CIG ready to assist Canada’s tax evasion probe

| 05/08/2016 | 8 Comments
CNS Business

Cayman National

(CNS Business): As Cayman National finds itself embroiled in another international tax evasion investigation, this time regarding the actions of clients of two Canadian banks, the Cayman government says it is ready and willing to assist Canada in uncovering where its citizens may have used offshore accounts to avoid tax obligations at home.

Last week a Canadian federal judge ordered The Royal Bank of Canada and Citibank to provide details of all their dealings with Cayman National Bank over the past seven years, as part of a new crackdown on the wealthy hiding money offshore. The banks have 120 days to hand this information over, according to the filings, however the authorities can obtain the details directly from Cayman if required.

“If the Canadian authorities approach Cayman, we have mechanisms in place – specifically, a bilateral tax information exchange agreement, and the Convention on Mutual Administrative Assistance in Tax Matters – to assist them,” Minister of Financial Services Wayne Panton told CNS Business, when asked about the implications of this latest incidence for a bank in Cayman to be associated with nefarious behavior overseas.

With Cayman coming to the attention of Canada’s tax authorities in this manner, international news reports say it will become a less attractive place for the wealthy to hide their money. CIMA, meanwhile, was cautious and was not ready to make a decisive statement.

“The Cayman Islands Monetary Authority has just been made aware of the report, and is making enquiries to gather the relevant facts. As a consequence, we are unable to comment further at this time,” a spokesperson said.

A request for comment was also made to Cayman National, however no response was received.

In this instance, the focus of the investigation is squarely on the actions of clients of the Canadian banks with the aim of uncovering individuals cheating on their taxes. According to reports, the incident was sparked by a Canadian woman volunteering the information through a programme designed to waive prosecution for people who come forward. The Canada Revenue Agency (CRA) is understood to be planning to sweep the information provided by the banks to see where other individuals are attempting to skirt the system.

Cayman National was singled out by the CRA this time, likely just because of the voluntary admission, however, the bank firm does already have a track record in this area. Earlier this year it was revealed that Cayman National group subsidiaries had helped US account holders evade tax for over a decade, when Cayman National Trust Company Limited and Cayman National Securities Limited pleaded guilty to a US court for helping clients avoid over US$130 million in taxes and was fined around US$6 million.

According to reports, the affidavit filed in Federal court stated that the CRA’s investigations have shown Canadian residents use accounts with institutions overseas with the objective of hiding income which should be taxable. In this case, the female client concerned had transferred funds from Cayman to Citibank in Canada, passing through a correspondent banking account held by Cayman National. The woman was said to have been made to pay over $1.2 million in relation to the unreported capital gains.

Against the backdrop of de-risking activity by primarily US banks, cutting access to US correspondent banking services for banks located south of the continental United States, this episode is further fuel to the fire for those commentators who believe Cayman faces potentially being cut off from the US dollar system as correspondent banking accounts are closed due to the risk of being associated with tax evasion or money laundering.

Banks in the Caribbean are seen as particularly susceptible, due to the region’s association with drug trafficking and money laundering. Where there is an increased risk of tax evasion or money laundering, US banks are in some cases making sweeping decisions to exit certain regions or lines of business in order to avoid falling foul of regulators.

Tags: , ,

Category: Finance, Financial Crime

Comments (8)

Trackback URL | Comments RSS Feed

  1. Anonymous says:

    Citibank, is of course, the New York based US Fedwire correspondent bank and custodian for USD payments to and from CNB. RBC is the CAD correspondent and custodian. None of this money is ever really physically domiciled in the Cayman Islands, it’s just segregated into client accounts here. Nobody in the Cayman Islands financial landscape of 2016 should believe or represent that accounts are “secret”; and everybody, including clients should be aware of the well-publicized TIEAs and regulator to regulator MOUs that govern disclosure. Any cheaters still in the Cayman Islands banking system should expect to be exposed sooner or later. The secret bank account train left the station many many years ago!

  2. robert says:

    i am an investor in CNB, for past 10 years, the bank’s profitability has not improved. under current CEO, it opened up offices overseas and spends shareholders moneys flying board members and their wives to these locations that only be considered great jollies, while cayman operation is drifting no where , without any strategic plan or foresight. it is high time the board and shareholders made changes at the top.

  3. Anonymous says:

    To: All Crooks and Bad Actors
    From: Watchful Eyes Across the pond ??????

    Well, this is comforting news. (sarcasm)

    These International Banks have been making headlines every couple months, since 2008:

    Bankers and Lawyers being arrested and (some) released on bail, while others sent to prison; Forex/LIBOR manipulation; Mortgage & Forclosure Fraud; Insider Trading; Incomplete Broker Trading Reports; Investment Managers imposing hidden fees, overcharging clients; Altering Share Register Reports; Penny Stock Securities Fraud; Unlicensed Advisory and Unlicensed Trading; Relationship Managers and Attorneys facilitating money laundering; Net Asset Valuation discrepancies; Investment Managers & Fund Managers diverting from the terms of the Clients’ Offering Memorandums; Bankers changing wire references to conceal origin of funds and/or final beneficiary; Compliance/AML inefficiencies; now, we have CNB embroiled in yet another a tax fraud investigation in just a few months- this time, with Canada!

    This rampant misbehavior and gross negligence are reasons why the financial world is in turmoil.

  4. Michel Lemay says:

    I am in Canada and I can tell you that the Cayman Islands reputation for being a fiscal paradise is alive and well. As much as I try to explain that we cooperate and that we have systems in place. Many seen the movie the Firm and thinks it’s still for real. Please clean up unna acts. Making us look real bad. It’s a very good idea to cooperate with Canada and not loose the priviledge of easy access to U.S.currency. Remember ? That is my opinion for what it’s worth.

  5. john says:

    CNB again in the news on facilitating tax evasion.. are the board of directors and shareholders of CNB a sleep and incompetent that they allow the senior mgt that run the bank during this time to continue in their role.

    • Anonymous says:

      Despite recent efforts to cooperate with the USDOJ/IRS, this latest news involving Canada has only further agitated revenue authorities to remain on alert for continued dishonesty about offshore accounts held by its citizens.

      If these local banks aren’t careful about how they do business and conceal tax fraud, they will surely see a fate similar to Belize Bank International, who just lost two U.S. Correspondent Banks, to include Bank of America.

    • Anonymous says:

      What’s needed is for shareholders to speak up and demand a change! Call for more robust and active and present leadership and a vigorous compliance program. Then, demand that a significant part of remuneration for executives includes shares; that will provide the focus for the Board.

Please include your email address in the form below if you are using your real name. You can use a pseudonym, with or without leaving an email address, or just leave the form blank to be "Anonymous". All comments will be moderated before they are published. The CNS Comment Policy is at the top of this page.

This site uses Akismet to reduce spam. Learn how your comment data is processed.