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:

• A citizen of the U.S. (including an individual born in the U.S. but resident in Canada or another country, who has not renounced U.S. citizenship);
• A lawfulresident of the U.S. (including a U.S. green card holder);
• A person residing in the U.S.
• You also may be considered a U.S. person if you spend a considerable amount of time in the U.S. on a yearly basis. For example, some Canadian “snowbirds” may be considered U.S. persons for U.S. tax purposes. If you are unsure, contact your tax advisor.
• U.S. corporations, estates and trusts are also considered U.S. persons.”

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.