With all the focus on American emigrants’ issues here at the Isaac Brock Society, it’s worth remembering that Doug Shulman’ whale-hunting efforts are also ruining the lives of immigrant minnows who keep some assets in their home countries. A major South Korean business newspaper reported earlier this month that some Korean Americans with accounts at South Korean banks are closing those accounts for fear of ridiculous IRS fines. I’ve been busy so I’m just getting around to translating this now.
| “벌금폭탄 피하자” 교민예금 이탈 가속 | “Dodging the penalty bomb”, withdrawal of diaspora deposits picks up speed |
| http://news.mk.co.kr/newsRead.php?year=2012&no=561021 | |
| 美, 내년부터 해외자산정보 미신고분에 벌금…시중은행 한곳서 100억 이상 빠져…금융권 비상 | Starting next year, the U.S. will issue fines for not reporting overseas assets; more than ₩10 billion drained from one retail bank; finance sector on alert |
| 기사입력 2012.09.03 17:31:49 최종수정 2012.09.04 07:29:25 |
Publication: 3 September 2012, 17:31:49 Most recent update: 4 September 2012, 7:29:25 |
| 내년부터 국내 시중은행들이 미국 정부에 예금정보내역을 제공하게 되면서 국내 은행에 들어있던 미국 교민 예치금이 이탈하고 있어 금융계에 비상이 걸렸다. | Starting next year, [South Korean] retail banks will have to start providing breakdowns of deposit information to the U.S. government, and so at banks across South Korea, Koreans living in the United States have been withdrawing their deposits, putting the finance industry on alert. |
It is worth emphasising: it remains formally legal for U.S. citizens and residents to hold assets in whatever country they wish, aside from those under U.S. sanctions. And there is nothing suspicious about doing so. As U.S. legislators fail to realise, it is no longer 1923, and not everyone migrates to the U.S. on a rickety boat with their life’s savings in their pockets — many people from overseas, whether they call themselves “immigrants” or “expatriates” or “guest workers”, keep assets in their countries of origin, either due to the difficulty of withdrawing those assets and transferring them overseas, or because they plan to return there after retirement, or for any other number of reasons.
Of course, with Congress and the IRS putting more and more paperwork burdens in the way, law-abiding green card holders and naturalised citizens — especially those whose native language is not English — will have a harder and harder time understanding what needs to be done to exercise their right to choose where they save, and in the end may be intimidated into remitting all their capital to the United States. Even if they cross every “t” and dot every “i”, the IRS may send them threatening letters anyway falsely claiming there’s something wrong with their paperwork, just to see if they pay up.
| 미 연방 국세청이 그동안 신고하지 않았던 해외자산에 벌금을 물리기로 결정하면서 국내에 투자했던 교민들이 아예 예금을 빼는 등 움직임이 있는 것이다. | The U.S.’ Internal Revenue Service has recently resolved to impose fines on unreported overseas assets, and so Koreans abroad who have invested in South Korea have suddenly been making moves to withdraw their deposits. |
| 3일 금융권에 따르면 A은행의 `비거주자 자유원예금` 잔액은 지난 6월 말 1143억원에서 7월 말에는 1046억원으로 한 달 새 100억원 가까이 감소했다. B은행 예금잔액도 지난 6월 말 1220억원에서 1205억원으로 줄었다. | According to [a statement by] a finance industry source on 3 September, “A” Bank’s “Non-Resident Freely [Remittable] Won Deposits” balance fell from ₩114.3 billion to ₩104.6 billion in June, a decrease of almost ₩10 billion in just one month. “B” Bank’s deposits decreased from ₩122 billion to ₩120.5 billion in June. |
It’s not clear how many account-holders are affected, but if they’re worried about being exposed by FATCA, that would mean an account balance of US$50,000, or about ₩55 million. In other words, between the two banks the amount of funds withdrawn might correspond to about 200 accounts. The scale of this phenomenon may seem rather small, but the fact that life-altering FBAR and FATCA fines scare even one person away from exercising his legal right to keep money in his country of origin is a cause for shame. Would a fair and just society threaten its immigrants like this?
People like Andrew Leonard would like to paint these immigrants as fatcat Tea Party tax evaders for daring to have such an amount outside of the Greatest Country On Earth™. But in fact US$50,000 is not a large amount of savings for a mid-to-late career professional or retiree to have; it is well below the median amount of financial assets held by Americans in the 45 to 74 age bracket. This decrease in deposits may be evidence that FATCA is succeeding at the goal of imposing capital controls by stealth — by terrifying ordinary people who prefer to hold their assets in other countries, such as those where they speak the language and understand the market better.
| 비거주자 자유원예금은 해외 거주자의 원화예금 중 해외로 지급하는 것이 가능한 계정으로, 해외 교민들이 국내에 예금을 할 때 주로 사용하고 있다. | Non-Residents’ Freely [Remittable] Won Deposits are a type of won-denominated account offered to people residing overseas from which payments can be remitted overseas, and are mostly used by Koreans abroad to deposit funds in South Korea. |
| 이 같은 예금이탈은 국내 은행들이 내년부터 미 연방 국세청에 예금정보를 제공하게 되면서 시작됐다. 미국 법상으로 미국 영주권자나 시민권자들은 미국이 아닌 다른 나라 계좌에 보유한 자산을 신고해 세금을 납부해야 한다. | This withdrawal of deposits is because starting from next year, South Korean banks must begin providing deposit information to the U.S.’ Internal Revenue Service. Under U.S. law, U.S. permanent residents and citizens who maintain assets in countries other than the U.S. must report those assets and pay tax on them. |
| 하지만 현재까지는 미국 측이 계좌정보를 확인하지 못해 유명무실한 법규에 지나지 않았다. 이에 상당수 재미교포들은 국내 은행계좌에 상당한 자산을 예치해 운용해왔다. 재미교포 김 모씨는 “미국에서는 예금금리가 거의 없지만 한국 시중은행에 예치하면 연 4~5% 금리를 받을 수 있어 재미교포들이 `쏠쏠한` 자산운용 방법으로 활용해왔다”고 말했다. | However, up to now the U.S. side has been unable to confirm any information about [such] accounts, meaning the regulations are nothing more than empty words. Due to this, a considerable number of Korean Americans have been keeping a considerable amount of assets in deposits at domestic banks. Mr. Kim, a Korean American, stated that “in the U.S., you can’t earn any deposit interest, but in South Korea for a deposit at a retail bank you can get as much as four to five percent interest, and so Korean Americans have been enthusiastically using it as a way to invest their assets”. |
It’s sad to see a South Korean newspaper adopting the American style of casting aspersions on anyone who dares to keep an account outside of their country of residence. In fact, the anonymous Mr. Kim’s quote says nothing at all about a causal connection between the U.S. inability to find out about South Korean accounts and the number of Korean Americans keeping accounts there. If Korean Americans really wanted to “hide money” they would have kept their accounts somewhere that does not cooperate so closely with the United States — or perhaps they would have just “roundtripped” their capital and opened U.S. accounts while pretending to be foreign depositors, in order to take advantage of the U.S.’ sweetheart 0% tax rates for foreigners (but not for U.S. Persons) designed precisely to drain capital out of other countries.
Instead it seems fairly clear that the depositors’ main motivation was finding a higher return on their savings than the pathetic rates on offer in the U.S. — not to mention more mundane concerns like having easy access to “walking-around money” during their visits back to their country of birth. (On my very first trip to Seoul all those years ago, the Korea Exchange Bank cash machine at Incheon Airport got confused by my non-Korean ATM card and ate it, leaving me with no cash. Think the “protection of the U.S. embassy” or the words “civis Americanus sum” helped me out of that one? Yeah right.)
Furthermore, there’s no indication that the depositors avoided paying the taxes owed on the interest payments in question (by including them on their Form 1040 Schedule B) — the only indication of any “wrongdoing” is that they failed to report their account balances by filing useless FBARs or Form 8938s. And exactly how much tax is owed on a US$50,000 account that earns a 4% interest rate? In the 28% bracket, US$560 per year. Even if depositors failed to report the interest they earned, we’re not exactly talking about Timmy Geithner-level tax evasion here — certainly nothing that warrants threats of FBAR fines of tens or hundreds of thousands of dollars.
| 그러나 내년부터 은행들이 미국에 정보를 제공하게 되면서 상황은 복잡해졌다. 미 연방 국세청은 그동안 신고하지 않은 자산이 적발되면 원금의 3배를 벌금으로 물도록 했고, 현재는 자진신고기간을 두고 있다. 자진신고로 벌금을 감액받는다고 해도 벌금이 원금의 27.5%에 달한다. | However, starting from next year banks will have to provide information to the U.S. government, and so the situation becomes more complicated. Recently, the Internal Revenue Service has been imposing fines of three times the account balance when unreported assets come to light, and is now running a voluntary disclosure programme. Even though the fine for a voluntary disclosure is reduced, it’s still as much as 27.5% of the principal. |
| 시중은행 관계자는 “국가 간 협정을 맺게 되면 금융회사들은 미국 시민권자나 영주권자와 관련된 정보를 제공해줘야 한다. 제공하지 않으면 불이익을 당하게 된다”며 “현재 정부도 이 같은 정보제공이 국내법과 충돌할 수 있는 문제 등에 대해 검토하고 있다”고 말했다. 또 다른 금융권 관계자는 “법률적인 검토를 하고 있지만 국내법과 상충되는 부분이 그리 크지 않아 내년부터 시행될 것으로 보인다”고 했다. | A source at a retail bank stated, “if an inter-governmental agreement is reached, financial institutions will have to provide information relating to U.S. citizens and permanent residents. If they do not provide the information, they will face penalties” and that “right now, they are still investigating problems such as the potential conflict with South Korean law even if the government [itself] provided this kind of information”. However, another finance industry source stated, “even though they’re still conducting legal review, the portions which conflict with domestic law are not so big, and so it’s likely to be implemented starting next year”. |
As mentioned last time, there are pending amendments to South Korea’s “Real-Name Financial Transaction System” (금융실명제) regulations and other laws in order to allow banks to transmit identifying information from their transactions data to the United States. I’ve been trying to find the exact laws and orders in question, but I haven’t been having any luck. I have my doubts that the legislature is giving this issue much scrutiny, with other domestic issues on their plate and a presidential election coming up at the end of the year.
| 이에 따라 교민 예금은 대대적인 이동을 시작했다. 아예 예금을 빼서 현금화하는 방안을 택한 것이다. | Due to this, the diaspora has begun a large-scale movement of their funds. They’re withdrawing their deposits and converting them into cash. |
| 특히 저축은행이나 제2금융권과 관계없이 미국 영주권자나 시민권자라면 정보를 제공하게 돼 있어 교민들의 불만도 높아지고 있다. 한 재미교포 사업가는 “한국 내 은행이나 저축은행에 있는 미국인 예금의 90% 이상은 시민권이나 영주권을 보유한 한인들”이라며 “약 1만~2만명의 한인교포들이 대상이 될 것으로 보여 예금을 인출하는 한인들이 늘고 있다”고 말했다. | It doesn’t matter whether [your account is with] a savings bank or a non-bank financial institution, if you’re a U.S. citizen or permanent resident your information will be provided [to the U.S. government], and so the diaspora’s dissatisfaction is growing. One Korean American businessperson stated, “In South Korea, more than 90% of the deposits held by Americans in banks and savings banks are from Koreans who have U.S. permanent residency or citizenship” and “seeing that roughly ten or twenty thousand overseas Koreans have become targets, the number of Koreans who are withdrawing their deposits is rising”. |
I really have to wonder whether or not the statement at the beginning of the second paragraph is true. I’d hope Maeil Business Newspaper would know better than me — after all, they are Korea’s leading business newspaper, the local equivalent of the Financial Times or The Wall Street Journal. If there is any inside story to know, they’re certainly well-connected enough to find it out — their CEO used to be acting prime minister of South Korea, though he belongs a party that’s now in the opposition, not the ruling New Frontier Party.
But anyway, if all account information is going to be provided to the U.S. regardless of what type of institution the account is held with, either the South Korean government is negotiating a very bad inter-governmental agreement, or South Korean credit unions and the like are not planning to try to take advantage of the “local FFI” exception or other similar exceptions to avoid having to engage in FATCA reporting — either they’re not aware of them, or they don’t think they can qualify due to their proportion of non-residents’ accounts.
Finally, I’m not sure if the statement about “ten or twenty thousand overseas Koreans have become targets” means the number who have gone into the OVDI (which would be a truly shocking proportion of the total of thirty-three thousand participants), or whether that’s an estimate of the number who have withdrawn their funds from South Korean banks recently.
| 국내 금융회사가 미국에 예금정보를 제공하는 것은 이르면 내년 7월부터 이뤄질 전망이다. | South Korean financial institutions are expected to begin providing deposit information to the U.S. in July of next year. |
| 은행연합회 관계자는 “은행들도 신규계좌를 개설할 때 미국인인지 아닌지 판단할 수 있는 시스템을 내년 6월까지 구축해야 한다”며 “기존에 운영 중인 자금세탁시스템이나 실명법 시스템 등이 있어 시스템 구축에 큰 어려움은 없을 것”이라고 내다봤다. | A source at the Korea Federation of Banks stated “banks have to develop systems by June of next year to determine whether or not [people establishing] new accounts are Americans or not”, but that “if they have existing money-laundering systems or ‘real-name law’ systems already in operation, there shouldn’t be any great difficulties in developing that system”. |
| [최승진 기자] | [Reporter Choi Seung-jin] |
Presumably he means anti-money-laundering systems rather than money-laundering systems. It’s surprising to see a bank officer estimating that FATCA compliance costs should be relatively low. My guess is that this attitude is unique to South Korea — banks there already have measures in place for supplying data to the U.S. on demand, like the Simultaneous Criminal Investigation Program that was set up two years ago.
@scared_citizen: If your bank doesn’t have information about your US citizenship, your 60K account will be safe. Cash is trash. If you decided to hide money under a mattress, try silver (or gold). Then you will have money that is not easily devalued.
@Petros maybe, but it would be better to keep accounts under 50kUSD equivalent, or even better, under 10kUSD. I have no idea how Korean banks are looking for “US Indicia”.
*My question: Is it too late to do anything? January 2013 the banks will be giving account info to the IRS and having > 50 K will put us in trouble unless we enter the OVDI program.
I asked if I close the account now will the bank still give the IRS my info?
Unlikely. They’ll already have a hard time getting information on current open accounts. I doubt they’ll contact past customers US indicia. And even if they do, you can tell them that it’s not their business anymore.
@scared_citizen, where do you live? What is the address that the bank has for you? If it is US then you have a problem if the account is above 50K. You could perhaps do a go-forward compliance or perhaps just send in late FBARs. OVDI is not really a very good unless you were intentionally hiding money overseas.
I confirm the discussion above. I am now taking classes at a US university. I have written emails to the dean of the International students, to the school newspaper, and to the state’s NPR station which is headquartered here. In all my cases, my email passed by their junk mail box and was stored in their Looney Bin.
Besides that, I have had the discussion with many European-resident-US citizen friends who all dismiss it as just impossible and worthy of ignoring. It is difficult to recruit activist comrades with people who don’t understand what is coming to them.
So what do you think the IRS is going to do with the humongous amount of data they are going to receive?
Are all these people whose names are given and who are not compliant (non filers of US tax returns or FBARs) going to receive a notice? It seems like it would be something that would be easy to automate.
Are we going to see more prosecutions? I am surprised of the relatively few prosecutions that have been published, compared to the thousands of names they received from the Swiss banks.
I work with US engineerng contractors who float from Switzerland to Australia to Sweden to Norway etc. When I spread the miserable FATCA information around my workplace, one guy reponded that he had received a question (audit) upon his 2010 return, as to why he had not reported 2010 interest from a Swiss UBS account mentioned by number. He sent them back the closure letter from when he had closed it in 2008.
There was no question as to FBARs or questions about interest from the 2000-2008 period when his account existed.
So, in that case the IRS was truly snooping around, using the UBS data, but not yet pressing.
*I am going to close the 60K account next week and put it in my Korean sister’s account in a new bank in Seoul
Steven Mopsick published a new article in TaxIndiaInternational:
http://mopsicktaxlaw.blogspot.com/2012/10/published-article-on.html
While it is good that he raises the immigrants’ issue, it is disapointing that he seems to think for now that a voluntary disclosure is how immigrants should fix the problem. He ends his article with:
“Doing nothing is not an option. Until we get the IRS’s attention on behalf of recent immigrants the law “is what it is” and we have to address it as it presently stands.“
@christophe
‘You must also beware of various lively web sites with some information which seems useful and accurate but are really promoting a different agenda. Some advise people to simply renounce their US citizenship which is certainly not an option for many people who have spent years trying to get here in the first place.’
Surely he can’t be referring to Brock, as those contributing here might only suggest that someone living abroad renounce US citizenship. As it goes, ‘Liberty and Justice for US Persons Abroad’.
@christophe
The author rips off his somewhat good essay with his concluding remark and puts his credibility at risk.
The law “is what it is”? Is ovdi the law? Wow!!
Isn’t it a nobrainer that immigrants have a pre-existing condition, i.e., a financial life before coming to the US? What a trap! What a miserable trap! It is really hard to believe a nation like the US is adopting such measures against its immigrants (not to mention its citizens abroad), when no education or clear guidance are given to them beforehand. Even lots of people who make accounting as a profession don’t know about fbars. Wow!! This is way too much, close to unbelievable.
How many families have to be destroyed before a simple and just solution?
Stress is a silent killer.
Utterly sad.
@kyte…
You are right. It is “utterly sad”.
I think what Mopsick is addressing in the statement “it is what it is” is that FBAR requirements ARE the law, and from a legal perspective, a non compliant immigrant has to deal with it. An attorney is not going to tell you to flaunt the law or ignore it. There are many routes to compliance with varying degrees of risk. Sadly, you have to make a decision. It might be to just clear up past non compliance, no matter how benign, via quiet disclosure. That is an option according to some attorneys like Jack Townsend.
It is very sad that the IRS makes the decisions for immigrants on what to do so VERY hard and stressful. Look what ij went through, but in the end he did win! I think Stephen’s opinion, which has generated a lot of discussion and disagreement in the past, is that he would make a noisy disclosure as a “make my day” approach that challenges the IRS rather than silently disclose. There are others that disagree. The topic got a lot of discussion here in the archives.
As time passes, I am not saying as current with all the twists and turns of the misguided IRS approach to compliance. I am now compliant myself, and have borne the pain and stress of the process and moving on. I do understand how difficult the decisions are. It is not right, but ‘it is what it is.’
@just me
I seem to be getting Brock comments only sporadically, I know you were experiencing that too. Do you know how to fix that?
@kyte:
“How many families have to be destroyed before a simple and just solution?”
And the interesting thing is that because this issue impacts mostly those immigrating to the US, or those living outside the US, the US government is demonstrating that our children, and our families are not as important as that of US residents – though we are being subjected to US laws and cannot renounce without passing through the IRS grinder.
Our children cannot renounce, and neither can our family members with mental health and intellectual disabilities – they are captive for life.
The IRS FBAR and other reporting form penalty industry – harvesting our legal and post-tax assets via cunningly designed confiscatory fines, are deliberately fashioned and enforced to raise revenue that only benefit US homelanders by sucking resources out of other countries. That is acknowledged in the legislation that enables FATCA etc. It is a US fundraiser.
The essential conflict of interest is that the US and IRS won’t meet their revenue goals if they make it easy to comply. Compliance is not what they really want, because it is only penalties and fines that can suck out assets from all those who would owe the US no actual tax under the FEIE and Foreign Tax credit limits.
To demonstrate that nothing is owing, and no crime has been committed, we pay thousands to US crossborder tax and law specialists. A return reporting less than 10,000. in wages per year, and almost no ‘investment’ income (ex. interest) can run to 25 pages if the savings are forbidden ‘foreign trusts’ like RESPs, TFSAs, RDSPs, etc. Our ‘fellow Americans’ don’t care if our children can save for college, or whether we can save for old age and disability. Our families and wellbeing don’t count – only our ‘foreign’ assets.
I don’t believe that there will ever be a just and simple solution. I believe that the US crimes being perpetuated against ourselves and our families will continue without a pause. If anything, I believe that they will make it even harder to renounce – because it is a way of voting with our feet – for those that can, demonstrating our dissent if we can, and because the US wants the option of continuing to mine our legal post-tax assets.
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