Update: Blaze asked me to upload this letter from the Canadian Bankers Association to the United States (pdf) – Petros
Schubert and I wrote to Canadian Bankers Association two weeks ago concerning FATCA. We had a reply on Friday. CBA provided a copy of a comprehensive submission they made to IRS and Department of Treasury. They covered many of the issues we raised, but did not mention Canadian Charter of Rights and Freedoms:
Here is a pdf link to CBA’s submission. (I hope I’m posting this correctly so you can open it.)
100519 – Signed CBA Comments to US on FATCA Provisions (1).pdf
Here is CBA’s reply to Schubert and me:
Thank you for your e-mail. We certainly understand the concerns that you and your friend have with FATCA. However, you seem to be under the impression that Canadian banks are planning to willingly go along with the FATCA requirements and this is certainly not the case. In fact, the Canadian banking industry agrees with your concerns and we have been and will continue to fight to change the extraterritorial reach of FATCA and lessen the impact it will have on Canadian banks and their customers.We have information on our stance on FATCA and information for customers at the following links (here and here).Over the past two years, the CBA and the Canadian banks have raised our concerns with the IRS and the US Treasury Department and have also done so through our membership in the International Banking Federation. I have attached some of those letters for your review. We have also had discussions in Washington with IRS and US Treasury officials and Canadian Embassy officials. In Ottawa, we have raised concerns with officials from the Department of Finance, the Minister of Finance and the US Embassy. Finance Minister Jim Flaherty has supported our position and expressed his own concerns publicly and we appreciate the support from the Minister and his officials. And we are not alone in fighting this legislation. Governments and banking groups from around the world share your concerns and ours. You can find more documents here (http://www.deloitte.com).Draft FATCA regulations were released on February 8 and we are currently reviewing them with our members and will again make our views known to US officials as part of their consultations on the draft regulations. We are pleased the US Treasury Department has indicated that it is ready and willing to look at alternative paths to achieving the policy objectives of FATCA so we will continue to push for changes.I would like to address a few of the other points you and your friend raise in your letters. You are correct in stating that Canadian banks currently have no requirements, nor desire, to identify the citizenship of their customers. If they were required to identify US persons under FATCA, they would not be doing this willingly. However, they may have no choice as FATCA is currently written because the non-compliance would have a much larger impact on more of the financial institutions’ customers. The penalty for being unable to comply with these complex rules is very severe for both banks and their clients. The penalty includes a 30 per cent withholding tax on all U.S. source income flowing to the bank and its customers, and a 30 per cent withholding tax on the gross proceeds of the sale of U.S. securities by the bank and its customers. According to Statistics Canada, as of 2010 Canadian direct investment in the United States totalled nearly $250 billion.Finally, you have said that your credit union has taken a “Canadian nationalist stance” on this issue and will not be complying with FATCA. While it is free to make that choice, such a decision comes with considerable consequences for its clients. Any U.S.-source income paid to clients of the credit union from mutual funds or other investments will be subject to a 30 per cent withholding tax as will the proceeds from the sale of any such investments. If your credit union does not offer such services (for example, if the only services it provides are domestic deposit-taking and lending) then it may be able to make that choice without consequence because neither the credit union nor its customers have US earning. You might be best to clarify the situation with your credit union.I hope this information is helpful in explaining why Canadian banks would comply, however reluctantly, with FATCA if it became necessary and why Canada’s banking industry, with the support of the federal government, will continue to fight for changes to the FATCA legislation. If you have any questions, please let me know.Sincerely,Maura Drew-Lytle | Director, Media Relations and Communications | Directrice, Relations avec les médias et Communications
post originally published March 4, 2012
There are quite a few FATCA “seminars” going on right now but all almost none of them mention conflicts with local law. I don’t like that FATCA is something that only seems to be being discussed among people working in the financials services industry we need to get this out into the general public and elected officials here in Canada.
Later today I am going to post some comments MP Megan Leslie made in the House of Commons last week about FATCA. Can the NDP leadership race be sped up at all so NDP MP’s can get back to work flighting issues such as FATCA. Is there a way the Isaac Brock Society twitter feed can have #FATCA hashtag added to it.
@Schubert1975
You are a “wealth” of information and I thank you from the bottom of my heart. The proof of pre-1986 citizenship in another country, causing the “relinquishment” of the U.S. citizenship, is defnitely in DOS’s own words. The scary part for me is will the IRS come after me if I go to file for the CLN they should have sent me years ago. When I have tried to explain this situation to friends and family, they have so much trouble understanding how the IRS could claim that you would have to file tax returns from the present date. But then these friends and family are reasonably logical people. The IRS and for that matter the government of U.S are not logical.
Re: the Canadian Bankers Association reply
(and also related to the Just Me post March 1, 2012 – ‘Where is America Headed?’ http://isaacbrocksociety.com/2012/03/01/where-is-america-headed/ ).
The ACLU (American Civil Liberties Union) website http://www.aclu.org/technology-and-liberty/financial-privacy-reporting-requirements-under-bank-secrecy-act has a really chilling article from 1999 about the US Bank Secrecy Act and the “Know Your Customer” and ‘anti-moneylaundering’ provisions for domestic US banking (proposed original legislation defeated in 200-2001, then ? replaced with the “Wolfsberg” principles http://www.wolfsberg-principles.com/privat-banking.html ? ) http://www.sptimes.com/News/010701/Business/Wolfsberg_picks_up_wh.shtml), which casts an interesting light on the CBA correspondence – particularly as the reference to ‘know your customer’ programs keep coming up in the IRS statements about their ‘new’ “less onerous” arrangements (with the countries who have caved so far -France, Germany, Italy, Spain and the UK). As described “The even bigger win for PFFIs: Uncle Sam has also reduced the number of accounts which firms must monitor and is allowing firms, in many instances to rely heavily on familiar anti money laundering and know your customer regulations.” from http://www.iss-mag.com/news/fatca-take-ii-finding-u.s.-tax-evaders-abroad-g and, “Treasury said it would allow foreign financial institutions to rely on information they have already collected under anti-money laundering and “know your customer” rules to determine whether they have U.S. taxpayers as clients and thus must collect and disclose information about them under FATCA.” from http://www.reuters.com/article/2012/02/08/us-usa-tax-treasury-fatca-idUSTRE8171G620120208
Have a look at: http://www.aclu.org/technology-and-liberty/financial-privacy-reporting-requirements-under-bank-secrecy-act
April 20, 1999 –
Statement of Gregory T. Nojeim,
Legislative Counsel, American Civil Liberties Union, Washington National Office
on
Financial Privacy, Reporting Requirements Under the Bank Secrecy Act And the “Know Your Customer” Regulations
Before The House Banking Committee Subcommittees on General Oversight and Investigations, and Financial Institutions and Consumer Credit.
(I followed Just Me’s links re NDAA, (thanks for bringing this to our attention!) and decided to follow another link in the Guardian article, http://www.guardian.co.uk/commentisfree/cifamerica/2012/feb/29/ndaa-danger-american-liberty which led me to the ACLU site.
Intrigued to see if they had anything on FATCA or FBARs or the Bank Secrecy Act, I found the following information describing a version of the “Know Your Customer” provisions that were meant to be enacted (and then defeated) as legislation in the US. It is hard to know what version will be touted as a good enough basis for FATCA reporting by banks who participate abroad.
Have a read, and think about what they were willing to impose on domestic US account holders. It was defeated with the help of the ACLU, and an online campaign that turned the tables – called “Know Your Banker”. (I can’t find any other specifics, and the KYB online page no longer exists). The whole thing is a must-read though, and it is hard to pick and choose the best excerpts. There is an interesting section on banks and privacy:
“Bank Privacy Policies and Practices”
“The privacy policies that have been voluntarily adopted by financial institutions are not an adequate substitute for protective federal legislation. They do not address the privacy issues raised above. As a general rule, they do not even inform customers of the circumstances under which financial institutions must report financial transactions to the federal government as “suspicious,” even though much of that information is in the public domain. They do not advise customers of the number of Suspicious Activity Reports the bank sent to the federal government in the last year and the number of their customers they reported as “suspects.” They do not tell the customer whether the bank has a “Know Your Customer” program in place. They are unenforceable by the customer and fail to include penalties for financial institution conduct that violates the privacy policy. Instead, customers are given only a soothing assurance that the financial institution believes that customer financial privacy is important, but that it will share personal financial information in many circumstances. Customers are vaguely apprised that customer information will be provided to “regulatory authorities and law enforcement officials in accordance with applicable law” as Chase Manhattan puts it…..”
“We are particularly concerned about the reactions of the financial institutions to the proposed Know Your Customer regulations. Most of the early comments from financial institutions and their trade associations did not sufficiently take into account the effect on financial privacy that the proposed regulations would have. Instead of saying from the start that the proposed regulations damage financial privacy and should be withdrawn, most argued that the proposed regulations should be applied to more entities — such as mutual funds and credit unions — so that banks would not face a competitive disadvantage. This is not a pro-privacy position. ”
The ACLU started a “Know Your Banker” campaign in protest.
See also: http://www.wired.com/politics/law/news/1999/03/18821
Sound at all familiar?
I realized that if the ACLU could help defeat this type of oppressive domestic US banking legislation, I wondered if the Canadian Civil Liberties Association http://ccla.org/ would be interested in protecting our consumer right to banking privacy in Canada too?
For example, the CCLA website says:
“Privacy and National Security”
“Privacy is a fundamental right which can determine enjoyment of other rights including due process, fair trial and security of the person. Any restrictions must be prescribed by law, and necessary and proportional in a free and democratic society. CCLA is concerned that the right to privacy protected in the Charter (in sections 8 and 7), and in international human rights law, is being eroded in the name of national security.
CCLA is concerned about the creation of databases on individuals and the access to these databases by State agencies or foreign States; exchange of the personal information of individuals among State agencies and/or with foreign governments; placing of individuals on ‘watch lists’ or ‘no fly lists’ without adequate due process; accumulation of personal information on individuals relating to travel, finance and communications resulting in surveillance or accumulation of information on persons without their knowledge; failure of Canada to enforce or extend its legal privacy safeguards to information shared with foreign States or third parties.”
I couldn’t find any specific mention of FATCA, or the IRS though……
@Brock: Thanks. I just sent an e-mail to CCLU. I think someone else already tried that with not much success, but It’s worth persisting.
Others might want to do the same. Their e-mail address in on the website which Brock gave.
I think it’s important to stick to the issue of how FATCA affects the banking of Canadians at Canadian financial institutions in Canada.
@Brock and @Blaze,
I have just sent an email to CCLU regarding the discrimination issue I have addressed to the TAS Tax Systemic Advocacy Office and my comments to relevant parts of the ‘Americans with Disability Act’ for ‘US persons in Canada’.
Thanks for providing another avenue to tell our stories, Brock!
Re intent and CLN
Section 349(a)(1) of the Immigration and Nationality Act, as Schubert1975 pointed out, says “…shall [not will] lose his nationality by obtaining naturalization in a foreign state…” Nothing about intent. As well, the act uses not the ordinary future ‘will’ but ‘shall,’ which connotes something more, such as determination, promise, threat, or command, i.e., something permanent and irrevocable, as Blaze was told by a consular person.
It’s perhaps worth a word that Mr. Ladybug’s letter (1980) and my letter (1976) both referred to Section 349(a)(1) and to the intent to relinquish U.S. citizenship. Congress did not catch up with court decisions until 1986, whereas State was in some sense current in 1976, even though it did not change its administrative presumption from “intended to relinquish” to “did not intend to relinquish” until 1990 or thereabouts. Also it’s also worth a word that in issuing a certificate of loss of nationality back then, State’s decision adhered to a higher standard than that described in 349(a)(1). The basis of the higher standard? In my case, perhaps Mr. Ladybug’s as well, it could be only my not ticking the box “did not intend to relinquish” on the form attached to their letter and returning it to them within 60 days. Failure to respond within 60 days meant that they would presume I intended to relinquish. So – if failure to notify State of the intent to relinquish was the basis for State’s determining loss of nationality and issuing a CLN, then it’s a standard that, at the very least, includes everyone who became the citizen of another country before 1986. Yet, in several cases individuals have claimed they did not intend to relinquish after being issued a CLN and the courts ruled against them on appeal, upholding their loss of citizenship.
The matter of proving intent to relinquish citizenship is easier to do looking back. We can say now that we’ve lived in our chosen country for 40 years, we’ve only voted in the chosen country’s elections, we’ve only travelled on the chosen country’s passport, we’ve only paid taxes to and in the chosen country, and so on. But at the time of expatriation we couldn’t have said any of these things. What would we have said then? What could anyone have said at the time? We know that saying we became citizens to get or keep a job, to dissociate ourselves from everything we didn’t like about the U.S., or because we were about to marry a chosen-country person or because we were happy in our new country and intended to stay would not be regarded as evidence of relinquishing, because motivation is irrelevant. Did any of us think then or would anyone think now that the reason to go to another country is to give up U.S. citizenship? We understood then that we were giving it up, that losing our U.S. citizenship was a consequence of our action, and that was fine by us, but to give up U.S. citizenship would have been a very strange reason for becoming a citizen of another country.
Another thought on the burden of proof: Before 1986 the burden was to prove that you didn’t intend to relinquish. How would you do that beyond saying “I did not intend to relinquish”? But as several court cases show, the I-did-not-intend argument is often rejected, despite the Court’s finding in 1980 that “In the last analysis, expatriation depends on the will of the citizen rather than on the will of Congress and its assessment of his conduct.” Now you must prove the opposite, that you intended to relinquish. But how would you do that beyond saying “I did intend to relinquish”? We know how that argument’s likely to work out. Looks like another example of the arrogance of power – heads they win, tails we lose.
There have been several FATCA seminars going on in recent days for financial institutions. One of key pieces of advice from Deloitte, KPMG et all was under no circumstances to discuss FATCA with clients and customer at this point in time. Interesting.
Hmmm. Can trap more expats if nobody knows about it.
Exactly. If they don’t trap expats, they might take their money and leave.
The FATCA is coming! The FATCA is coming!
Renounce, Renounce, Relinquish while you still can!
I am actually a little surprised the Canadian Bankers Association actually responded back to Schubert and Blaze. I would have thought they would have just played silent with the possibility that their response woud get blabbed all over the internet(which it has)and the possibility that it would get into MP’s hands(Which Schubert says it will if he doesn’t get a satisfactory response back).
Ha ha. I was amazed at how forthcoming that response was. The cat’s out of the bag now!
Somebody will probably get fired over that one.
@Tim
re March 7, 2012 at 4:52 pm
“FATCA seminars … key pieces of advice from Deloitte, KPMG et all .. under no circumstances to discuss FATCA with clients and customer at this point in time. ”
How did that get out?
They’re taking a page from the US banks – see this ACLU link and report “Financial Privacy, Reporting Requirements Under the Bank Secrecy Act ” (dated, but unfortunately still relevant) http://www.aclu.org/technology-and-liberty/financial-privacy-reporting-requirements-under-bank-secrecy-act
Key time for credit unions to make public their opposition to FATCA and promote membership!
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I’ve posted some updated information about CBA on another thread, but I’m also posting it here.
When I wrote for a second time to Canadian Banker’s Association, I mentioned by name the Charter lawyer Tiger, Somerfugl and I consulted. Tim thought his name might scare the s–t out of CBA.
I received a quick reply back. Included in that reply was this statement: “I’m sorry if I left the impression that Canadian banks do not obey Canadian privacy laws, they do and will in this case. If FATCA was implemented as it currently stands, banks would only reveal personal and financial information to the IRS with customer consent. We have an FAQ for customers of financial institutions on our website at the link below, which was developed by the Canadian Bankers Association, the Canadian Life and Health Insurance Association, the Investment Funds Institute of Canada and the Investment Industry Association of Canada. Of course, the information there may change as the regulations evolve.
http://www.cba.ca/en/consumer-information/40-banking-basics/597-us-foreign-account-tax-compliance-act-fatca-information-for-clients”
Because from CBA’s website says banks will be required to report to IRS on US persons in Canada, I again contacted CBA and asked if my bank would be demanding my place of birth and consent to provide financial information and my address to IRS.
This is next reply I received: “We understand that Canadians are concerned about FATCA and its implications and we share your concerns. The CBA is doing what we can to identify legal, operational and practical issues associated with FATCA and the impact it will have on banks and their customers, and we are bringing those issues to the attention of the authorities in both the US and Canada.
“We remain hopeful that many of the issues that you raise can be addressed through changes to FATCA regulations or through agreements between the Canadian and US governments. Until then, the information for clients of Canadian financial institutions that we have on our website is the information that we can provide at this time.”
As you can see, CBA does not actually say they will not demand place of birth. Plus, information on their website says “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 payments that you receive and send this money to the IRS.”
So, I again responded such action would not be consent. Rather, it would be forced compliance due to a threat. I further advised I would continue to consult an attorney about my legal options and would also investigate moving my assets to a credit union. I again stressed Charter of Rights, Human Rights, Bank Act and Privacy Act. I have heard nothing further.
If anyone else is interested in contacting CBA, here is their contact information.
Box 348
Commerce Court West
199 Bay Street, 30th Floor
Toronto, Ontario M5L 1G2
E-mail: inform@cba.ca
Both Schubert and I have contacted CBA, but it’s important they know others are also watching and preparing to take legal action if necessary.
@Badger: I’ve contacted CCLU twice via e-mail, but have only received an autoreply message back. I will try to follow up again next week. Has anyone else who contacted them heard back?
Let’s assume the worst!
1. Bank asks me my citizenship. I say Canadian.
2. Bank asks me for a birth certificate? Cannot happen, Violates Charter of Rights and Freedom.
3. Bank says I sound American. I say “Are you for real?”
4. Bank says I have to certify I am not a US person. I either refuse, or say I am not a US Person. Sign a form? Maybe, why not?
End of story. What can conceivably happen as I do not intend to cross the border nor do I intend to shed my stealth outfit. I have made sure that all investment income is not from USA. It is 27 years since my last contact with authorities. Really now, am I at risk?
I CANNOT IMAGINE THAT THIS IS GOING TO HAPPEN..
Now even worse. Bank sends my records to USA. What happens next? Interpol alert? Me and 700,000 others in Canada?.
Also, this forces Canadian banks to be arbiters of US citizenship. Many US-born Canadian citizens hold the position that they relinquished US citizenship by intent, in keeping with State Department law.
Also, what if a Canadian citizen were to invoke the UN Universal Declaration of Rights – which gives them the right to choose their nationality – and to which Canada is a signatory? What if they further renounce any other citizenship they have in front of a Canadian Notary or Justice of Peace, and then present that affidavit to their bank?
@Joe, Wondering: I’m one of those who relinquished in 1973. US Consulate was clear, firm and direct about the fact it was :”permanent and irrevocable.” It’s only now that they may want to try to reclaim me.
In my Canadian citizenship oath, I also renounced. Tiger, Schubert’s wife and I have gotten copies from CIC of the oath which we signed which includes “I hereby renounce all allegiance and fidelity to any sovereign foreign or state of whom or which I may at this time be a subject or citizen.”
Despite all that, at this time I will refuse to answer any questions from my bank about my citizenship or my place of birth because it is a violation of the Charter, Bank Act and Privacy Act for them to demand that information. I will also continue to fight this attempt of US to intrude in any way into my life or the lives of others in my country of choice.
Joe: Crossing the border on my Canadian passport with US place of birth could be a problem, but I will continue to do it as long as my elderly mother is alive. I will know more when I travel in two weeks for her 89th birthday. Shall I call the Brocks to come rescue me if I am arrested at the Peace Bridge (not going to happen, I know. The worst that can happen is they will refuse to let me in to see my mother. That would punish someone who has lived in the US for almost 90 years far more than it would me. Bizarre.) I will post after my return as to whether I encounter any glitches.
I suggest Americans in Canada who are not yet Canadian citizens become one before banks are required to begin reporting to IRS in 2014. It is your best protection.
@JoeSmith
You may or may not be right, but you always cheer me up a bit. You said, “Banks send my records to the US – what happens next?” That’s what I wonder. Is the bank’s “duty” to FATCA fulfilled and I can continue to do business with the bank as before?
@Blaze
If necessary I will come rescue you. I haven’t been back to Ontario for about 8 years – time for a visit. Only thing I ask is that as I am ‘a tad busy’ right now, could you delay your crossing until after April 30th. If so, I will be there, wrapped in a flag with the maple leaf on it! What fun it would be. And to think I might get on the front page of both a Canadian newspaper and an American newpaper. My family, both sides of the border should be impressed (especially my grandkids). And the Peace Bridge would be a good place for this. Didn’t Isaac defeat the Yanks at Fort Detroit?
@Tiger: Thanks, but I can’t wait for you. My mother’s birthday is April 27, my sister’s is April 28. We’ll just have to save your glory for another time. Plus, your geography is a bit off. Peace Bridge is not at Detroit. It’s at Fort Erie (Canadian side) and Buffalo (US side). Peace Bridge is not far from Queenston Heights where Sir Isaac died defending Canada. Actually there is a crossing at Queenston, so perhaps I should try crossing there–and ask Sir Isaac’s spirit to protect me.
@Hijacked: Yes, the bank’s obligation would be filled if they report to IRS and you would continue your normal banking with them. But, let’s keep trying to make sure that doesn’t happen!
@Blaze
It has been too long since I visited central Canada. I don’t think I have ever crossed at Fort Erie – used to do Detroit/Windsor all the time. Now I remember – that is the Ambassador Bridge!
@Blaze and hijacked – Wouldn’t the bank have to get a signature from you to agree that your info be sent to the IRS. I don’t think many of us would give that signature. If we don’t then could they close the account?
@Tiger: Yes, the bank requires consent. If you don’t give consent, CBA website says they may close account. That’s where the fight comes in. So, I made an assumption if hijacked’s info was submitted to IRS, that consent would have been given, so account would continue.
@Everyone: I don’t know where else to post this, so I’ll try here. When I was speaking with a friend (no connection to USA) about this yesterday, she asked if I’m a member of CARP (Canadian Assoxiation of Retired Persons). Interestingly, I just sent in my membership last week.
My friend told me Susan Eng, who is Vice President of Advocacy for CARP, is a former tax lawyer and a strong advocate on numerous issues. Although this isn’t specifically a retirement issue, there are a lot of seniors-retirees affected by all of this and retirement savings could most definitely be affected.
So, I Googled Susan Eng. http://www.carp.ca/about-carp/bios/susan-eng/
Her background is impressive. This says “Under Susan’s leadership, CARP Advocacy has helped to shape the public discourse on key issues such as pension reform, mandatory retirement, workplace age discrimination, home care and age friendly cities. Increasingly, CARP has become a trusted source of public policy input at all levels of government and the media.”
She was also involved in the Chinese Head Tax and Exclusion redress and apology, has been involved in race relations and is a former Chair of the Metro Toronto Police Services Board.
It might be worthwhile contacting her to see if she has any thoughts on this issue–, especially because she is a former tax lawyer!