just the officially reported amount.”

He points out that the growing amount of data leaks in the past few years have spurred a crackdown on tax evasion. In July both RBC and Citibank agreed to hand over account information between Canadian residents and the Cayman National Bank.

“There is a lot more pressure on policymakers to do something,” says Howlett. “It does give pause to some of the companies and wealthy individuals and make them think twice… but it’s still a huge problem.”