All businesses should prepare for the possibility of a search warrant being executed at their premises by the police or a regulatory authority. One area in particular that ought to be a cause for concern for certain businesses is the increased likelihood of a search by the CRA.
The Trudeau government emphasized tax enforcement in both its 2016 and 2017 budgets, which greatly increased allocation of resources to the CRA. Furthermore, the so-called Panama Papers have focused the attention of governments across the globe, including the Government of Canada, on multinational corporations that may be engaged in off-shore tax evasion.
Over the next five years, the CRA will receive $523.9 million in additional funding to improve its enforcement efforts. Funding allocated in the 2016 federal budget has already led to the hiring of more investigators by the CRA, which has given rise to more aggressive audits, collection efforts and criminal enforcement, including executing search warrants.
When the CRA comes knocking, there are best practices that businesses would be wise to have in place. A business that operates in an industry with a higher likelihood of investigation, or that perceives itself as being at an elevated risk of regulatory or police scrutiny, should prepare now for a search warrant execution. Legal advice should be sought to draft a policy in preparation for responding to a demand to execute a search warrant. Here are some guidelines that should be considered as part of a detailed plan for when the CRA, or any other authority, attends at your business premises for a search.
1. Designate a liaison: Appoint one or more senior individual(s) to act as the liaison between the investigators and the company throughout the search.
2. Carefully review the search warrant: If the investigators are not prepared to wait, or external counsel cannot arrive in time, then request a copy of the search warrant.
Review the warrant carefully to see if there are any defects on the face of the warrant which can be raised with the investigators (e.g. the company name, address, etc.). If there is a defect, the investigators can be notified of this fact and it can be pointed out that the defect raises an issue as to the warrant’s validity. Make a written record of any defects and of the conversation with the authorities regarding the defects. The investigators may still elect to proceed with the search.
Review the warrant carefully to identify the items sought by the investigators. In particular, note dates, if they are specified. If the investigators seize anything that falls outside the bounds of what is specified in the warrant, make a polite objection to the seizure. Make a written note regarding any objections made to the authorities executing the warrant.
3. Cooperate and do not obstruct: Inform the investigators that it is the company’s policy to cooperate in the orderly execution of a valid search warrant. At no point should any company personnel attempt to obstruct or interfere with a search.
4. Identify the investigators: Obtain the investigators’ names, titles and credentials.
5. Alert external legal counsel: Immediately notify external legal counsel and inform the investigators that the company would prefer to wait for external counsel to arrive before the search commences. While there is no legal obligation on the investigators to comply with this request, as a courtesy they may delay starting the search until external counsel arrive.
6. Maintain all applicable legal privileges: Assert privilege over all documents that may reasonably be categorized as such. This should include a blanket statement made to the investigators at the outset of the search that the company is claiming privilege over documents in the possession of its lawyers, or in the possession of the company where those documents contain legal advice from the company’s external or in-house counsel to the company, or that request legal advice from the company’s external or in-house counsel.
If possible, in advance of a search, the company should make a practice of isolating privileged documents in a separate hard copy and/or electronic folder. The folder should be clearly marked as containing privileged documents and it should be updated on an ongoing basis as new privileged documents come into existence.
Polite objection should be made to the investigators throughout the search, if they attempt to seize privileged documents.
7. Limit discussions with investigators: There is no legal requirement to respond to questions from investigators with respect to the substance of the search. There is a legal right to remain silent in respect of the criminal investigation being conducted. Therefore, should you choose to exercise your right to remain silent, discussions with the investigators should be strictly limited to the manner and logistics of the execution of the warrant.
8. Shadow the investigators: Depending on the size of the business and the number of company personnel available, someone should be assigned to shadow (but not obstruct) each investigator involved in the search.
9. Take detailed notes: Make careful and copious notes throughout the search. In particular, detailed notes should be taken of the following:
a. all items seized by the investigators;
b. the particulars of the search warrant; and
c. all interactions with the investigators, including any objections made to the manner or conduct of the search and their responses to queries and objections.
10. Be respectful towards the investigators: Ensure that all company personnel involved remain calm, courteous and professional at all times during the search.
Dealing with the unexpected arrival of the authorities is always a significant shock to businesses and the individuals tasked with responding to a demand to search the premises. Being prepared can lessen the shock and allow for a more effective response. While the above guidance is not an exhaustive list, it provides a general framework of best practices that can be implemented relatively easily. Having a framework in place, tailored to the circumstances of your business and drafted in consultation with legal counsel, will ensure that the company and its personnel are prepared as much as possible for the authorities in the event they come knocking.