Regardless of where they live, US citizens must pay tax, after allowable deductions, on their worldwide income. Unlike Canadians, who are taxed based on residency, or on where their income is earned, Americans are taxed on the basis of citizenship. Some Americans who reside abroad have been keeping what they think are secret offshore bank and investment accounts. To their surprise, the Secretary of the Treasury and the US Attorney General are using the provisions of the Patriot Act to subpoena information from any foreign bank that does business in the United States through a correspondent bank.
Failure to comply with information requests can result in fines of $10,000 US per day and a requirement to terminate the correspondent relationship. Even SWIFT (Society for Worldwide Interbank Financial Telecommunications), which tracks the global movement of money, regularly receives compulsory subpoenas from the US government and provides it with information. Why is this important to Canada? The IRS feeds information on Canadians to the CRA’s International Tax group in Ottawa. The CRA, in turn, uses this information to go after Canadian offshore tax cheats.
The foregoing provides only an overview and does not constitute legal advice. You are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained in the context of your own particular circumstances.