Michael Young (Twitter: @BeirutCalling), the opinion editor of Lebanon’s Daily Star, has a new column exploring a relatively undiscussed problem with FATCA: its impact on the privacy and security of U.S. persons abroad, an issue of particular concern in the Middle East.
However, there is one aspect of FATCA that has not been sufficiently examined, but that remains potentially hazardous. The American government is effectively asking foreign institutions to prepare detailed data bases of American citizens, with no guidelines explaining how this information must be protected. For a country obsessed with the security of its citizens in the aftermath of the 9/11 attacks, such behavior is paradoxical, indeed astonishing.
Foreign financial institutions will effectively become vast repositories of information on Americans—including what they earn, the sources of their income, what they spend, where they live, who their family members are, and so on. In their zeal to implicitly label Americans living abroad as tax cheats requiring monitoring, the sponsors of FATCA have shown utter indifference to the safety of their citizens.
*A well-written polemic on an aspect of FATCAT that I, for one, had overlooked.
Good comments. No doubt they are illustrative of the feelings of the poor US person schmucks stuck with this law.
How about oil workers and other workers around the world, in Nigeria, Libya, Columbia, anyplace within reach of pirates etc. Kidnapping
An interesting observation.
Related somewhat to this, FATCA implementation under bilateral agreements is based upon the assumption of transparency and integrity in the financial system of the participating country. However, many countries suffer from corruption, which will allow individuals to bribe their way to safety. Example: I was speaking a few months ago to a US citizen, resident in Ohio, who is an immigrant from Italy. His mother in Italy, without his knowledge, set up an Italian bank account in his name and transferred money into it. I am assuming she intended to evade estate tax or something of the kind, though I am not sure. When my friend learned of this, and knowing about FATCA, he flew to Italy, closed the account, and (because this is Italy) he arranged that all records of the account disappeared. It never existed. OK, that’s Italy. How about Russia? India? other countries?
That is interesting. I had heard the same argument about reciprocity, when the US is going to send the names of non residents banking in the US to countries like Mexico, which has signed an IGA, this could potentially be a security issue for these people.
I really don’t understand why, instead of voting FATCA, they didn’t sign some type of agreement in which all countries would agree to tax non residents. My guess is that it would have generated maybe more revenue and avoided all the privacy/discrimination and legal issues that are the result of FATCA. Why don’t we have sane people running this country, thinking about the consequences of what they vote. For sure, the president must have heard about how much resentment this is generated in many countries, and the negative impact on american abroad and the economy in general. I don’t understand why they’re not reverting course. Admitting mistakes is not easy, but sometimes it is the right thing to do.
I don’t even understand Spain who recently signed. Their banking system is on its knees. The last thing they need is more regulation that do not benefit them when they need more capital. The whole thing does not make sense. They might be worried of capital flight, but to European countries. Not the US. It made no sense to sign such a deal with the US.
I think there is another issue which is one of punishment of tax evasion. They really want to punish people who are not in compliance. Just like France, for example, refused to sign the Rubik’s aggreement with Switzerland, which would have taxed Swiss accounts owned by French people and send the revenue in aggregate back to France. The reason? That would have “validated” the concept of tax evasion and somehow encourage it. I disagree. If the revenues were taxed, it is a win-win for everyone. The government get its share, and the citizen maintain privacy. All these people standing for principle and voting stupid laws that don’t even make sense. It is just depressing, depressing that we can’t even reason them.
I like Switzerland and their concept of referendum. A lot of things should be validated by the people, and not just the few elected. It is interesting that they didn’t revolt more over that.
Spain and others no doubt fell for the carrot. THey too are publicly hungry to get ahold of info about where Spanish wealth lies. It’s more directly important to the countries which tax wealth rather than just dividends.
Interesting that France took that position, as it was the Eu who had initiated that concept to Luxembourg and the UK islands (implementation 2005ish) as a pre-requisite to their inclusion in Eu.
Very interesting perspective – that I had not thought of. The international security risks to those deemed US taxable persons abroad, plus the already breathtaking lack of data protection by the IRS jeopardizes the US persons, plus anyone associated with them – ex non-US family, business partners, employers, non-US joint account holders…
This is another aspect that should be underscored. When writing to Canadian authorities – could underscore that a Canadian citizen, with US double-taxable status, who lives and works abroad – ex. in countries with political unrest or corruption – it puts those people at substantial risk for kidnapping, etc. Basically, as the article points out, anyone with access to those files at the foreign institutions, or in the foreign government, can identify those ripe for kidnapping, or for identity theft – because of the breadth of information that must be provided. Given the US demand that the information be updated at intervals, (and copies of the US status id kept on file?) it makes US persons abroad and their family, and any business or employer associated with them – vulnerable to identity theft, theft of financial assets, extortion, kidnapping, etc.
“Strangely, we have heard nothing about FATCA from the State Department,
which is responsible for Americans overseas. At a time when American
embassies regularly issue advisories to citizens to guarantee their
safety, we are seeing the IRS asking institutions abroad to gather the
most sensitive facts on Americans, with no oversight. The
irresponsibility is breathtaking. Worse, because FATCA imposes pariah
status on Americans abroad, whatever rightful protest they have against
the legislation will sound suspicious.” http://www.nowlebanon.com/NewsArticleDetails.aspx?ID=464465&MID=0&PID=0
The article is absolutely correct when it points out that the State Department has done nothing to point this out and to protect US persons abroad, and their families and associated persons from this threat that FATCA makes them vulnerable to. Imagine being forced to report – under FBAR and FATCA, on the non-personal accounts of a non-US employer or business partner abroad, in a country where corruption and kidnapping is a real possibility.
This is a very very powerful counter to that oft cited and entirely specious argument that the burdens of extraterritorial US double-taxation and asset reporting obligations buys us some kind of ‘protection’ by the US State Department and US forces abroad – in situations and countries where there is danger because of unrest, war or disaster. Those phantom US battleships can’t save you if corruption and organized crime in the country you’re living in puts you at risk for kidnapping, and endangers your family, because someone in the local financial institution now has all your personal information, perhaps copies of your birth certificate and passport on file, etc. under FATCA provisions. That could very well be true even in some European countries that are thought of as relatively safe – but where organized crime is well established, and where those with US taxable status are likely to have business interests, or family ties.
Wonder what the US Ambassadors abroad, and the Consuls would say to that? What could they possibly do to assist US persons abroad if they were kidnapped, or their family threatened after their financial and personal information was stolen – as a result of all the FATCA information held on file abroad?
We all know that most office work entails people working in excel, with data stored on memory sticks in their pockets, so that they can work at home and play at work.
Maybe they are hoping that this will push many of us to repatriate? Although what they would do with us, I don’t know. They can barely keep their country afloat now without forcing 6 or more million of us to move “home”.
But, attacks on USP’s in other countries would suit the military arm of the US just fine. Give them all sorts of excuses for over-reach, invasion, occupation. This is what dying empires do in their last days, right?
Perhaps we should just all start hoping the Mayans were right and this will all be over in a couple of weeks?
Picking up on one of several points made by Christophe…
A large part of the problem FATCA is ostensibly aimed at could be solved relatively easily by taxing investment accounts of non-residents, let’s say at a standard 30 percent.
After all, you could send the Marines into the Cayman Islands, but they won’t actually find much money there. There is nothing in Cayman Islands to invest in, aside maybe from a condo. No, Cayman Islands is a way-station for money that is laundered and re-invested, chiefly in OECD countries, first and foremost the USA.
You mean to say that the mob may be involved in banking in some countries?
Eric…
Did you see this? Hong Kong calls for battle against financial imperialism http://bit.ly/XzHPSs Prevent the US & EU from imposing their rules on region!
and, thanks for highlighting this story out of the Middle East. They, more than anyone, understand the security issues. This is one of the more important stories I have seen.
@bubblebustin: re ..”the mob may be involved in banking in some countries?”
Then I remembered this story http://www.spiegel.de/international/europe/a-growing-vatican-bank-scandal-threatens-catholic-church-image-a-842140.html
And I started to wonder if the US will try to impose FATCA on the Vatican?
……….”Many who have become ensnarled in illegal business dealings with the
Vatican bank have been forced to pay with their lives, while others have
spent years behind bars. Despite all of its sacred and solemn promises,
the Vatican has succeeded in keeping the pope’s bank a haven for
money-launderers. And instead of being on some Caribbean island, this
one is right in the middle of Europe, in the heart of Rome.
Its business model depends on keeping things as shrouded as possible
from all financial authorities. Capital gains are untaxed, financial
statements are not disclosed and anonymity is guaranteed. The bank’s
exotic status of belonging to a religious monarchy in a sovereign state
the size of a city park has shielded it from investigations and
unpleasant external monitoring.
The bank’s headquarters are housed in a medieval defensive tower
known as Niccolò V nestled right against the Apostolic Palace, the
pope’s official residence, and is home to a vast amount of money and
commercial papers. Here, roughly 100 employees look after 33,000
accounts with total deposits of some €6 billion ($7.6 billion). The
direct beneficiary is the pope and his Church; 2010 earnings from the
bank were €55 million. Such revenues help make up for a decline in
donations from members of his global congregation.”
See also: http://www.spiegel.de/international/europe/a-growing-vatican-bank-scandal-threatens-catholic-church-image-a-842140-2.html
and,
http://federaltaxcrimes.blogspot.ca/2012/07/vatican-bank-as-money-laundering-and.html
I love it. Thanks for the idea. I can move my Christmas fund to the Vatican, out of reach of the IRS, protected by God.
@ Mark Twain, well the US said they wouldn’t carve out any exceptions didn’t they?
And a medieval tower sounds like a perfect setting for treasure. All that is missing is a dragon.
only for the King of Thailand, US citizen, and new Obama supporter
Eric, this has been one of my concerns from git-go. I’m hoping to hide this in the comments here but the Consular people are well-aware of the FATCA. I can’t remember when I did my first visit, but I heard them very clearly through the bullet-proof glass saying “FATCA is a MAJOR ISSUE” They know what’s going on, whether you visit a consulate official in Beirut or Buenos Aires. 90% of the time, we (as humans) want to blame idiococy and mistakes on problems in procedural errors. The “smart” 10% of con-men and government people just take advantage of this. If a consulate official says they don’t know what the FATCA is, tell them to jump in the closest lake. DON’T TRUST THEM!
I think we all have to use some common sense when we are in somewhat riskier situations à la “to be American or not” – I choose not to be permanently. If my kids want to register, that’s their deal. We receive no benefit from that place. Why should we? For the record – I’m not anti-American or pro-Nothing. I simply want to live my life without hindrances. I’m VERY middle class. We don’t even own a clothes dryer!!! How do you call that rich!
I’m going to send this article to my Congressman (Posey) He can add it to his arsenal in opposition of FATCA/ DATCA.
Treasury response to Posey (aka the official brush off):
http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Tax/us_tax_United_States_Treasury_03312011_061311.pdf
@bubblebutin,
“Competition for a race to the bottom”. “What is good for the goose is not good for the gander.” Assurance from the IRS bureaucrats that the US foreign depositors information is safe won’t calm their fears — there have been breaches? Treasury not willing to stand personally liable for breaches?”
What makes other countries think reciprocity agreements with the US in the form of FATCA IGAs will be honoured by the US?” What makes other countries think that private financal information of USPs ABroad being handed over on a platter to the US will be protected — that those USPs will be protected? The US Treasury Department will tell us they are not willing to stand personally liable for any such breaches? Why are we falling into line, one after the other like good little puppet countries of the US?
Is this not another form of Albert Einstein’s definition of Insanity: doing the same thing over and over again and expecting different results?
http://www.realclearpolitics.com/video/2011/12/19/barney_frank_wears_revealing_shirt_on_house_floor.html
Seems like Barney is finding himself
Great ammunition for letters to the Canadian and provincial Privacy Commissioners, as well as to our MPs, CCLA, CARP, etc.
Yet another recent US government report flags the continued IRS failures to secure our personal data, and the personal information of any non-US person (spouses, estates, employers, business partners, voluntary organizations) we hold joint accounts with, can co-sign on, or are forced to report on an FBAR, and under FATCA.
“………Until the IRS addresses security weaknesses, it will continue to put
the confidentiality, integrity, and availability of financial and
taxpayer information and employee safety at risk,” Mr. George said……………….” (J. Russell George, the Treasury Inspector General for Tax Administration.)
http://www.treasury.gov/tigta/press/press_tigta-2012-68.htm
http://www.tax-news.com/news/IRS_IT_Systems_Improve_But_Security_Risks_Remain____58651.html
…….”The report says IRS data integrity testing hasn’t provided sufficient
assurance that CADE 2 data is consistently accurate and complete. It
calls for stronger traceability controls on a database meant to become
the authoritative repository of taxpayer information.”……
http://gcn.com/blogs/pulse/2012/12/irs-modernization-could-expose-taxpayer-data.aspx
The story’s been run again with a fresh chance to comment:
https://now.mmedia.me/lb/en/commentaryanalysis/fatcas_security_problem
@bubblebustin.
Thanks for that alert. I posted a comment. It all ran together for some reason without spacing that I put in it. I hate that, but left it as is. Something better than nothing…
@just me
Welcome. I don’t see your comment there…
@bubblebustin.
I just refreshed the page, and I see it…
https://now.mmedia.me/lb/en/commentaryanalysis/fatcas_security_problem
With spaces, it was this…