Canada: The Paradise Papers: A Slippery Slope

In less than 30 years, it has become possible for individuals to perform criminal activities electronically, without being physically present at a crime scene. For example, the traditional way of robbing a bank is to appear with guns, masks, and a get-away vehicle. Today, this method is outdated. A criminal with sufficient expertise can much more effectively rob a bank of information (such as credit card data or bank account numbers) or steal funds by electronic means. The electronic thief is no less criminally culpable than the robber of the bricksand- mortar bank.

Like a bank, a law firm can be the victim of electronic theft. An electronic thief is arguably just as culpable as a robber who appears at the front desk, threatens the staff at gunpoint, and speeds away with documents to later distribute. Moreover, consider a situation in which an electronic criminal steals funds and deposits them in a third person's bank account, and that third person then uses the funds. The involvement of the third person is no less offensive than the involvement of an individual to whom a bricks-and-mortar bank robber simply passes some cash.

Why then does public opinion generally consider it morally acceptable for a hacker to electronically steal documents from a law firm and pass them to the press for public consumption? In general, there has been no outcry against these criminal acts; instead, the public appears to have welcomed them, and in many instances the press has sensationalized the stolen information. Ever since the theft and release of this sort of information has become commonplace, it has also become commonplace for the public and the press to jump to conclusions about it. The latest example of criminal wrongdoing is the theft of 13.4 million electronic documents (the socalled Paradise Papers) from Appleby, a reputable law firm, which has caused a media frenzy and prompted exaggerated responses from the government.

It is unfortunate that offshore industries – banking, law, insurance, and others – are often associated with tax avoidance or evasion. However, while there is no doubt that criminal activities do occur in offshore jurisdictions, these jurisdictions are frequently used for legitimate non-tax reasons: privacy, confidentiality, safety concerns, creditor-protection planning, and succession planning. Clients who have sought professional advice about the use of offshore jurisdictions have a legitimate expectation of privacy from public scrutiny, provided that their taxation particulars are fully transparent to the tax administrators and in compliance with domestic tax laws.

It is improper for stolen information to be made available to the public and for conclusions to be drawn about it on the basis of a less-than-thorough understanding of the circumstances. Moreover, it is highly offensive for the media and others to draw attention to the people whose private information has been the object of electronic theft.

Social media and other electronic forms of communication should not be used to normalize criminal activities and disseminate clients' information to a public audience. It is time to eradicate this phenomenon and to consider the possibility of criminalizing the possession and public dissemination of information obtained by electronic theft.

Originally published in STEP Inside " JANUARY 2018 " VOLUME 17 NO. 1

Moodys Gartner Tax Law is only about tax. It is not an add-on service, it is our singular focus. Our Canadian and US lawyers and Chartered Accountants work together to develop effective tax strategies that get results, for individuals and corporate clients with interests in Canada, the US or both. Our strengths lie in Canadian and US cross-border tax advisory services, estateplanning, and tax litigation/dispute resolution. We identify areas of risk and opportunity, and create plans that yield the right balance of protection, optimization and compliance for each of our clients' special circumstances.