We’re all worried about what will happen to our bank accounts under FATCA, but several commenters here have pointed out that data quality issues may prove an insurmountable barrier to accurate identification of United States Persons. How good are banks at searching through this kind of textual data in order to identify people with connections to a particular country? The Wall Street Journal brings us an example from HSBC, “the world’s local bank”:
On January 18, 2008, for instance, $15,000 that originated in Myanmar was processed through the bank’s U.S. subsidiary, according to HSBC emails included in the Senate report. An email among HSBC’s compliance officers later showed that the payment was processed because it was marked with the city name “Yangon,” instead of the colonial name of the country’s former capital, “Rangoon.” … At the time, HSBC’s U.S. head of compliance requested that the filter be fixed. “We are running too much risk that these misses will cause [U.S. regulators] to start questioning the effectiveness of our controls,” she wrote.
Clearly it’s time to start listing my place of birth as “Saint Francis City, Bear Republic”.
In 2010, two more U.S. dollar transactions were processed and one got through unchecked. In one instance, the bank’s filtering software didn’t catch the term “Burmese” as related to Burma, Myanmar’s alternate name.
The potential demonyms of Americans are even more varied than those of the Burmese/Myanmarese: Usonians, United Statesians, Yankees, Homelanders, et cetera. Or for that matter, why not list yourself as a citizen of the state where you lived decades ago: Californian, Michigander, or New Hampshirite?
In the other instance, the filter “did not identify ‘Mynmar’ as a possible reference to Myanmar,” according to HSBC emails included in the Senate report.
If you don’t have an alternative name for your place of birth, you could always try distracting the bank clerk at a crucial moment so he makes a typo in your records. Possible distractions include loud noises, stupid questions, spilled beverages, or large sums of money. In fact, thanks to typos, some countries don’t even know the difference between FATCA (the Foreign Account Tax Compliance Act) and FACTA, as this hilarious Pravda report demonstrates:
An oft-cited reason for giving up one’s US passport is the US law known as Facta, or the Fair and Accurate Credit Transactions Act … the high cost of compliance with Facta has led many banks and hedge funds in Asia to turn away all American clients, creating insurmountable barriers to banking and investment for numerous American expatriates living and working in Asia.
This could even turn into a vicious downward (upward?) spiral for some banks: denied access to the U.S. financial system, they’ll have no way of paying for the mass quantities of American spellcheckers they’ll need to make sure their records are free of typos. That will result in to an even higher rate of error and further misidentification of U.S. Persons abroad, leading to their continued exile from the U.S. financial system. In the mean time, angry emails from the Compliance Department will stress that it is crucial for the bank to come into FACTA compliance as soon as possible, leading to a massive misallocation of efforts as all the engineers burn the midnight oil trying to ensure that all their U.S. Person customers get one free credit report every year.
Thre chears fore speeling misteaks!
Bst artikle evr!
If I could just get my city of birth listed on my passport I would be scott free – Its a Spanish city name and there are tons of duplicates in Spain, Italy and in Latin America, so it would be absolutely impossible to figure out which one it is.
By the way, Michigander sounds like some German regional group. I wouldn’t even think twice if I saw that on paper as a banker in Europe and would just assume that it is somewhere in Europe.
I worked on a name checking IT project a several years ago. The initial source of PEP (politically exposed people) data was from Factiva, a Dow Jones company. Factiva’s data was incredibly “dirty” and had to go through a clean up before we could even use it. The complexity of dealing with foreign names is something few people have any idea about. Spanish surnames are a nightmare and Austrian titles are not to be believed. We had a special high paid contractor who handled the rules for Arabic names.
In the end what the computer operator was presented with was a list of people with matching or nearly matching names with a ranking score. It was up to the operator to make the final decision which one on the list was the person of interest.
Eventually every customer of the bank was run through the program.
The last time I visited the US immigration stopped me at the border due to a 35 year old minor misdemeanor drug conviction. I think that they weren’t sure from the computer screen that it was really me, so they have some standard policy that in this case they deliberately say one thing that is incorrect and wait for the “suspect” to correct them. In my case they said that the conviction was in 1997 when it was 1977. I immediately corrected them with out thinking and presto, they had their verification. In this kind of scenario our best and most honest character traits can be our worst enemies.
How does FATCA effect if a person was born to a parent who is US citizen, in a foreign country, but he obtained passport of his birth country. Also not knowing that he is a US citizen, he visited the USA many times by obtaining visa from US consulate? Would he be required to file back taxes and become compliant, if FATCA catches up to him?
*@Baharat. The answer to your question is yes. But as you have noted there may be difficulties in confirming that the person is ndeed a US citizen. The one exception that comes to mind is the person born abroad illigitemately to a US citizen father. This is the one case where US ciizenship is not automatic. There has to have been an agreement in writing by the father to support the child in order for the child to have receved US citizenship. I am currently aware of a US ciitizen father who lives with his common law wife abroad who is attempting to confirm the US citizenship of their children born in the country where they live. They live together as husband and wife, he has not yet been able to confirm US citizenship for their children to the satisfaction of the US consul. I suspect that the problem may be that he did not sign such a support statement as required by US law.
@Mr. Conklin: Thank you. If he becomes aware through his FATCA bank that he is a US citizen, it might initially be a pleasant surprise, but quickly turns into dreaded nightmare that never ends.
A wonderful post, Eric. This is going to be fun to watch. Yes, there are all kinds of errors that slip into official documents and all kinds of situations where what to do is not clear to the parties involved.
My livret de famille (official French document established by our marriage and listing our children’s birth) has my hometown of Seattle spelled as “Sealthe.” To my knowledge no such city exists in the U.S. Getting this fixed is not a simple matter and we simply haven’t bothered to do it. In other documents, I’ve seen my birthplace is simply listed as “Washington.” I changed my name few years after I got married and did get the U.S passport changed but recently in France there is a move to use maiden names exclusively in some circumstances. So I have things that are under my old name and other things under my married name. To make it even more interesting, some folks on the U.S. side have trouble with the spelling of my married name and I’ve seen some really horrible misspellings over the years to the extent that if mail was addressed to me using one of these deformed spellings, it probably wouldn’t get to me.
Another issue is my status as a long-term EU resident which confers certain rights here. There have been situations where in the beginning I was treated entirely as a U.S. citizen until they found out how long I’ve been here. At that point they’ve treated me as a de facto French citizen (just to be on the safe side).
Finally another thing I’ve wondered about over the years and that is how does the U.S. deals with all the different forms of marriage or domestic partnerships available to French citizens? There are at least two ways of getting married (by contract or community property) but there is also the PACS (very popular these days) and concubinage. Does a French person become a potential U.S. person if he/she is PACSed but not strictly married in the older more traditional sense of the term? I don’t think so.
Would one solution for French citizens wishing to marry Americans but who wish to avoid entanglement with the U.S. IRS to simply be PACsed instead? Inquiring minds would like to know…
I have been noticing that my discussions with bank clerks that they are asking me to give answers that are favorable,ie “you are a SWEDISH citizen, of course”
@roger and bharat,
I believe Victoria provided this link re acquisition of US citizenship. Unlike children born out of wedlock to US fathers, children born out of wedlock of US mothers may acquire US citizenship simply by the mother having been physically present in the US for one year any time before the child’s birth.
Roger, from what you mentioned in another thread, that mother need not have acquired US citizenship by being born on US soil in order to allow her child to acquire US citizenship ‘by descent’. Living in the US for one year is sufficient enough.
Troubling. It seems that a certain senator and his merry band of men are busy at work making bad guys of any bank they can. Shaping public opinion about foreign banks for the implementation of FATCA?
‘The Senate subcommittee used HSBC as a “case study” for problems it said are widespread in the finance industry.’
Coburn and Levin. What a surprise.
For those of you who don’t remember FEIE foe Tom Coburn of Oklahoma, he wants to eat your brains, because he thinks they belong to him:
Only people who have worked directly with large quantities of data, like poster Eric and ConfederateH, can begin to imagine how true this is. Truly clean data, especially nonnumerical, costs literal gold to produce. The U.S. cannot afford it, so they will scattergun everything in sight. If it moves, if it’s a partial match, take it out, no discrimination. That’s the liberal conservative approach. It moved, didn’t it? Who cares what it was. Oh, just one of those pesky extraterritorials again.
Re;”data quality issues may prove an insurmountable barrier to accurate identification of United States Persons“
There will be false positives as well as false negatives. That will be costly and onerous for anyone identified erroneously. As I pointed out in one of my comments to the CBA representative http://isaacbrocksociety.ca/2012/07/16/canadian-bankers-association-maura-drew-lytle-responds-to-the-isaac-brock-society/ (which did not get any response), the consequences are serious for the account holder, may be difficult to resolve, and could result in time and money losses. There continues to be NO discussion of any resolution process for errors, and restitution for anyone who has a 30% withholding in error and has to apply to get it back from the IRS.
A single-citizenship Canadian who has a Canadian bank or financial institution (insurance, etc.) grill them in error and required to submit documents to prove that they are not a US person would be a really interesting news story.
@badger, the way to avoid that is to stay clear from US investments.
Some and possibly most banks in Switzerland are now requiring the completion of a W-9 form for anyone identified as a US Person. Since the W-9 includes the bank account holder’s social security number, or tax identification number (TIN), ambiguity regarding the identity of the US Person would normally be eliminated, imho.