Banks to hand over Canadian offshore files after Trudeau government wins orders

The Trudeau government has won a round in its battle against offshore tax cheats.

Two banks have agreed to give the federal revenue minister information from the accounts of a Caribbean financial institution to help the government crack down on Canadian tax evaders.

The Federal Court of Canada has approved federal requests for seven years' worth of transaction information from the Royal Bank of Canada and Citibank, N.A., related to accounts in the name of Cayman National Bank Ltd.

The Royal Bank and Citibank — neither of which opposed the federal demands — have 120 days to hand over records from Jan. 1, 2009, through Dec. 31, 2015, including account statements, deposit slips, cheques, bank drafts and wire transfer orders.

The Canada Revenue Agency plans to comb through the data to see if Canadian residents are using the Canadian dollar accounts, opened by Cayman National Bank, to transfer funds to Canada and avoid reporting taxable income from their foreign holdings.

The move is part of the government's ongoing efforts to fight offshore tax evasion, said revenue agency spokesman David Walters. "The CRA is committed to combating the abusive use of offshore jurisdictions and protecting the integrity of the Canadian tax system."

In an affidavit filed with the Federal Court, David Letkeman, an auditor with the agency's offshore compliance section, says past investigations have confirmed that Canadian residents use accounts with foreign financial institutions to hide taxable income.

"In my experience, the expectation of such persons is that the CRA would not discover the entities, accounts and omitted income."

In this case, the revenue agency has not yet identified Canadians suspected of an offshore tax dodge.

However, Letkeman says the agency was alerted to the possible Cayman ruse by a Canadian woman who voluntarily disclosed her dealings through a special program that allows those who come forward to avoid prosecution.

Documents showed the woman's funds flowed from the Cayman Islands — through Cayman National Bank's correspondent account with the Canadian branch of Citibank, N.A. — to a Canadian bank account in her name.

As a result of the revenue agency's review, she was ordered to pay a total of more than $1.2 million plus interest for unreported capital gains related to offshore property.

The revenue agency acknowledges that some of the information it seeks from the two banks may already be in its possession as a result of federal measures that in 2015 introduced mandatory reporting of international electronic funds transfers of $10,000 or more.

However, the agency says, audits have revealed cases where Canadian residents attempting to conceal income and assets had periodically paid themselves "allowances" of less than $10,000 from offshore accounts.

Walters said the latest court actions are unrelated to the so-called Panama Papers trove of leaked data, which exposed the offshore dealings of many high-profile people around the globe.