Boy unlike the big banks in the FATCA partner countries are they pissed in their comment letter.
A couple of key points:
1. Still very concerned about the remittance issue with credit unions in Central America.
2. Want an almost complete exemption for all credit unions from FATCA.
3. Basically impossible in terms of resources for credit unions to fully comply with FATCA even if they wanted to.
4. Want to be able to accept local resident US Persons without a reporting obligation
5. Significant number of credit unions will be non participating no matter what.
It will be interesting to see how this turns out. The left is always a huge fan of credit unions. I wonder how they will play this.
thanks for posting the letter @Tim. I just skimmed it, but it is very comprehensive, and makes so many irrefutable points. Hope that all these submissions make a dent in the situation. At least to make it less onerous, if worse comes to worse. I was glad to see the inclusion of the issue of the US not recognizing the registered accounts such as the RDSP and the TFSA.
@Everyone
While I have said it earlier I suspect based on what I have read in some of the other comment letters there will be a one year delay in FATCA from July 1 2013 to July 1 2014. This will give the US more time to negotiate “partner agreements”.
@Everyone
Interesting blurb I saw buried deep on Canadian Bankers Association website from April 2011.
CBA takes on the Alberta Privacy Commissioner and wins
As a result of collaborative advocacy by members, the CBA and the Investment Industry Association of Canada (IIAC), the Alberta Privacy Commissioner decided not to pursue a complaint about a member’s securities subsidiary requiring a photocopy of a driver’s license. The photocopy is needed to comply with the U.S. IRS’s Qualified Intermediary (QI) agreement. Had the Commissioner’s office continued with its investigation and preliminary finding, firms in Alberta would have been precluded from retaining the required documentation to meet the QI requirements, thereby jeopardizing their ability to waive the 30 per cent withholding tax for Alberta clients.
The collective advocacy not only addressed the QI agreement requirements, but also earned us an ally in our representations on the Foreign Account Tax Compliance Act (FATCA).
The Office of the Information and Privacy Commissioner now appears to better understand the U.S. requirements and has recently advised the member firm that it has decided to refuse to conduct an inquiry into the matter and that this file is now closed.
If you have any questions about this matter, please contact Linda Routledge, the CBA’s Director of Consumer Affairs at lroutledge@cba.ca.
From the new Institute of International Bankers FATCA comment letter:
Second, we understand why the proposed regulations include a “U.S. place of birth” as a U.S.
indicia, but we believe that it should be eliminated given that it is neither the commercial
practice for FFIs to collect such information nor is it relevant for AML/KYC purposes.
Furthermore, we believe that the population of “accidental” U.S. citizens who happened to be
born in the United States but have not considered themselves Americans may be significantly
larger than expected by Treasury and the IRS. We question the value of creating a potential
administrative headache for FFIs, the IRS and affected individuals who will be forced to deal
with this population of individuals that likely have technical U.S. tax filing obligations but often
have no effective tax liability given their residence in other high tax jurisdictions. We believe
that all of the above problems can be easily avoided by focusing on the citizenship country of a
customer rather than his or her place of birth.
Yes, Yes, Yes, Yes
The comments above were from:
http://www.iib.org/associations/6316/files/04302012IIB-EBFSubmission_FATCA.pdf
@Tim – I so agree. YES YES YES YES YES YES YES
now, if they’ll only listen to reason & common sense. The credit union letter reinforces my decision to go to a local credit union.
thanks for finding all of this!
More from IIB
First, we believe that including U.S. telephone numbers as an indicia of U.S. status adds
unnecessary complexity and costs, is inconsistent with prevailing AML/KYC obligations, which
have no analogous requirement, and should be eliminated. The “001” international telephone
prefix does not apply only to U.S. phone numbers but those in Canada and the Caribbean as well.
Accordingly, it is not a simple matter to comply with the requirement to track such numbers, but
requires all area codes in the three geographic areas to be monitored, tracked and updated. As
you are aware, this is hardly a static set of codes but has proliferated substantially with the
advent of mobile and smart phones.
How the hell will Canadian banks comply. Are all Canadian now Americans
It really sounds like they think that FATCA is to expose the funds of the resident US person who is hiding money in foreign bank accounts, not the US persons who may be their customers! Does anyone else get this impression?
Possibly, I guess in a polite way the IIB is saying if the goal isn’t to expose the resident US person but instead the “accidental” American be prepared for a political mess. I know as a sub federation of IIB Canadian Bankers Association had input into this letter and several people here have been in contact with the Canadian Bankers Association.
Thanks Tim for posting all these. It usually takes me a while to retain this stuff but I like what I see. The rather insistent tone of WOCCU toward IRS including CU’s as “non registering local banks” would make a lot of sense. Just to clarify for others, this is what allows for that designation:
•Non-registering Local Bank – Requirements:
-Must be licensed solely as a bank in its country of incorporation;
-Must not have a place of business outside its country of incorporation;
-Must not solicit account holders outside its country of incorporation;
-Must have no more than $175 million of assets and if a member of an affiliated group, the group must not have more than $500 million of assets;
-Must be required under the tax laws of its country of incorporation to either perform withholding or information reporting with respect to resident accounts – except if all accounts have a balance of $50,000 or less;
-If a member of affiliated group, all member must be incorporated in same country and meet all the tests.
•Need not register with the IRS
Then everyone here could simply be with a CU and not worry about the hassles of being recalcitrant, proving “not US”, 30% witholding and so on.
On another site, I saw one of the few suggestions I’ve come across that indicate non-compliance might be possible:
“Smaller and mid size banks with mainly retail and wholesale banking operations may find it cheaper not to comply if the potential withholding is a manageable amount especially if they can limit or reorganize their US investments.”
The problem is most credit unions have way more than $175 million in assets. Thus the World Council of Credit Unions was asking for this cap to be raised. I thought it was good though that IIB which represents the big major banks was bringing up the “accidental” American issue.
I did not notice in previous post that the reference to not-complying involved banks that would not really serve individuals. Sorry, just got excited that somebody had suggested a possible alternative to complying…..really, when you read the entire WOCCU response, it hits you, once again, just how outrageous and arrogant FATCAT is…and so unlikely to produce enough revenue to justify the costs involved for so many non-US entities. Unbelievable they virtually have no choice but to comply….
I found a description of the timeline regarding these submissions….When the public hearing on May 15 is held, where would we go to find if it will be aired via internet?
Proposed regulations are a normal part of the regulatory and rule making process in the US.
•US Treasury solicits comments – due 30 April
•Holds a public hearing – scheduled for 15 May
•Then issues final regulations – expected September 2012
One not-so-great comment at end of the list:
•Historically, approximately 90% of what is in proposed regulations ends up in the final regulations.
argh, cant find the link, sorry….
I doubt the public hearing will be on the Internet although it should be. I wouldn’t necessarily assume 90% number in this case.
Just about every responder though is calling for a one year delay in implementation. Hard to see how they ignore that.
one more year would be helpful to those who can’t renounce until they get the second citizenship
maybe not 90% but probably better not to get one’s hopes up too much.
will be curious to see if they do address the comments regarding Accidentals, wouldn’t it be great if they would just let all of that go…..
one of my credit unions says over $1bil in assets so yes
@nobledreamer,
Here’s one place “Historically, approximately 90% of what is in proposed regulations ends up in the final regulations.” appears:
http://www.prmia.org/Chapter_Pages/Data/Files/5209_4888_FATCA%20Forum%20-%20PRMIA_PwC_AIM%5B1%5D_other1.pdf
Thanks for pointing this out, badger. It is indeed heartening to see these specific Canadian accounts (RESP, TFSA and RDSP) identified as ones that should not be recognized for FATCA.
I don’t understand why all these banks not bringing a law suite and get an injection until all this mess and ambiguity sorted out. These ambiguous laws later can be interpreted any way IRS pleases, causing financial withholding mess that end up costing billions to untangle. The ambiguous laws would have huge collateral damage even on non-US citizens, if he wants to protect his identity or unaware of US laws and end up as reluctant customer (and withholdings).
I know millions of accounts are inactive for decades and owners don’t even bother to verify it. For example, if grand parents gift a child some money for his education, it would be put in a fixed deposit until he goes to collage. There could be million reasons like that.
How could US expect every person in the world to know and comply with US laws or risk 30% tax withholding?
@Expat_business_man
Well at least here in Canada I think in general our relationship with the United State is very much up in the air. For the last 25 we operated on the premise of more free trade and integration with the US. That era I believe is closing for a lot of different reasons FATCA included but also stricter border controls, extraterritorial Volcker rule etc.
@All
I’ll probably have more tommorrow including hopefuly what they Canadian Bankers Association has to say.
many thanks @Tim, for the research – invaluable!
@Tim
Thank you so much for all your research. Always good to read and learn from!
@Tim, Thanks so much!! We all appreciate your research!! Good Job Tim!!
This is all so hypothetical until actual Canadian and EU citizens who happen to be US-born are discriminated against by their long-standing banking and financial service suppliers. These are educated citizens of means, members of advanced democratic human-rights states with activist judiciaries. Will Boris Johnson, the US born mayor of London England, allow his bank accounts to be closed without s struggle? Multiply his response by hundreds of thousands in Canada, Europe, and beyond.
What is sad: the lack of sovereign pride and moral leadership among banks and governments. The clamor to comply is like lining up to book staterooms on the Titanic… after it struck the iceberg.
Tim, thanks for all the research.
The only way I see FATCA being scaled back is if many governments, and not banking associations or private individuals, resist or if Congress repeals.
The IRS has God-like powers in the US, and I think they fail to see that they don’t abroad. My feeling is that all these letters and representations are allowed by the IRS in order to make everyone feel better about going to their certain doom.
I’ve never seen a government entity willingly relinquish hard power as the IRS has now.