I found this yesterday and thought it was interesting and worth sharing.
The Société Générale has an entire section of their Securities Services website devoted to FATCA. They are calling it the “défi américain” (the American challenge) and this seems to be an attempt to explain a few things to their clients who are clearly curious about what this all means. I think the site is well done and I hope my bank here does something similar.
I’ll let you all peruse the site at your leisure but I would like to call your attention to the Question/Answer section which gives a good indication of the kinds of questions clients are asking. Here are three of them:
Qu’est-ce que FATCA et pourquoi est-ce mis en œuvre ? (What is FATCA and why is it being implemented?)
First the SG explains the intent and the history of the law and then goes on to list the political, regulatory, procedural and financial impacts. Concerning the cost, they say:
“Ce coût pourrait devoir être supporté par les investisseurs et les titulaires de comptes. Les représentants du secteur estiment que la hausse des coûts pourrait être de l’ordre de 20 à 50 USD par compte, ce qui est encore à vérifier, mais ne semble pas irréaliste.”
(The cost might have to be borne by investors and account holders. Sector representatives are estimating that the final cost could be on the order of 20 to 50 USD per account, which remains to be verified, but does not seem unrealistic.)
Quelle est l’opinion de la Commission européenne et de l’autorité de réglementation, et comment s’impliquent-elles dans le lobbying ? (What is the opinion of the European Commission and regulatory authorities et how are they implicating themselves in the lobbying effort?)
La Commission européenne n’a commencé à s’impliquer que très récemment, une fois que les efforts terribles et les coûts astronomiques pour le secteur financier européen et ses consommateurs ont été compris.
Une lettre a été envoyée par l’UE au Trésor américain début avril cette année. La lettre souligne le fardeau que FATCA représente pour le secteur financier européen et suggère que la directive européenne sur la fiscalité de l’épargne soit étendue aux personnes américaines.
(The European Commission only began to be implicated very recently, once the immense effort and astronomical costs for the European financial sector were understood.
A letter was sent by the EU to the American Treasury Department early April of this year. The letter underlined the burden that FATCA represents for the European financial sector and suggests instead that the European directive on the taxation of savings be extended to U.S. persons – here is the link to this directive)Que se passe-t-il si des personnes américaines sont identifiées au cours du processus d’identification des clients ? (What will happen if U.S. persons are identified in the client identification process?)
Si un investisseur refuse de fournir les documents nécessaires pour prouver s’il est américain ou non, une retenue de 30 % sera appliquée aux versements imposables qui lui seront faits. S’il fournit toute la documentation pertinente et une dispense de divulgation, ses données devront être divulguées à l’IRS.
S’il y a suffisamment de preuves établissant sa nationalité américaine, et qu’il ne fournit pas de dispense, ou s’il souhaite être prélevé, son compte devra être fermé – à condition qu’il soit en règle avec la législation locale.
(If an investor refuses to provide the necessary documentation to prove whether he is a U.S. person or not, 30% of all withholdable payments to him will have to be withheld. If he provides all relevant documentation and a waiver to disclose, his data will have to be reported to the IRS. If there is sufficient documentation to prove that he is a U.S. person and he does not provide a waiver, or he prefers to be withheld, his account will have to be closed – provided that this is in line with local law.)
Clearly they are not happy with this and they don’t seem to think that FATCA is a done deal – they use “could be” a lot and words like “immense costs” and “burden.” I was also surprised to hear that the EU made them a counteroffer to apply an EU directive instead. Does anyone know if the U.S. Treasury replied (officially or un-officially) to this offer?
Commerzbank in Germany has also issued a sort of “white paper” on the subject with an interesting in-depth analysis of what is going on. It’s only half translated though, so you’ll have to deal with some German to read the graphs. Sort of sums up well how complicated and messy FATCA is:
http://www.dajv.de/tl_files/DAJV/veranstaltungen/2011/FGT%202011/PPP/Tax_Schmidt.pdf
In the end, it basically boils down to them signing FATCA or not, “sequestering” all US persons into special account types, or maybe even getting rid of all US clients. This was produced in March 2011 though, and German banks have since started to simply close accounts. My bank in Germany apparently sent every suspected Us citizen or person a letter to advise them that “US persons” who held anything other than a checkings or savings account would have them closed. I think the only way to have any other types of accounts in Germany would be to use the Deutsche Post Bank, since they cannot legally deny services to anyone as a government entity.
In many countries including Canada there usually laws that mandate so called “Access to Basic Banking Services” which include basic checking and savings with very minimal forms of ID(In Canada just a drivers license or health card). Often if the account is a non interest bearing checking account there is no form of tax id required even domestically in Canada and I suspect in many other countries. On the otherside if every US citizen including quite possibly embassy employees and servicemembers in Europe had their “basic checking account” turned off there would be a huge uproar that would overwhelm domestically in the US I suspect whatever favorable views existed of FATCA.
Ill note the writeup Victoria posted came from the Securities Services division of SocGen not the retail part that is responsible for your corner bank branch. (In many banks the investment side and the retail side are almost two different companies with seperate computer systems etc) I suspect the view of the “retail” side of SocGen is either “basic banking” won’t have to comply with FATCA or if it does they will simply close out the accounts of anyone effected including US embassy employees and let the US deal with the fallout. I also believe there is an EU Directive on access to basic banking services scheduled to come into effect while I have not checked the language I suspect no allowance has been made for FATCA.
In terms of Securities accounts that IS a different story. First there are other US laws other than FATCA that discourage them from offering securities accounts(I believe Japanese nationals despite not being taxed based on citizenship can suffer similar problems). There also tends to be more tax consequences in terms of things such PFIC/TEFRA compliant and many securiites products common in Europe such as CFD’s, high leverage, spread bets etc cannot be offered in the US.
Défi américain is the title of a book that was hot stuff in France in the late sixties. Author: Jean-Jacques Servan-Schreiber.
@usxcanad
I always thought Jean-Jacques Servan was the French equivilent and may it went the other way of Walter Gordon in Canada. One of the things that surprised is to what degree he came from the “right” side of political spectrum despite his contemporary association with the anti American wing of the NDP. (One of the ways you can tell the UK is the US’ closest pal is they never had equivilent of Gordon or Jean-Jacques Servan)
One of the more famous Canadian political ads of all time.
Here is a link to some information from Canadian Bankers Association. I understand they are trying to resist FACTA, but with little result.
http://www.cba.ca/en/consumer-information/40-banking-basics/597-us-foreign-account-tax-compliance-act-fatca-information-for-clients
______________________________________________________________________
Here is some of the specific information from their website as it affects US persons in Canada:
I am a U.S. person. What does FATCA mean for me?
If you are a U.S. person, you may be asked to complete IRS Form W-9 (Request for Taxpayer Identification Number and Certification) which will be kept on file at your financial institution. You may also be required to provide consent to your financial institution to provide the IRS with personal and account information.
If you do not complete IRS Form W-9 or provide your consent to disclose information to the IRS, your financial institution may refuse to open an account or may be required to close existing accounts. Otherwise, your financial institution will be required to withhold a tax of 30% on any U.S. source payments1 that you receive and send this money to the IRS.
______________________________________________________________________
I will not complete IRS Form W-9 nor give consent for disclosure. If my financial institution. plans to comply with FACTA, I will transfer all of my funds to my employee credit union–which does no business in US and can therefore not been subject to penalties. I runderstand Australia and Japan have said they will NOT participate in FACTA. As much as I appreciate Canadian Finance Minister’s efforts on this, I wish he and Canadian banks would take a stronger position like Australia and Japan. I’m at least grateful our government has announced Canada Revenue Agency (Canadian equivalent of IRS) will not collect for IRS for any Canadian citizens regardless of whether IRS considers them “US persons.” That, however, does not help Americans living here who have not yet become Canadian.
Can you imagine what would happen if countries like China and Iran were demanding American banks report on assets of Chinese-Americans or Iranian-Canadians?
a federal government of any flavour will try to manage the FATCA file, it is up to the opposition to bring up rhe invaisivness & damage of FATCA.
A parliamentary debate about possibel trade action
would be reported worldwide, given Canada’s banking and fiscal reputation
Here is the European Banking Federation’s and Institute of International Bankers response to the US Gov that they sent in November (my apologies if this has already been posted)
Much complaining that there are no clear guidelines as yet. They cite one compliance issue I hadn’t thought of but should have because IT is my metier:
“It is our collective experience that worldwide IT systems cannot be either built or
modified until financial institutions have a firm understanding of what information must be
captured, what items must be withheld and what items must be reported. As previously
discussed, the most optimistic estimated timeframe for a successful IT-build is 18 – 24 months or
longer from the time final regulations are issued.”
Ahem. IT projects are notoriously late and almost always over budget. You say 24 months? I say three to four years.
Also see their discussion about the due diligence rules (knowing who is a U.S. person) starting on pages 16 and 17.
(Oh and I thought the Deloitte round-up of all the comment letters from countries and association was quite useful. http://www.deloitte.com/view/en_US/us/Services/tax/global-business-tax/business-tax/Tax-Controversy-Services/ffba750a5bbea210VgnVCM3000001c56f00aRCRD.htm)
The other thing I’ll mention is banks anywhere tend to be very leery of making changes to the their so called “core” systems that handle basic accounts, check processing, atm withdrawals etc. No one EVER wants these systems to ever go down and thus they are often many decades old and written in older programming languages such as COBOL but “hardened” through decades of use. Any changes to these system are often multi-year if not decade long projects. One exception was Y2K but even then people new years in advance that changes would be needed. In a country such as France for example my guess is systems were all written in French(from the perspective of the comments and documentation in the code) so its not as if you can bring in a bunch of overseas programmers to make changes either.
That is a very good point, Tim. I’ve seen these systems and they are UGLY. You wouldn’t want to touch them unless you absolutely had to. Documentation? Mostly in people’s heads, believe it or not. Interfaces to other systems? Spaghetti. Might even be better to just start from scratch in some cases.
You know I really hadn’t thought about this aspect but FATCA compliance projects will be huge money-makers for the IT industry – right up there with Y2K, conversion to the Euro and SARBOX. I’ve done one of each in my time. First two were successful, the last one was a failure and the company pulled out of the NASDAQ.
Oh and they do go down. They’ve just set things up so that you don’t see it.
So, even in the most efficient scenario the IRS can expect to have to wait until about 2015 at the earliest before FATCA actually kicks in…brilliant! By then it will hopefully be long since discarded. You really have to wonder sometimes what fantasy realm law makers live in when they basically “decree” that all foreign banks will magically be able to update their systems out of thin air to meet foreign legislation.
@Victoria
Thats why the likes of KPMG and PwC are so “happy” about FATCA, they expect to make tons of money off of it doing IT consulting. The real problem is at the retail level the European banking business is not as dominated by the big “Trans Atlantic” universal banks like SocGen and BNP Parisbas as some in the US might think. Much of the retail deposit business in European is controlled by cooperatives, post offices, landerbanks, Public Savings Banks, KantontonalBanks etc. depending on what country you are in that don’t have much to do with the US. (I find it amusing those on the left that are so pro-FATCA are also very anti big bank and strongly encourage people to “move their money” as they say. Shouldn’t this apply to expats too.) If you look at the news right now it is not as if the likes of BNP or SocGen are doing well at all financially either. I remember once when there was a retail Citibank branch right on the Champs Elysee that tended to specialize in serving Expats at least those living right in Paris but those days are long gone. Now the likes of Credit Mutuel traditionally strong in regional France are stealing business from the likes of SocGen even right in Paris.
In terms of IT systems I remember vividly my foreign credit card(within the last ten years) not working at an automated vending machine for the Paris Metro after arriving at Gare Du Nord for the first time in Paris at 22:00(I also got completely confused with the difference between the RER and Metro but thats another story) so my sense is these systems are not easily changed at all.
@Tim, All very true. Lot of people in France still bank at La Poste. If I didn’t love my banker so much at the BNP, I’d go there.
As for the credit cards not working – still true. I regularly in summer rescue North Americans at my little train station near my house. It’s on the other side of Versailles and they get stuck trying to buy train tickets with credit cards the machines won’t accept. The station is being renovated, the SNCF closed the counter and so there is no human to appeal to. Tip – always carry cash in France.
@Victoria
The more embarrasing part of story I didn’t mention is I had to be “rescued” too in the Metro station. The otherthing I didn’t know is trying to get from Gare du Nord to La Defense by taking and switching RER trains at Chattelet les Halles at 11 a’clock at night is supposedly not a smart idea compared to just taking the regular METRO. The other thing I didn’t know is La Defense is in different fare zones depending on whether you take the RER or the METRO(I believe the entire METRO is only in one fare zone). I did though one day take the SNCF train from La Defense down to I suspect that little SNCF station you referred on the north side of Versailles(One my memories of Versailles on that trip was getting a sorbet at the Haagen Daaz which is completely different in France compared to North America.
I actually found another article I posted a link to below that I found quite interesting that had some comments from the National Foreign Trade Council which is a much more powerful group than American Citizens Abroad. First there seems to be serious concern about access to banking services. Second there were several comments that seemed to indicate that many of the smaller regional banks in Europe especially in “regions” have no hope of ever complying. Third one solution that seemed be mentioned is to push expats to “bigger” multinational banks but as I pointed out earlier these are becoming rarier especially in more rural areas. HSBC CCF I know for example cut way back there presence a few years back outside of Paris and I know you don’t see much of HSBC Canada outside of Toronto, Vancouver, and Montreal. The Fourth option that seemed to implied is that companies could simply pay expat employees in physical currency. As ridicolous as this seemed to me at first many parts of Europe for example Germany are heavily based on cash and as you mentioned in France always carry extra cash.
http://www.hreonline.com/HRE/story.jsp?storyId=533344532
@Tim, I’m just glad you made it out of Chatelet alive. That is a bad place to be late at night. La Defense too.
Great article, by the way. I hadn’t thought about payroll. I think we are just skating on the edge of the iceberg when we talk about costs. More will be revealed. Systems are interconnected to an amazing extent these days. HR system, finance system, external payroll system, and so on.Touch one system, touch all the systems. Interface hell.