Court orders issued last week sought to obtain seven years’ worth of Canadian account-holders’ Cayman Islands correspondent bank records in what Canadian authorities said was an ongoing investigation into tax evasion.

Some accounts, held in the name of Cayman National Bank at the Canadian branch of Citibank N.A., had been used by at least one Canadian taxpayer “to transfer funds from the Cayman Islands in an attempt to keep undetected from the Canada Revenue Agency certain offshore activities attracting tax liability in Canada.” That’s according to an affidavit filed July 20 requesting the Canadian federal court order to obtain the bank records.

The scheme was used to hide C$1.24 million in gains from “capital property held offshore,” Canadian authorities said.

“The bank documents revealed that the funds received by the taxpayer originated from an entity in the Cayman Islands beneficially owned by [the taxpayer] and another family member,” the court affidavit, filed by the Canada Revenue Agency, stated.

Other accounts, held in CNB’s name at the Royal Bank of Canada, are also the subject of the Ministry of National Revenue’s inquiry into whether certain Canadian citizens had fulfilled their obligations under the country’s Income Tax Act. In its affidavit, the revenue agency specified one account number from a corresponding Canadian dollar account held in CNB’s name at RBC.

“The Canada Revenue Agency has long been concerned that some Canadian residents with foreign assets are not fulfilling their obligations under the [tax] act,” the ministry’s request seeking the bank records stated. Among those obligations were the reporting of income from sources outside Canada, reporting of bank transfers or loans to non-resident trusts and reporting of certain foreign property.

At this stage, the Canadian court orders issued July 20 and July 21 involve civil matters. Depending on what the bank records reveal, criminal cases could be pursued against suspected tax evaders.

Neither RBC nor Citibank opposed the court order to produce the documents. The banks now have 120 days to turn them over. Representatives of both CNB and RBC were contacted by the Cayman Compass Wednesday for comment, but no response had been received by press time. Cayman National Bank is the largest subsidiary of Cayman National Corp. Ltd.

CNB, like many other international banks, holds correspondent accounts in Canada in order to conduct Canadian dollar transactions for its customers. The correspondent accounts are usually deposit accounts opened at a Canadian bank in the name of a foreign bank – in this case Cayman National – which maintains no offices in Canada.

The application before the Canadian federal court and subsequent judicial orders authorizing the bank records’ release to tax authorities, allow the revenue agency to receive bank records from RBC or Citibank that were cleared through the CNB accounts.

The Canadian court filing did not name any taxpayers in the records request, nor did it state how many individuals for whom bank records had been sought. The Minister of National Revenue is seeking information on Canadian residents who had authority over accounts or companies which held accounts at Cayman National Bank between Jan. 1, 2009 and Dec. 31, 2015.

The order seeks bank account statements, as well as deposit and funds disbursement records during the seven-year period.

U.S. case

The affidavit filed to obtain the Canadian federal court order also makes reference to a U.S. Department of Justice tax evasion investigation into two other Cayman National Corp. subsidiaries, Cayman National Trust Co. Ltd. and Cayman National Securities Ltd.

Both companies, which manage the corporation’s trusts and investment funds, settled their respective cases by pleading guilty to tax evasion conspiracy earlier this year. They were alleged to have assisted certain U.S. taxpayers hide an estimated US$137 million from the Internal Revenue Service.

Cayman National Bank was investigated in that matter, but the Department of Justice said it declined to pursue a case against the bank.

Cayman National Corp. paid a US$6 million fine as a result of its guilty plea in the U.S.



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