The Intersection Between Canadian Taxes And Money Laundering

In Canada, financial crimes such as tax evasion and money laundering are taken extremely seriously by the criminal justice system and the Canada Revenue Agency (CRA). Citizens and residents should be aware of the relationship between Canadian taxes and money laundering. When preparing taxes, steps should be taken to make sure everything is filed according to the law. If you have been audited by the CRA due to alleged money laundering, tax evasion, or another tax issue, consider seeking legal guidance. Experienced Canadian tax lawyer Jeremy Scott can evaluate your case and help you develop a plan for handling this difficult situation. Call Jeremy today at (902) 403-7201 to learn more.

How Is Money Laundering Defined in Canada?

According to Public Safety Canada, money laundering is a serious financial crime that can affect the safety, security, and quality of life of the average Canadian. This crime is a process that criminals often use to disguise the source of illegally obtained money or assets. Illegal money from criminal activities is typically processed through legitimate businesses and converted into “clean money”, which cannot be easily traced back to its criminal origin. Criminal groups often use the proceeds of money laundering to support illegal activities like the sale of drugs, corruption, fraud, and human trafficking.

Individuals can be found guilty of money laundering in Canada if the prosecution proves beyond a reasonable doubt that they either laundered money gained through illegal activities or moved money on behalf of another person or organization while aware that this movement could be money laundering.

What Does the Canada Revenue Agency Consider Tax Evasion?

In general terms, the Canadian government defines tax evasion as any intentional attempt to avoid complying with Canadian tax laws. The CRA considers the following activities as forms of tax evasion and/or tax fraud:

• Falsifying tax records and claims
• Intentionally not reporting income in tax returns
• Inflating expenses
• Fraudulently claiming refunds, benefits, or deductions

Tax evasion is considered a serious crime in Canada, which could result in criminal charges and financial penalties from the CRA.

Penalties For Tax Crimes in Canada

Individuals who are found guilty of tax evasion or money laundering in Canada face serious criminal penalties:

• The maximum penalty for tax evasion is 5 years in prison and a mandatory fine of between 100% and 200% of the unpaid taxes.
• The maximum penalty for money laundering is 10 years in prison. The government can also confiscate property that was obtained with the proceeds of crime and impose fines when forfeiture of such property is not possible.

If you have been accused of a tax crime in Canada, you can learn more about your legal rights by contacting Canada tax lawyer Jeremy Scott.

How Does the CRA Catch Tax Evasion?

The Canada Revenue Agency takes tax evasion extremely seriously, as the agency believes that this crime deprives Canadian citizens and governments of critical public funding for programs like infrastructure projects and social services, such as healthcare and education. The CRA has a four-step criminal investigation process for taxpayers suspected of tax evasion.

What Can Trigger a Criminal Tax Evasion Investigation?

There are numerous sources of information that can prompt the CRA’s Criminal Investigations Program (CIP) to launch a tax evasion investigation. These include, but are not limited to:

• Internal referrals from the CRA, including a variety of audit programs
• Informant tips
• Relevant information from different law enforcement agencies
• Publicly available sources of information, such as newspaper articles

How Does the CRA Select Files to Investigate?

Not all of the previously mentioned documents will automatically trigger a criminal tax evasion investigation. The CRA generally selects files by first analyzing the information contained within them to determine the extent of the alleged tax evasion, and then assesses all circumstances, the availability of evidence, and how likely they are to successfully prosecute.

The following circumstances are prioritized by the CRA when conducting investigations:

• Major tax evasion involving international elements
• The promotion of sophisticated and organized tax evasion or money laundering schemes
• Joint investigations involving law enforcement agencies, such as tax evasion that includes money laundering
• Major cases of income tax and/or GST/HST tax evasion
• Significant cases involving benefits fraud

The Steps of a Criminal Tax Investigation

A typical CRA investigation of Canadian taxes and money laundering or tax evasion will usually involve the following steps:

• Gathering evidence
• Interviews of taxpayers and witnesses
• Execution of search warrants
• Analyzing evidence
• Preparing a thorough report of the investigation
• Sending the investigation report to the Public Prosecution Service of Canada for review

Decision From the Public Prosecution Service of Canada

After receiving a report from the CRA, the Public Prosecution Service of Canada reviews the information and decides whether there is enough evidence to prosecute. If they decide to go forward, the CRA investigators will file charges and the accused taxpayer will receive a court summons, along with full disclosure of the charges against them.

Is Tax Evasion Money Laundering in Canada?

Tax evasion and money laundering are separate offenses in Canada, but in some cases, an individual may be charged with both crimes. Money laundering is defined as concealing income derived from illegal sources and tax evasion is illegal. Thus, in some situations, individuals who have evaded income taxes and then attempted to conceal the source of that income may be charged with both offenses.

Seek Legal Guidance From Canada Tax Lawyer Jeremy Scott

If you are facing a serious tax dispute with the Canada Revenue Agency, it may be wise to seek legal guidance. Whether it is an audit or criminal charges for tax evasion or money laundering, the consequences of these disputes can be severe. At Jeremy Scott Law, our experienced Canadian tax lawyers help our clients resolve disputes with the CRA. We are prepared to analyze your case and provide legal guidance on the best course of legal action given the circumstances. For more information about Canadian taxes and money laundering or another Canadian tax issue, contact Jeremy Scott Law today at (902) 403-7201.