Royal Bank forced to reveal who is behind 97 Bahamian accounts

Royal Bank forced to reveal who is behind 97 accounts in the Bahamas

RBC headquarters in Toronto's business district

A Federal Court judge ordered the Royal Bank of Canada (RBC) to disclose the beneficial owners of 97 Bahamas-registered companies that have used its services. An expert, however, wonders why the Canada Revenue Agency (CRA) took so long to act and try to detect possible tax fraud.

The 97 companies in question are all registered in the Bahamas, a tax haven. Their names were exposed six years ago in a financial document leak called the Bahamas Leaks.

The CRA says most companies have used tactics to hide the identities of the people who actually control these entities and are the true owners. The Canadian tax authorities want to verify if the real owners are Canadians who are hiding money in tax havens.

In the wake of the Bahamas Leaks, in 2016, Radio-Canada revealed that three Canadian banks had provided services to nearly 2,000 companies registered in the Bahamas since 1990.

Files showed that RBC acted as an agent for 847 Bahamian companies, whose names range from Abbatis 1 Inc. to Yellow Jacket Holdings Ltd. CIBC has registered or administered 632 companies and Scotiabank has managed 481.

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

The federal government persuaded a judge in late May to order RBC and its subsidiary RBC Dominion Securities to provide any information that would help the CRA learn the identity of the owners of the 97 companies. of the Bahamas. The bank did not oppose the government.

Neither the CRA nor the RBC explained how the number of companies registered in the Bahamas that make the subject of an investigation has been reduced from 847 to only 97 entities.

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 Revenue Canada also determined that many of the companies did not have Canadian shareholders or other ties to Canada that could give rise to tax liability.

There is, however, no indication in the Federal Court records that the CRA ever prosecuted either of the companies operated by CIBC or the Scotiabank.

Although the tax agency may have obtained information directly and confidentially from these two banks using powers under the Income Tax Act, it refuses to say more.

“The CRA generally does not disclose information related to our compliance approaches, as it could provide a roadmap in the event of non-compliance.

—Canada Revenue Agency, in a press release

Strictly speaking, we are unable to confirm whether the CRA will seek permission to retrieve third-party data from CIBC and Scotiabank, she told CBC News.

Toby Sanger, director of the advocacy group Canadians for Tax Fairness, remains unsatisfied. According to him, this lack of transparency gives the impression that the CRA seems to focus more on the soft targets, the small individuals, rather than on the larger and more complex cases of tax evasion at home.

Even though the CRA has proclaimed, following leaks like the Panama Papers and the Paradise Papers, that it is cracking down on tax shenanigans, it does not explain why it is only interested in 97 companies and why the delays were six years, laments Mr. Sanger.

Canadian individuals and businesses officially hold $23 billion in declared funds in the Bahamas, more than France, Spain and Portugal combined. A 2018 CRA study suggests that Canadians hold an additional $76 billion to $241 billion undeclared in various tax havens, without detailing by country.

In the case of the Panama Papers also revealed in 2016, the CRA has yet to lay a single criminal charge against anyone named in that leak, even though other countries have already brought hundreds. charges and obtained convictions.

A policeman outside the offices of Mossack Fonseca, Panama

Although the CRA received nearly $1 billion in additional funding between 2016 and 2022 to combat tax evasion and avoidance, the federal organization was unable to provide CBC/Radio-Canada with any criminal convictions she has obtained in the past 4½ years related to offshore tax evasion.

The CRA said last week that at one point it had five open criminal investigations related to the Panama Papers, but later dropped three of them. The two remaining cases appear to be ongoing investigations into $77 million in alleged tax evasion in Vancouver and an investigation into an Alberta oil financier.

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

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