Royal Bank of Canada closed accounts of about 40 clients and bolstered tax compliance following a review of offshore accounts tied to last year’s leak of records from a Panama law firm.
“The review is completed,” J-F Courville, chief operating officer of Royal Bank’s wealth-management unit, said in an interview. “We found out we have a business with good controls, but opportunities to improve consistency through constant training to make sure we have consistent interpretation and application of strict policies and procedures.”
Royal Bank set up a team last April to scour four decades of internal records to see what ties the Toronto-based lender had to Mossack Fonseca & Co., the Panama City law firm at the center of a leak of 11.5 million records. The leaks suggested politicians and business leaders channeled billions of dollars through offshore accounts using some of the world’s biggest banks. Royal Bank was one of several lenders named in the records, along with HSBC Holdings Plc and UBS Group AG.
“We reviewed all accounts related to Mossack Fonseca in depth,” Courville said in Monday’s interview. “The relationships with Mossack Fonseca — basically relationships initiated by the client using that law firm as an adviser — represented an extraordinarily small proportion of our total client base.”
Royal Bank closed accounts because they no longer fell within its risk-tolerance levels, based on current industry principles and the bank’s own criteria, Courville said. Those shuttered accounts represented less than 0.001 percent of the firm’s client base, he said.
Royal Bank is also introducing measures this year to strengthen account agreements with cross-border customers around tax requirements in their countries.
“We are also going to continue enhancing the due diligence that we do on clients when operating in countries where automatic transfer of tax information doesn’t exist, including requesting confirmation that they’re filing their taxes on these accounts,” Courville said.
At a meeting last year, shareholders pressed Royal Bank Chief Executive Officer David McKay about the lender’s role in setting up offshore accounts and shell companies in tax havens. McKay reiterated during the meeting that the firm follows the laws and regulations in every country, and that Royal Bank hasn’t been accused of doing anything illegal.