Court orders Canadian banks to disclose Cayman ties

Two Canadian banks have been ordered to disclose their dealings with a Cayman Islands financial institution

Two Canadian banks have been ordered by the Federal Court to disclose their dealings with a Cayman Islands financial institution, according to a Toronto Star report.

Royal Bank of Canada and Citibank, N.A. have 120 days to provide the Canadian Revenue Agency all transaction information for accounts held at Cayman National Bank between 2009 and 2015, the Star reported. The order marks the second time the government has sought court intervention to investigate offshore tax havens since the Star and the International Consortium of Journalists publicized the Panama Papers leak earlier this year.

“It’s part of a resurgence in the investigation and prosecution of offshore tax evasion,” tax lawyer Joseph Markson told the Star. “In the present climate, following the Panama Papers and international efforts to end tax haven secrecy, resistance has become futile.”

Neither bank opposed the government’s court applications – a move that didn’t surprise Markson.
“The banks want to be seen as good corporate citizens,” he told the Star.

CRA auditor David Letkeman told the Federal Court that the agency was alerted to the Cayman Island tax scheme by a woman who voluntarily disclosed her hidden offshore assets, the Star reported. The woman transferred money from the Cayman Islands through Cayman National Bank’s account at Citibank, N.A., to a bank account in her name.

The woman was ordered to pay more than $1.2 million plus interest for unreported capital gains, according to the Star. However, she avoided penalties and criminal prosecution because she came forward voluntarily.

The court order will allow the CRA to investigate whether other Canadians used the same strategy to avoid taxes, according to the Star.

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