This FATCA word just in from the Channel Islands on
Why in Jersey and Guernsey an FFI cannot lawfully transfer information to the US without that person’s permission …
Principle 8 provides that transfers are only permitted to countries that are deemed to have adequate protection of confidential information. US data protection law is much weaker than that of Jersey and the United States is not a country which is listed as one having adequate data protection – the de facto position in Jersey and Guernsey is therefore that an FFI can’t lawfully transfer information to the US without that person’s permission. Again, whilst client consent is an exception to this principle, compliance with another country’s laws is not. On the face of it, it will therefore be unlawful for a Jersey or Guernsey institution to transfer information pursuant to, or indeed register for, FATCA.
Rosie Stott – Jersey: The United States Foreign Account Tax Compliance Act (“FATCA”) – Implications For Financial Services Businesses In The Channel Islands – 4 April 2012
This is off topic, but I am rushing out on a trip and will not be connected for some time. Check this out:
http://www.washingtontimes.com/news/2012/apr/2/biden-tax-the-world/
The big trouble with these privacy laws is that in many jurisdictions, when the laws were being debated the public was not particularly interested in obscure issues about data transfer. So financial institutions were able to lobby for the laws to be riddled with loopholes so they could legally transfer personal data to offshore affiliates for marketing purposes. Now those same loopholes are going to be turned against the customers so that the same craven FFIs can keep their costs down.
For example we have similar privacy legislation in Hong Kong, in which there is a section on Prohibition against transfer of personal data to place outside Hong Kong except in specified circumstances. But it has some particularly egregious exceptions, especially 33(2)(f): “A data user shall not transfer personal data to a place outside Hong Kong unless … (f) the user has taken all reasonable precautions and exercised all due diligence to ensure that the data will not, in that place, be collected, held, processed or used in any manner which, if that place were Hong Kong, would be a contravention of a requirement under this Ordinance.” This exception is practically purpose-designed for the big global banks like HSBC and Standard Chartered who do lots of business here.
Similarly Jersey’s privacy law for example generally prohibits transfer of personal data outside the EEA in its “Eighth Principle, but the law has a whole section for Transfers to which Eight Principle does not apply. specifically: ” Third-party contract in interest of data subject: The transfer is necessary for … the conclusion of a contract between the data controller and a person other than the data subject, being a contract that is entered into at the request of the data subject, or is in the interests of the data subject”.
Other parts of the EU actually have data protection laws with teeth. Of course you’ll notice that these are the same countries that the IRS first targetted to sign country-to-country FATCA deals.
By the way if you’re hitting the paywall, there’s a free version of Stott’s article available at this link. Unfortunately it’s in PDF form but hey, beggars can’t be choosers right =)
Getting around Data Protection was one of the reasons why they went for the Intergovernmental Five Agreement. Apparently it’s OK for a bank to give the data to there local tax authority (like the HMRC in the UK) and not break Data Protection rather than the IRS directly. Once the data is in the HMRC’s possession they can in turn pass it to the IRS without breaking the Data Protection Act.
However from the IRS’s point of view, it still involves the foreign tax authority (who really doesn’t have any incentive to collect data for the IRS) which they wanted to avoid by going to the FFI direct.
For everyone’s sake I hope the HMRC will use the “bottom of the stack” mentality and put their own work ahead of the IRS’s data collection needs.
Another reason to complain to your MP, why should your country spend money and resource to help the IRS when proportionally they do not reap the same benefit?
However the IRS may not help there own cause when they fail to pass data to foreign tax authorities in a timely manner if ever. If the Americans can’t keep their bloody part of the bargin why should we?
When I read the PDF, it made my blood boil (Errrrr.. I didn’t ask to be born in the US!). Then I read the 2nd article “Biden: Tax the World”, I saw how completely clueless and destructive this current US Administration has been. I’ll be very happy to have cut my links with that place!!! Thank God we can STILL do that!