According to their website, “The Canadian Bankers Association works on behalf of 54 domestic banks, foreign bank subsidiaries and foreign bank branches operating in Canada…to promote an understanding of the banking industry and its importance to Canadians.”
It is all the more disappointing to find the following information on their site, intended for us Canadian consumers (says last updated July 5).
- For a US person – “If you do not complete IRS Form W-9 or provide your consent to disclose information to the IRS, your financial institution may be required to withhold a tax of 30% on any U.S. source payments that you receive and send this money to the IRS. Also, your financial institution may refuse to open an account or may be required to close existing accounts” (emphasis mine).
- For ‘non-US person’ clients, the repercussions of not providing further documentation, if requested, are, “If you choose not to provide this additional documentation upon request, at a minimum, your financial institution may be required to withhold a tax of 30% on U.S. source payments1that you receive and send this money to the IRS.”
So, a Canadian born in Scotland that has US indicia who refuses to provide documentation will have 30% US source income withheld. A Canadian born in the US who refuses to provide documentation will not only have 30% withheld, but may have their account closed? Yet, if both refuse to provide further documentation, then how the heck will a bank know where a person was born? And how is this not discrimination?
Shouldn’t this banking association be the ones reassuring us that Canada’s Access to Basic Banking Services will come into play for our protection?
Obviously not. Seems like they are quite willing to roll over and expose their tummy.
If the CBA is on board with FATCA, then it seems that the individual banks will just follow their lead. My impression is that the CBA is simply telling US born Canadians “yep, sucks to be you”.
U.S. Foreign Account Tax Compliance Act (FATCA) Information for Clients
The CBA’s stance seems to be that the banking industry is important to Canadians but not all Canadians are important to the banking industry.
Frustrating, disappointing and upsetting, but I guess not unexpected given what’s been happening in the last couple of months.
@bubblebustin
that ongoing requirement and the impacts it will have on ALL bank customers, even online account applications and requirements for keeping detail records was a big concern of Bank comments to FATCA regulations. I don’t know how they do it. Let’s hope they can’t!
FATCA wasn’t even brought up at the Caricom heads of government summit on July 3rd. Jamaica mistake in defiance?
http://jamaica-gleaner.com/gleaner/20120715/business/business9.html
@Jordie;
A civil/human rights case against banks who choose to jump the gun, and pro-actively implement ‘foreign’ (US) rules inside sovereign non-US countries would bring much needed Canadian and global negative attention to FATCA. Great negative publicity.
Even without a court case, just a public call to boycott them, and move accounts to credit unions where possible would help. Even in the event that credit unions are eventually forced to comply if Canada gives in, it would be very evident who jumped the gun (banks), and who held out. No-one is likely to forget or forgive that for a lifetime where their assets are concerned. And in the next generation – often children choose to bank where their parents did.
Being named ‘eager Canadian collaborator-extra-territorial-agent -and-friend-of-the-IRS’ isn’t good advertising for a Canadian financial institution that is supposed to have a paramount fiduciary duty to account holders – inside a sovereign country. Again, they might try to explain away this pro-active breach by pointing to the US taxable status as an diversion and excuse – (although many affected will be actually be Canadian-born duals – or naturalized, and on Canadian soil, this is the status that should take precedence)
There will be no palatable way of explaining away why they would also be voluntarily imposing this by default on those whose only US connection is by marriage, or familial co-owners on the affected jointly held accounts.
Particularly valuable would be some negative attention drawn to the CBA, and Canadian banks who choose to implement these rules before they are legally required to, without the agreement of the sovereign country (ex. Canada) where they are based, and the subject accounts are held.
Holding up the example of joint accounts – those with both a non-US AND a US ‘person’ account-holder is particularly problematic to explain away, in advance of the implementation of FATCA, because by requiring identification of citizenship status, based on any peripheral relationship (ex. marriage or family tie to a US ‘citizen’, or greencard holder) they compromise the rights of a Canadian-only citizen inside Canada. Wouldn’t look good if publicized.
I am with the CBA and we have been following your discussion. We certainly understand the concerns that you 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 on our website:
http://cba.ca/en/research-and-advocacy/47-regulatory-enviornment/598-foreign-account-tax-compliance-act–
For more than 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. We have also had discussions in Washington with IRS and US Treasury officials and Canadian Embassy officials. In May, the CBA made a presentation in Washington at public hearings before Treasury and the IRS and our president spoke out against FATCA in speeches in Calgary and Vancouver this spring. Here are the links:
http://cba.ca/contents/files/presentations/pre_20120515_irsfatca_en.pdf
Last week we also submitted an opinion piece with our concerns about FATCA to the Washington Post and we are waiting to hear back about whether it will be printed.
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/view/en_US/us/Services/tax/global-business-tax/business-tax/Tax-Controversy-Services/ffba750a5bbea210VgnVCM3000001c56f00aRCRD.htm
If banks 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, and withholding on some portion of so-called “foreign pass-thru” payments. According to Statistics Canada, as of 2010 Canadian direct investment in the United States totalled nearly $250 billion. As outlined on our website, banks would only provide information to US authorities with a customer’s consent (http://cba.ca/en/consumer-information/40-banking-basics/597-us-foreign-account-tax-compliance-act-fatca-information-for-clients).
There is nothing in the Canadian Bank Act or the Access to Basic Banking Services (ABBS) Regulations that prohibits a bank from closing an account. The ABBS regulations give reasons why a bank can refuse to open an account for someone, but they don’t give any restrictions on closing an account. You can find information here: http://laws-lois.justice.gc.ca/eng/regulations/SOR-2003-184/page-1.html
I hope this 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. As your concern seems to be the requirements under FATCA, you may wish to add your voice to the growing opposition to this legislation by raising these issues with the US Treasury, the IRS and the U.S. embassy in Ottawa.
Maura Drew-Lytle
Director, Media Relations and Communications
Canadian Bankers Association
Dear CBA
Are your member banks prepared to give up close to 1,000,000 bank customers and terminate their businesses?
@ Joe Smith
We are working hard to get changes to FATCA to lessen the impact on bank customers in Canada. While we are still hopeful that some changes may be made, the banks and other financial institutions also have to start preparing for its implementation even though they are reluctant to do so.
@Joe Smith, thanks for posting this. I just saw that I received the same email.
Does anybody have updates on Credit Unions planned approaches? This could be a tremendous windfall for the cooperative movement if they pick up 1,000,000+ accounts, mortgages, loans, RRSPS and RESPS as well as tax-free accounts..
@Joe Smith
While she is technically correct on the application of ABBS(re closing vs opening) effectively over a large portion of the population ABBS blocks closure. If someone was closed out legitimately one institutions they could simply go to another and demand to opened under ABBS effectively negating the point of the FATCA regs. The Washington Post part of the story is news to me and a good sign. The foreign pass through payment issue is in total violation of Canadian law under several court rulings.
@Maura: It seems you are cofirming our worst fears that there is nothing to prevent a bank from closing an account. This to me says Canadian banks may very well (even if reluctanlty) demand to know place of birth, request permission to provide information to IRS if that place of birth is in US and be prepared to close an account if that permission is not given.
Despite your protestations, this says a foreign law will take precedence over the rights of Canadian citizens and residents when push comes to shove.
Your comments are also in conflict with the following comments in a letter from a Vice-President of TD to DOT and IRS.
“If an FFI closed an account because such information was not provided, the purpose of ABBS rules would be frustrated and, in addition, the FFI would be subject to fines. Each violation of the ABBS requirements would subject the financial institution to a penalty of up to 200,000. Even if an FFI could close the account of an uncooperative account holder, an FFI could not refuse to reopen an account for such an individual if adequate identification under ABBS were again provided.”
Would you please clarify for us the following:
1. Is the information you provided correct or is the information in the letter from TD correct?
2, Under what legal authority would a bank be able to ask it’s customers where they were born or if they hold citizenship of a foreign country?
As I I told you in my e-mail, I have been in contact with a prominent Canadian lawyer. My bank can expect legal action of they ask me my place of birth or make a request to transmit private financial information to a foreign government.
You may be assured we are making our views known to government officials on both sides of the border.
In the meantime, your response is making my employee credit union look better and better.
*
@Joe Smith
The latest from the Credit Union movement is a letter from Central One to US Treasury.
http://bsmlegal.com/PDFs/Central1.pdf
Basically they call to exempted completely. They also indicate that a significant number of individual CU’s will refuse to comply and thus Central One will have major problems. Central One also seems to indicate that if a solution is not reached soon the Canadian Payments Association and the Bank of Canada will get involved.
@Maura Drew-Lytle;
Thank you for your comments. I appreciate your interest in our concerns. As individuals, we have been speaking with our banks and credit unions and comparing notes. Some have also corresponded with some of your members. We have also written to Minister Flaherty, and other political representatives, as well as the Privacy Commissioner. Some have contacted US politicians, and the ACLU.
I appreciate the presentations that the banks have made – and I have read the presentations where available on the net, as have several others here. Opposition to FATCA in any form or origin is welcome. But, I’d quibble a bit about the nature/form/motivation of some of the opposition, since some of the CBA member’s investment affiliates have advocated not against FATCA itself, and the impact on clients, but in opposition to the ‘compliance burden’, and costs, thus are advocates for a government-to-government reporting approach to take the onus, costs and heat off themselves. It would help to deflect negative attention away from financial institutions and investment firms if they could point to government as the source of the implementation instead. If the Canadian government does agree to do that, there would of course be a cost – which would be paid for by all Canadian taxpayers. And since we all pay taxes to Canada, whether we also hold US taxable status as well, everyone in Canada will share in implementing the costs – with zero benefit. Whereas, banks, insurance companies, etc. will continue to have unimpeded access to US markets, with less direct cost borne by their shareholders. This is where our interests diverge quite a bit – I don’t want FATCA at all, and have no interest in settling for a less expensive version.
For example I don’t have the full article below, but I think this illustrates my point;
“FATCA Partners” agreement would limit compliance burdens, Canadian trade group says Feb 14 2012
by Emmanuel Olaoye
“Ian Russell, president of the Investment Industry Association of Canada (IIAC), said the changes would be a “very positive step” for Canadian firms if Canada signed on as a FATCA partner.
“It would resolve the problems of conflicts in privacy laws. We are obliged to provide information to foreign….” http://www.complinet.com/global/news/news/article.html?ref=152318 The IIAC has a member list here: http://www.iiac.ca/welcome-to-iiac/about-us/iiac-members , and you will see that there are members who have relationships with major Canadian banks.
I think I’d be more inclined to appreciate the efforts that banks have made, without as much criticism if they had tried to alert their customers in ways that would help marshall popular and political resistance against FATCA – rather than only post information on a website they would have no reason to look at. I note that banks aren’t alone in that. Pension plans have not followed up on the suggestions by affected account holders to notify their members of the pending crisis either. I haven’t seen any full page newspaper and media ads to that effect – unless I missed them. There has been surprisingly little coverage of FATCA domestically or in the US.
Re your comments:
“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.”
From the CBA site, this is the broad group of mostly Canadian citizens who will be affected:
http://cba.ca/en/consumer-information/40-banking-basics/597-us-foreign-account-tax-compliance-act-fatca-information-for-clients
The CBA site says the affected would include:
If you are unsure, contact your tax advisor.
Many of those above will also be dual Canadian/US citizens by birth or naturalization. Some may hold US only citizenship – but be decades-long permanent residents.
The CBA no doubt is working from its own estimated statistics of how
many accounts would be affected – that would just be good business
planning. I’d be interested in knowing what numbers you’re using. I
think that it is at least an estimated million or more US taxable
‘persons’ in Canada (not just citizens, but duals, snowbirds, greencard
holders, etc. Correct me if I’m wrong?
All the persons in the categories above would suffer directly from Canadian bank and financial institution collaboration with the FATCA regime. Those deemed by the US to be ‘taxable persons’ living in Canada, all have families, and many have single-citizenship Canadian spouses or other relatives who may hold joint accounts with them. Even if not jointly held, one member of the household – say a breadwinner – who is refused banking, has their account closed, or suffers a 30% witholding, will affect an entire Canadian family. Add to that all the Canadian business accounts that could be affected. And mortgages, and savings, pension, life insurance – and other types of accounts – since the list of what FATCA includes is longer than any small exclusions. That’s a lot of angry customers and a lot of affected accounts and assets.
Some FATCA compliance sites have advised their clients on ways of keeping this low key – so as not to alienate account holders during the process of implementation. I’ve been wondering if that is why when I look at the list of presenters at FATCA hearings in the US, we hear so little from them here at home. One pension plan opined that there was no need to get members upset – in the hopes that they’d be exempted from complying with FATCA. Problem is that people can’t make their objections known in a democracy unless they’re told what is brewing before it is too late. I would have thought that Canadian citizens and residents could be partners with their financial institutions in approaching our government with our concerns if we’d been alerted when this was first proposed.
How will joint account holders, and beneficiaries fare in this – when only one of them is a US taxable person with a FATCA obligation? How will banks treat this situation? I’m assuming that even the single-citizenship Canadians will have to prove that they are not American?
Account holders will have a choice? Won’t we be considered ‘recalcitrant’ then? What is the result of being recalcitrant? “If you do not complete IRS Form W-9 or provide your consent to disclose
information to the IRS, your financial institution maybe required to withhold a tax of 30% on any U.S. source payments1 that you receive and send this money to the IRS. Also, your financial institution may refuse to open an account or may be required to close existing accounts.”
http://cba.ca/en/consumer-information/40-banking-basics/597-us-foreign-account-tax-compliance-act-fatca-information-for-clients
You say that banks will be forced to do this because of the impact on all their other clients. Well, who will be paying for the expensive systems to implement FATCA? Only those deemed US persons? Or will it be shared amongst all the other account holders – except that they won’t know that they’re paying for it will they?
Interesting comment you made re; no prohibition on banks closing an account.
“There is nothing in the Canadian Bank Act or the Access to Basic Banking
Services (ABBS) Regulations that prohibits a bank from closing an account. The ABBS regulations give reasons why a bank can refuse to open an account for someone, but they don’t give any restrictions on closing an account“
That may be true, I don’t know. Does that make it any more palatable for the account holder – that it’s not actually prohibited? If the reason for closing an account hinges on identifying birthplace, US citizenship (for duals, placing US above Canadian citizenship held simultaneously – often through birth on Canadian soil), or merely US connections (ex. marriage to a US person – on joint accounts and investments). Could that be discrimination? We are in Canada. Shouldn’t Canadian law supercede US laws in our sovereign country?
It may be that the US will win, and FATCA will be imposed on us if our federal government gives in. Savings and assets are of paramount importance to most people – and that means we’re hardly likely to forget this episode in history. Neither will our non-US friends and family when we share with them what happened – even if it becomes legal to do.
If a million or more of us and our joint account holders and beneficiaries end up under the bus as a minor but unavoidable bump in the road, do you think that we will forgive and forget? I don’t think so. Some might be thinking that if and when credit unions – (who operate for and by their members), are also forced to cooperate, that we’ll have no alternatives, and thus we’ll have no choice. This may very well be the case. Perhaps we’ll have no good alternative other than a house full of piggy banks, but we’ll certainly remember who co-operated first, and who started to collaborate before it even became in force here in Canada.
We are fully compliant with the laws in Canada – our accounts are transparent, and are registered and reported with our SIN#s, post-tax earnings, we pay tax on any interest – the CRA already knows everything we have.
Canada is not a tax haven.
The whole situation gets more depressing by the moment. I can’t imagine the IRS and/or Congress giving a hoot about the importance of Central 1’s ability to service the Canadian system, or whether the CBA wants to comply etc. They only care about what they want and since they can hold that 30% witholding threat over everybody’s heads, there seems to be nothing anyone can do. Unless all the governments were prepared to take the hit and tell them they wouldn’t comply. It is truly hard to fathom that one country can hold that much power over everyone else.
I wish my CLN would arrive. Among all the other negatives, I could not imagine being told I couldn’t have a bank account.
@Tim
perhaps I am missing something but I don’t see a section in the letter from Central One that indicates a significant number of individual CU’s will refuse to comply. Could you point this out to me? I would be thrilled, as all my $$ was moved to CU the minute I heard about FATCA.
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