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3 Canadian banks served 2,000 offshore corporations, Bahamas leak shows

CIBC, Scotiabank and RBC all cite safeguards against potential for tax evasion and money laundering

RBC, Scotia, CIBC

Subsidiaries of Royal Bank, Scotiabank and CIBC helped administer Bahamas-based offshore corporations with names like Bifocal Holdings, Bear With Me Corp. and Zizi Ocean Ltd. (Canadian Press)

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Three of Canada's big banks provided services to nearly 2,000 offshore corporations since 1990 in the Bahamas, one of the world's premier tax havens, leaked records show. The revelation has elicited concerns from a leading governance expert that they may be inadvertently aiding illicit activities.

Subsidiaries of CIBC, Royal Bank and Scotiabank helped administer Bahamas corporations with names like Bifocal Holdings, Bear With Me Corp. and Zizi Ocean Ltd., though nearly half the companies are no longer active. At a minimum, the services provided consisted of paying annual fees and filing paperwork — but in many cases also consisted of incorporating the offshore companies.

The findings come from a cache of leaked internal records from the Bahamas corporate registry covering 175,000 companies, trusts and foundations set up in the Caribbean country over the past 25 years.

The data was leaked to Germany's Sueddeutsche Zeitung newspaper — the same media outlet that received the massive Panama Papers leak disclosed earlier this year — and shared with the Washington-based International Consortium of Investigative Journalists, whose exclusive Canadian partners are CBC/Radio-Canada and the Toronto Star.

Far less detail than Panama Papers

Nothing in the sample of records CBC or the Star were able to examine indicates any wrongdoing on the part of the Canadian banks or other companies. The leaked documents are much less elaborate than the data obtained in the Panama Papers, which included emails, tax returns, some banking information and even elements like passport info on 214,000 offshore entities handled by a major Panamanian administrator of offshore shell companies.

Richard Leblanc

'It raises red flags in my mind,' corporate governance expert Richard Leblanc says of the volume of Bahamas offshore corporations being served by Canadian banks.

But one expert suggested even just the "high volume" of offshore companies Canadian banks were dealing with, coupled with the opaqueness of corporate records in the Bahamas — a tiny country of about 400,000 people — is cause for possible concern.

"Why are there so many companies registered and such a high volume in a jurisdiction that doesn't have the population base and economy to support it?" asked Richard Leblanc, a professor of law, governance and ethics at York University in Toronto, in an interview with the Star.

"We don't know whether it's done for legitimate reasons or tax evasion or avoidance ... It raises red flags in my mind."

While it's not illegal to set up or own an offshore corporation — provided any income and assets are declared to tax authorities — tax havens like the Bahamas have a history of being used as locales to hide wealth or launder money.

Banks tout safeguards

The Canadian banks all said they specifically guard against those risks.

"Tax evasion, fraud and money laundering are illegal, and we have established policies and controls in place to detect and prevent them from occurring throughout RBC," Royal Bank, which registered or administered 847 Bahamian companies named in the leaked data, said in a statement.  

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"We have an extensive due diligence process to ensure we understand who the clients are and the purposes for those accounts. We have policies, controls and teams to ensure we meet legal requirements to prevent and report suspicious transactions."

Scotiabank, which is listed as the agent for 481 companies in the leak, said administering offshore corporations is a small part of its business in Bahamas, where it has a full retail banking operation with 90,000 customers. It added that it conducts daily monitoring on offshore accounts to spot any irregularities, and does background checks on potential customers.

"We regularly have to decline a prospective client. We don't just take all comers," Peter Slan, senior vice-president of global wealth management, said in an interview with the Star. "We will decline clients. We will close accounts if we are at all uncomfortable with the source of their wealth."

CIBC, listed in the Bahamas leak in connection with 632 companies, said in a statement: "We apply stringent anti-money laundering and anti-terrorist financing standards in every jurisdiction in which we operate ... If we identify any suspicious activity we report it to all relevant regulators."

Morneau mentioned

Other prominent Canadian names in the data include Bill Morneau, who ran human resources outsourcing and consulting firm Morneau Shepell before becoming federal finance minister last fall. Morneau appears as a director of Morneau Shepell (Bahamas) Ltd., a subsidiary set up in 2014 for his company to consolidate its pension-consulting work in various Caribbean countries, including the Bahamas.

CPP Reforms 20160620

Finance Minister Bill Morneau's name is in the leak from the Bahamas. (Darryl Dyck/Canadian Press)

As required under the Conflict of Interest Act, Morneau resigned from Morneau Shepell and its Bahamian subsidiary last October before being sworn in as a minister.

A defunct Caribbean arm of the Labatt brewing empire also turns up in the records. The company, Labatt Brewing Canada Holding Ltd., was only briefly active in 2004. Labatt vice-president Charlie Angelakos said it was simply a holding company and disappeared when Labatt parent company Interbrew merged with AmBev that year.

Preferred tax haven

The Bahamas has been a preferred tax haven for Canadian money for years, in part due to its serene beaches and breezy lifestyle, but also because Canada entered into a pact called a tax information exchange agreement, or TIEA, with the Caribbean country in 2011.

Under the deal, the Bahamas committed to hand over confidential banking and other financial details on Canadians with accounts there to the Canada Revenue Agency to help it ferret out tax cheats. In exchange, Canada allows Canadian businesses with legitimate activity in the Bahamas to earn profits that enjoy the country's zero corporate tax rate, and then bring those earnings back home tax-free.

Partly as a result, the Bahamas has become the No. 6 destination for money legally going abroad from Canada. Corporations and wealthy Canadians have nearly $33 billion in assets there, Statistics Canada's latest numbers show — more than in China, Brazil and Germany combined.

A previous joint CBC/Toronto Star investigation found TIEAs like the one with the Bahamas may in fact be achieving the opposite of their stated goal to curb the amount of money routed offshore. 


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