The Isaac Brock Society does not endorse tax professionals. However, I have been able to provide the following content, with permission, from Moodys LLP, tax advisors blog. It provides a useful summary of what FATCA will require the FFIs to do to detect the accounts of US persons.
On February 08, 2012 the IRS issued IR 2012-15, which contains proposed regulations that clarify the manner in which non-US financial institutions will find and report US persons to the IRS, which is required by the Foreign Account Tax Compliance Act (FATCA), enacted by the US Congress in 2010. The new regulations set forth: a) the type of information the financial institution will search for; and b) the manner in which it will search for that information.
Information the Financial Institution Will Search For
In order to determine whether an account holder is a US person, the financial institution is required to search for the following specific items:
- Identification of the account holder as a US person;
- Whether the account holder was born in the US;
- Whether the account holder has a US address or US telephone number;
- Whether there are instructions to transfer funds to an account maintained in the US; and
- Whether power of attorney or signatory authority has been granted to a person with a US address or telephone number.
If any of the foregoing are present, the institution must require the account holder to complete a US information report (form W-9) and that report will be submitted to the IRS. If the report is not completed, or the account holder refuses to comply, then the institution will be required to withhold 30% of any distributions to the account holder and remit that amount to the IRS.
Manner in Which the Financial Institution Will Search For This Information
The manner in which the institution must search for indications that an account holder is a US person depends on the balance of the account, whether the account is new or existing, and whether the account holder is an individual or an entity.
Existing accounts held by individuals
- The financial institution is not required to conduct a search provided the account had a balance of less than $50,000. However, if the financial institution decides to make an inquiry, it must follow the methodology described below.
- If the account balance is at least $50,000 but less than $1,000,000, the financial institution must review its electronically searchable data for the information listed above.
- If the account balance is $1,000,000 or more the financial institution must review its electronically searchable data for the same indications listed above. In addition, however, the institution is obligated to search all non-electronic files for the same information, including interviewing any relationship manager associated with the account.
New accounts held by individuals
When an individual opens a new account, the financial institution will be required to review all information provided when opening the account under appropriate know-your-customer and anti-money laundering rules. Accordingly, the institution will generally not need to make significant changes to the information collected during the account opening process in order to identify US accounts, except to the extent that the above-referenced information is identified.
So what does this mean for the US citizen who is resident in Canada? First, if the individual meets the thresholds under a preexisting account he may or may not be asked by the financial institution if he is a US citizen. Second, when the individual opens a new financial account in the future he will most likely be asked for his place of birth, a copy of his passport, or asked about ties to the US.
As stated in our previous blogs, on January 09, 2012 the IRS extended the Offshore Voluntary Disclosure programs indefinitely for US citizens who live abroad and who are not current on their US tax obligations. The penalties for taxes and non-filing are draconian, and do not appear to be going away. Those who have not brought their filings current should act quickly before FATCA compliance becomes effective.
@geeez– congratulations on your mastery of Portugese! That’s got to feel good when others don’t immediately recognize that you have an American accent.
@Moody’s
The missing factor in this equation is with much energized outrage the uncounted thousands of Canadian citizens who happened to be born in the US will express, when longstanding banking suppliers attempt to query their birth place, and then propose to withdraw services or withhold funds based upon place of birth.
Especially since many of these people swore allegiance to Canada decades ago, and according to US law at the time relinquished their US citizenship. Canadian banks are in the unenviable and tenuous position of being arbitrators of US citizenship.
Under US law 8 U.S.C.S. § 1481(a) (“Nationality Act”):
A national of the United States loses his or her nationality by voluntarily performing, among others, one of the following statutorily defined acts (“Expatriating Acts”) with the intent to lose U.S. citizenship:
1. obtaining naturalization in a foreign state upon his own application or upon an application filed by a duly authorized agent, after having attained the age of eighteen years; or
2. taking an oath or making an affirmation or other formal declaration of allegiance to a foreign state or a political subdivision thereof, after having attained the age of eighteen years.
Legal defense plans in place. Letters and statements have been drawn, lawyers are on stand-by, class-actions suits have been discussed, politicians are aware and engaged. Banks should expect significant push back.
Just an fyi… Found a new internet publication dedicated to just FATCA news.. Started 7 days ago.. http://paper.li/CUMicah/1328750124
I just sent another e-mail to Flaherty. I again informed him the US is trying to reclaim me and my money after telling me 40 years ago I was renouncing US citizenship by becoming Canadian.
I summarized some of the information here about regulations to find and report on US persons in Canada.
I also wrote the following:
I outlined a summary of these regulations and then said:
This is a clear violation of my right to privacy. It also contravenes my rights to equal treatment based on national origin in Charter of Rights and Freedoms and Canadian Human Rights Code. In addition, Canada’s Bank Act does not allow my bank to request identification which identifies my place of birth. Finally, these efforts of a foreign country to direct Canadian laws and businesses in an affront to Canadian sovereignty.
My 1973 citizenship certificate says I am “entitled to all the rights and privileges and (am) subject to all the responsibilities, obligations and duties of a Canadian citizenship.
As a loyal, productive, contributing Canadian worker, volunteer, voter, taxpayer and citizen, I have fully and proudly met my obligations over 40 years. I’m now requesting the government ensure my rights to privacy and equal treatment based on national origin be protected. I’m also requesting the government ensure I have the same rights and privileges in my financial dealings and managing my assets (including RRSPs, TFSAs, etc.) as do all other Canadians.
Mr. Flaherty, will you immediately make clear to US government and Canadian financial institutions that my bank cannot discriminate against me on the basis of my place of birth (national origin) and that they cannot contravene my legislated right to privacy? I have the same rights as a Canadian of Eritrean (another country with citizenship based taxation) origin I expect those right to be protected by the only country (Canada) of which I am a citizen.
Will you also make it clear to IRS that Canadian financial institutions cannot submit information or money from a Canadian financial account to a foreign government without the agreement of the Canadian account holder?
Finally, I ask you to assure me that Canada will not participate in the US proposal that financial institutions submit information to governments of the resident countries of so-called “US persons” which those governments, in turn, would submit to IRS. Such action would not be tolerated from Eritrea, China, Iran, North Korea, India or Russia. Canadians of American origin deserve the same rights and protections.
I hope an definite resolution can be found to this soon. I am a 61 year old woman with multiple sclerosis, who is nearing retirement. This action by US is taking a serious toll on my health and future.
I know many other Canadians of American origin are experiencing similar anxiety and stress. I look forward to your response.
:
@Blaze
Eloquent & stunning!
Suggest cc the NDP members (especially in BC Caucus) who are following this. Maybe Bob Rae @ LIberal Party as well.
Also Canadian Bankers Association.
Also Rideau Institute (a public policy think tank) has published critique of cross border issues like merged security zone. Gar Pardy was author of that.
Writers like Don Cayo and Barrie McKenna may cover this – you can request to leave your name out.
It may be good to additionally send “real” letters via post. Those are more exceptional than emails, so may be more likely to receive attention.
Re the Moody’s checklist:
items 3-5 won’t affect most people on this forum, certainly none of the people I’ve been assisting (folks who relinquished US citizenship by becoming Canadian well before 1994 and who have NO US ties, other than family members living in the US which isn’t a deal-breaker, or exercising of US citizenship rights since then).
Item 1 just means be very careful what you say to your banker about citizenship or birthplace, basically it’s none of his/her business under banking laws.
Item 2, asking for birthplace, would be a clear violation of Article 15 of the Charter of Rights and Freedoms and is going to land the bank into deep legal do-do very fast, unless Parliament passes a banking exemption to that provision under the notwithstanding clause. I don’t see that happening, in fact I can’t believe any MP never mind the current cabinet would propose such a thing. The firestorm that would result (from the precedent set for ALL naturalized Canadians from EVERY country) would be a huge political albatross around that party’s or politician’s neck in the next election, and they know it.
As others have noticed, the only transaction withholdings from “recalcitrant” account holders pertain to US-source transactions. Which means get your investments out of US or US-inclusive mutual funds, stocks, bonds, etc and move them to Canadian-only or non-US-only, now before this kicks in. Any other transaction witholdings (from non-US-source payments and especially Canadian-source) would be theft and should be reported as such to local police or the RCMP (not sure which jurisdiction is appropriate).
Those of you living in or near Ottawa: I got an email from my MP, Paul Dewar, yesterday telling me that he is sponsoring a meeting in Tom Brown Arena (141 Bayview Road) from 7-9 pm on March 26, a Monday. There will be a cross-border CPA who will be presenting on FATCA and FBAR, with introductory remarks by Peter Julian MP, the NDP Finance Critic. There will be an opportunity for questions from the audience. The details are still being worked out and are subject to confirmation, but Dewar has promised to send me an invitation when everything is finalized, and I will confirm on this thread once that happens. Given the audience participation opportunity, I urge anyone within reasonable driving range of Ottawa to consider attending this event.
The NDP has been on our side on this battle from day one, so the podium isn’t going to be unsympathetic to our questions and concerns. This will be the day after the end of the NDP Leadership Convention, in which Dewar is a leadership candidate (hence potential leader of the official opposition and maybe even Prime Minister some day, for those of you who aren’t Canadian) — recent poll I’ve seen says he’s in a three-way race at the top of the pack with Mulcair and Nash — so we’ll see whether he’s there himself and what he says if anything, depending how his fortunes unfold that weekend. He’s sponsoring this, as it’s in his riding, and he knows I’m a party member and will be voting on-line at the convention which may be why I got the email, though it may have gone to every constituent who’s emailed him on the issue, which I know has been a large number.
Should be interesting, I plan to go, and may post a brief summary of my impressions. If anyone on this forum plans to go, jump over to the Forum link and contact me via forum email there and we’ll maybe connect before or after the meeting.
Maybe I’ll re-post this meeting as a separate thread once I get the invitation that finalizes the details.
Thanks for the feedback Wondering. I did intend to follow up with NDP members who have spoken out on this as well as another letter to Bob Rae. I like the suggestion about Canadian Bankers Association. I hadn’t thought about that, but I’m hestitant to do anything that could alert my financial institution that US may still consider me a “US person.”
I agree “real” letters are often more effective. I wrote two weeks ago to Prime Minister, Ministers of Finance, Foreign Affairs and Minister of Citizenship and Immigration, with copies to Bob Rae, Don Davies and my MP. But, I was so alarmed by these regulations and the proposal that our governments around the world become international police for IRS that I sent the e-mail today with a cc to my MP.
The above will be next week’s project.
Tomorrow, Somerfugl and I are meeting to explore the possibility of contacting a Human Rights or Charter lawyer. Amazingly, after we decided to work on this together, we discovered we live in the same city (about a 15 minute drive from each other!) and have many other similarities in our background.
Just for fun concerning “real letters”. I was informed by someone from a group that lobbies Congressman that I should not write a letter (email or fax only). Why? Well because the security screening takes time and a real letter may take weeks if not months to reach a US Congressperson. Can anyone confirm that?
@Blaze
Re writing the Canadian Banker’s Association — I understand your reluctance.
I’m in a unique position, in that I actually have a CLN from way back, and any bank that tries to give even a digit of my account number or a letter of my name to the IRS is going to land smack in court with one hell of a fight, because I am NOT a US citizen any longer and have that State Department certificate to prove it.
I would be happy to forward your letter to CBA under my own name, removing your name of course, tell them I’m forwarding it because the writer is frightened of being “outed” which itself is an appalling situation in our democracy (and oh by God will I make that point in my cover letter),
If you want to take me up on my offer, skip over to the forum (link is at the right side of home page), register on it if you aren’t already there, and send me a private email via the forum email system (which preserves the privacy of our real email addresses and names), I’m there under schubert1975 of course, and we’ll work out the details, and I’d run the draft cover letter by you for comment and approval before sending it off.
Thanks Schubert. I will work on it next week and get a draft to you. Good suggestion.
@Victoria
Yes, I understand the same with respect to letters but only if you send to the Washington DC address, there can be significant delays due to security. Most congressmen have at least one or more local offices where they often recommend you send the real letters that don’t face the same delays.
On a side note, if anyone has any connections to New York and wants to write, there is a newish Senator there Kirsten Gillibrand who may be sympathtic to our cause. With a little digging she is married to a UK national and they apparently have at least one offshore bank account in the UK as disclosed on her financial disclosure forms. So she should be sympathetic to FBAR and FATCA forms as she has to fill them out herself.
@Everyone
There is an article I linked to below that shows there continue to be major issues with FATCA and US tax policy worldwide. The bank in question is Raffiesen which is a Swiss retail oriented bank not a exclusive private bank. They don’t for example give account statements in English. Quote:
We decided last Autumn not to have any deposit relations with U.S.-Americans. Our business was never focused on them. We also don’t give out any bank statements in English,” Vincenz said.
“Still, we have 220 of such customers, which have close ties with Switzerland, and they have 58 million Swiss francs with the bank,” he said.
“What is clear is that we are getting rid of all clients who have a link with the United States. This includes Swiss clients who have children studying there,” Vincenz said.
I think the comment about clients with children studying in US is absolutely stunning. I believe Jim Flaherty himself for example has one of his kids going to school in the US and Flaherty and his wife Ontario MPP Christine Elliott are not necessarily low income by any means. I wonder how they personally would like their financial information being shared with the US.
http://www.reuters.com/article/2012/02/05/swiss-tax-idUSL5E8D50CY20120205
@nofatcat – thank you for the reply. OK, I’m going to resend my letters to their local offices. Good to know. Thanks again.
@Tim – great article. Yes, pesky little problem of getting money to kids studying in the US. Wonder what US universities are going to think of this? sorry we can’t pay the tuition because our bank is threatening to close our account if we send you money 🙂
@Victoria
For all the legal problems the Swiss banks are having in many ways they more on top of this than banks in other countries. I think the inability of foreign parents to pay for their kids education in the US WOULD be the type of think to blow this whole thing out of the water.
From a business standpoint while it is not what FATCA is designed to do closing accounts actually makes perfect sense if you can get away with it under local law. Why take ANY risk as a bank especially when you are talking about a small number of clients. More and more people with “US Connections”(the view of the bank in question toward college students in the US is actually quite legitimate when you look at the proposed FATCA legislation) living in Europe I suspect will be heading down to the good ole Post Office for their banking needs.