RBC denies wrongdoing, says controls in place to prevent tax evasion.
Canada’s largest commercial bank finds itself in the middle of a global uproar over leaked documents exposing activities in offshore tax havens.
But the Royal Bank of Canada, which was among financial institutions named in the so-called “Panama Papers,” has denied any wrongdoing, saying it has “established controls, policies and procedures in place” to detect and prevent tax evasion.
“We have an extensive due diligence process to ensure we understand who the client is and what their intentions are, and will not proceed with a transaction until we do,” Canada’s biggest financial institution by market capitalization said in a statement Monday.
RBC also said there are a number of legitimate reasons to set up holding companies in low-tax havens. “If we have reason to believe a client is seeking to commit a criminal offence by evading taxes, we would report that offence and not do business with the client,” it said.
The bank was named alongside dozens of other financial institutions in the massive leak of documents involving 11.5 million records from Panama- based law firm Mossack Fonseca, reportedly one of the world’s top creators of shell companies — entities that have no active business or operations and, although they can be used for legitimate purposes, can also be used to hide asset ownerships in order to evade taxes.
The International Consortium of Investigative Journalists, a Washington- based non- profit organization, combed through the records that it said were provided by an anonymous source.
Also named in the Panama Papers are more than 100 past and present politicians allegedly linked to offshore companies — including Russian President Vladimir Putin, Chinese President Xi Jinping and Icelandic Prime Minister Sigmundur David Gunnlaugsson — as well as other public figures in the U.K., Ukraine and Pakistan.
According to those media outlets given access to Mossack Fonseca data, RBC and its subsidiaries set up as many as 370 so-called “shell” companies.
In its statement, RBC said it works within the legal and regulatory framework of every country in which it operates, and builds internal policies based on the regulatory requirements of each jurisdiction.
“We make sure our clients have the information they need to properly file their taxes and we advise them of their obligation to do so,” the bank said, adding that it also advises clients to seek independent professional tax advice.
The Canada Revenue Agency did not respond to requests for comment by deadline on Monday.
Nicolas Simard, a lawyer in the tax practice at Fasken Martineau DuMoulin LLP in Montreal, said the Panama documents are likely to lead to more tax audits targeting wealthy Canadians.
“Previous l eaks of off- shore activities have led the Canada Revenue Agency ( CRA) to engage in multiple tax audits targeting wealthy Canadians,” including clients of an international accounting firm, Simard wrote in an online article Monday. “This time should be no different.”
Panama is not unique in providing tax havens for rich investors. The Isle of Man, Cayman Islands and Bermuda are also among a dozen or so offering low- tax regimes for non-residents.
The Canadian govern- ment has enacted numerous measures and guidelines to crack down or limit such offshore tax incentives in recent years, but the problem has persisted.
Next week, Sen. Percy Downe — a long- time advocate of tighter tax rules — is expected to table a bill in the Senate calling for the government to do more to limit overseas tax avoidance.
In its 2016-17 budget, released March 22, the federal government commit- ted $ 444.4 million over five years for the Canada Revenue Agency “to enhance its efforts to crack down on tax evasion and combat tax avoidance,” Downe said in a statement Monday.
Downe, who is scheduled to introduce his Senate bill on April 13, said: “Hopefully, some of that money will be targeted at overseas tax evasion.”
In a letter to Downe, dated Jan. 20, National Revenue Minister Diane Lebouthillier said she had “instructed my officials to commence work on a plan aimed at enhancing public understanding of non-compliance with Canada’s tax laws and to identify the financial resources that would be required to move forward on the plan.”
Lebouthillier added: “As a first step, the CRA will undertake a comprehensive study of tax gap estimation.”
Meanwhile, the Organization for Economic Co- operation and Development has also waded in on the issue, with the secretary-general of the 34- nation group saying “we have constantly and consistently warned of the risks of countries like Panama failing to comply with the international tax transparency standards.”
“The Panama Papers revelations have shone the light on Panama’s culture and practice of secrecy,” Angel Gurría said in a statement Monday, but added the country “is the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities.”
Gurría said this “is a testament to the incredible transformation effected in the last seven years to establish robust international standards on tax transparency.”
PAPERS SHONE THE LIGHT ON PANAMA’S CULTURE OF SECRECY.