Disclosing Information to the CRA About Unnamed Non-Target Persons
Suppose that the CRA issues a requirement for information (RFI) to a financial institution for information on all accounts held by a named person, including accounts held jointly with persons not named in the RFI. The named person may hold accounts jointly with a spouse, a business partner, or an elderly parent, for example, who may not be named in the RFI and who may not be the target of the CRA investigation. Should the financial institution comply with the RFI? If so, how can it avoid blemishing its reputation for protecting its customers' privacy?
Ordinarily, an RFI issued under subsection 231.2(1) provides little opportunity for a business to decline to comply. However, subsection 231.2(2) provides that in respect of an RFI issued under subsection 231.2(1), judicial authorization must be sought when unnamed persons are involved. Further, subsection 231.2(3) provides that in order to grant the authorization, the judge must be satisfied that the RFI has been made for the purpose of verifying compliance with the Act by the unnamed persons. Thus, the legislation is ambiguous in respect of an RFI concerning unnamed persons whose compliance with the Act is not at issue.
One interpretation of this situation is that no RFI can be valid, on the basis that judicial authorization is required but the judge cannot grant it; this was the conclusion in Canada (Minister of National Revenue) v. Toronto Dominion Bank (2004 FCA 359). The other interpretation is that subsection 231.2(2) does not apply to situations in which an RFI asks for information about an unnamed person who is not being investigated; in that case, the RFI is valid and judicial authorization is not needed. This interpretation has been supported in Canada (Customs and Revenue Agency) v. Artistic Ideas Inc. (2005 FCA 68); Canada (National Revenue) v. Morton (2007 FC 503); Canada (National Revenue) v. Advantage Credit Union (2008 FC 853); Canada (National Revenue) v. Amex Bank of Canada (2008 FC 972); and London Life v. Canada (Attorney General) (2009 FC 956). Several of the FC cases noted the conflict between the two FCA cases and expressly preferred the interpretation in Artistic Ideas over that in Toronto Dominion.
Thus, it appears that in the example above the financial institution will probably choose to provide the information to the CRA. Compliance with privacy law and regulatory rules governing information disclosure is probably assured, given the legal validity of the RFI. But will customers be convinced that the financial institution is protecting their privacy interests?
One strategy is for the financial institution to request that the names of the unnamed persons be allowed to be redacted before the information is given to the CRA. Additionally, one might request that the CRA provide a written statement that the RFI is not being made to verify compliance under the Act by any person not named in the RFI. This is similar to the suggestion often made in respect of RFIs concerning possible tax evasion that the CRA be asked to confirm that the predominant purpose of the investigation is not criminal in nature (and thus the taxpayer cannot invoke the Charter right against self-incrimination). Whether or not such requests are granted by the CRA may depend on the circumstances, but making the attempt alone may be of value to the business's relationship with its customers.
Darryl R. Antel
Pitblado Law, Winnipeg