U.S. agents: Bank knew wealthy Canadian helped clients hide money from Uncle Sam, Canada

UPDATED: Washington Post National Security and Foreign Affairs editor Jenna Johnson analyzed the evidence in a lengthy piece published Wednesday. The federal charges against a Canadian investment banker were particularly noteworthy for one key…

U.S. agents: Bank knew wealthy Canadian helped clients hide money from Uncle Sam, Canada

UPDATED: Washington Post National Security and Foreign Affairs editor Jenna Johnson analyzed the evidence in a lengthy piece published Wednesday.

The federal charges against a Canadian investment banker were particularly noteworthy for one key detail: The bank that employed Guillaume Bérubé, 45, knew he was helping his wealthy clients set up offshore companies for tax purposes, the feds say.

But the firm “did not report its knowledge,” according to a criminal complaint against Bérubé, who’s charged with bank fraud and aggravated identity theft.

And the Canadian government — which is often lauded for its efforts to crack down on tax evasion by wealthy residents — has turned a blind eye, the Post’s Thomas Gibbons-Neff reported Monday.

Bérubé, now in jail pending an expected trial in July, said nothing in an interview with The Post’s Johnson, so there’s no way to know exactly what he told the bank.

But if the charges are accurate, it’s almost certain that the lender, Bank of Montreal, didn’t share those details with the Revenue Agency. In fact, the bank appears to have sought to conceal its knowledge of its client’s schemes. (Bérubé reportedly didn’t work directly for the bank, but rather as a consultant for its investment arm, which is run by a former banker and headed by a Canadian senator.)

Bank of Montreal’s controlling shareholder is the Caisse de dépôt et placement du Québec, which is a provincial government agency. The largest domicile of the agency’s “asset management business” — which the taxpayer-funded agency pays the Caisse to administer — is its American subsidiary, the Post reported, leaving open the possibility that the bank is closely involved in the development of offshore schemes involving Canadian taxpayers.

Gibbons-Neff said the revenue agency has dismissed charges against Bérubé’s business partner, Lyle Muscott, who also has been charged with bank fraud and aggravated identity theft.

Here’s why that’s such a big deal, he explained:

Bérubé’s business partner allegedly also helped set up dozens of offshore companies. Although Muscott remains out on bail, the federal agency has already decided not to charge him, though a number of IRS examiners wanted to look more closely at his activities. Federal officials believe they may be in the minority.

Bérubé’s indictment comes amid a tax-evasion crackdown by U.S. authorities and Canada’s Parliamentary Budget Officer.

Last year, Trudeau’s government changed the tax system — in an effort to defuse controversies involving Canadian tax cheats — to protect the privacy of income and credit card transactions. It also introduced new regulations to clamp down on high-risk tax evasion schemes.

But in March, the parliamentary budget officer published a devastating report saying the country’s tax collection agency had put “ad hoc” rules in place to circumvent criminal investigations into taxpayers who help themselves to refunds of taxes paid by others.

According to the Post, the CFO now plans to ask the government’s auditor general to undertake a review of the agency.

The revenue agency should have been undertaking a broad analysis, Gibbons-Neff said. One of the most important findings: That fewer than 2 percent of Canadians who are caught dodging the tax system end up being charged with tax crimes.

The answer, he concluded, could lie in three areas:

Regulation. U.S. authorities have insisted that Canadians pay more attention to U.S. data on customers and transactions, Gibbons-Neff wrote. That practice has been in place for years in countries around the world, but has really taken off this decade in Canada. According to statistics cited by the Post, the revenue agency’s examination of individuals has skyrocketed from 38 percent in 2013 to 79 percent in 2015. Gibbons-Neff found evidence that the agency believes the next step is to change Canada’s income tax law, too.

Financial disclosure. The Revenue Agency — whose Web site quotes the ethics commissioner urging Canadians to “check whether you or your spouse are or may be contributing to tax evasion” — could learn from tax information Americans routinely disclose, Gibbons-Neff wrote. �

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