Up to now, Canada and Scotland, traditionally white-listed countries having a clean bill of health for tax evasion, have been the last place to look for dodgy shell companies and other structures attempting to conceal undeclared wealth.
Since the drive against evasion and money laundering gained pace, lately boosted by the lurid disclosures around the law firm Mossack Fonseca in Panama, Canada has been revealed as an effective jurisdiction in which to hide assets, however.
A new term has been invented to cover the above - "snow washing".
The widespread international tax avoidance industry has been using Canada's "white listed" tax destination reputation and sound economy to make suspect transactions appear genuine, according to Ian Moncrief-Scott, of Isle of Man-based Information Management Solutions Limited.
“The Canadian Authorities, by their tax agreements with 115 countries, have increased the opportunities for criminals and tax avoiders to transfer funds through its financial system.”
Prominent Toronto tax lawyer Jonathan Garbutt explained the process of making a company “appear Canadian” involved placing wealth of doubtful origin into an offshore structure that was pure as the “…driven snow in the Great White North.”
In fact, a new investigation shows that evasion and related offshore havens are costing Canada up to C$15 billion annually. Releasing the results of its probe, the Canadian national Assembly’s public finances committee charged that the country’s banks and accountancy firms, where much of the money is sheltered, are the most reluctant to tackle the issue.
Its report asked why RBC operated eight branches in Jersey. At the same time, Barbados was claimed to have harboured C$80 billion in Canadian offshore funds and the Caymans sheltered C$49 billion.
Tax specialists say Scotland may be also falling into the snow washing category. It has a similar limited liability partnership structures to Canada and, like its counterpart across the Atlantic, it enjoys the façade of being a white listed jurisdiction.
In the overall attack on evasion, attention is now swinging towards the second passport. In particular, these ersatz residency devices are offered by countries such as Malta, Cyprus and several Caribbean states, including Antigua & Barbuda St Lucia and Grenada.
Mr Moncrief-Scott says that these islands “have rapidly become the hot favourites because of their Commonwealth links worldwide, which permit visa-free travel to more than 168 and 134 countries respectively, including the Schengen region of Europe”.
He adds, “There is continued growing concern in Europe and the US over the use of Citizen by Investment Programmes, especially those without any residency requirement. These are being used to defeat the privilege of visa-free travel agreements between specific nation states, which have genuine arrangements, by other countries that have subordinate agreements with the same individual country.“
Malta has issued over 700 passports to non-EU nationals in exchange for at least EUR200 million since 2014. Antigua and Barbuda has almost tripled the number of passports to 1,923 during the same period.
Traditionally, Canadians fleeing their frigid winters for the balmier climate of Florida and much of the Caribbean have been termed as Snow Birds. Nowadays, snow washers may prove a more appropriate phrase for those also seeking a quiet home for their cash.