Yesterday, the French newspaper, Les Echos (business/finance/economics), published an article about FATCA. The headline gives you a strong clue as to how they feel about it:
Banque : les Etats-Unis imposent leur loi à l’Europe
(Banking: The United-States imposes its law on Europe)
The tone is harsh and and the language is strong. Here are a few translations:
“Adopté aux Etats-Unis en 2010 après l’affaire UBS, le Foreign Account Tax Compliance Act (Fatca) traque littéralement tous les citoyens américains à travers le monde et exerce des moyens de pression si considérables sur les institutions financières.”
(Adopted in the United States in 2010 after the UBS affair, the Foreign Account Tax Compliance Act (Fatca) literally hunts down all the American citizens in the world and uses strong methods to pressure financial institutions…)
“Les banques de tous les pays se mettent en ordre de marche… forcée.”
(The banks in all countries are being set on a forced march.)
“La loi part du principe que tout citoyen américain ou entreprise du pays basé à l’étranger est un fraudeur fiscal potentiel.”
(The law starts with the principal that every American citizen or company based abroad is a potential tax evader.)
“Les banques devront grosso modo adapter leurs systèmes d’information et de reporting dans tous les pays où elles sont présentes afin de détecter leurs clients américains et toutes les opérations faites avec les Etats-Unis.”
(Banks must essentially adapt their information and reporting systems in every country where they are present in order to detect their American clients and all transactions with the United States.)
“En France, le chiffre de 500 millions d’euros de coûts supplémentaires a couru l’an dernier sans être confirmé officiellement.”
(In France the figure of 500 million euros in extra costs [to be compliant] was put out last year without being officially confirmed.)
They go on to quote the French bank La Société Générale which says it has no choice but to comply. They also mention German banks refusing service to their American clients. The agreement (the IGA) is mentioned and they say it is based on reciprocity and will be signed soon. I looked but could find nothing that says where France and the U.S. are in negotiations.
The article starts with a bang and ends with a whimper. My .02.
Have to wonder if one of the intents of FATCA is to make Americans living outside the homeland pariahs to either force them to renounce or “come home”.
There is so much resentment being fostered in ex-pats and in the lands where they live. What could possibly by the purpose for that?
@a As the main intent? I don’t think so. As a happy by-product? Oh yeah.
Citizenship used to be more conditional than it is today. Pretty damn hard to denationalize a US birthright citizen (a little easier to denaturalize a naturalized one) but that wasn’t always true. Marriage to a foreigner, living abroad, voting in a foreign country were all things that once could get you stripped of your citizenship faster than you can say “Emma Goldman.”
They can’t do that anymore. Supreme Court said it was a “no no.” From the tone of many comments I have received in nearly 20 years abroad there are many Americans in the homeland who think that was a big mistake. So if there is a way to once again make it conditional in a roundabout way, I think they would go for it in a heartbeat and the American public would support the effort. My .02.
Here is the official web site of the Societe Generale (in French), that describes how they’re going to handle US Persons accounts. They explicitly say that they’re going to close recalcitrants’ accounts in the last article.
http://www.sg-securities-services.com/fr/veille-reglementaire/fatca/qui-change-pour-les-clients/
http://www.sg-securities-services.com/fr/veille-reglementaire/fatca/les-actions-menees-par-sgss/
http://www.sg-securities-services.com/fr/veille-reglementaire/fatca/questionsreponses-fatca/
“S’il y a suffisamment de preuves établissant sa nationalité américaine, et qu’il ne fournit pas de dispense, ou s’il souhaite être prélevé, son compte devra être fermé”
“If there is enough evidence establishing his American citizenship, and that he does not sign a waiver, or if he wishes to be witheld, his account will be closed.”
@all
Here is the article translated into English by google.
FATCA tax law that will require banks to provide information to the IRS could cost 500 million euros to French banks.
“Complex”, “intrusive”, “disproportionate”, “bomb”. Critics abound on tax FATCA project. Little known to the general public, it is nevertheless one of the more structural tax changes for the global banking sector. Adopted
in the United States in 2010 after the UBS case, the Foreign Account
Tax Compliance Act (FATCA) literally chasing all U.S. citizens around
the world and exerts considerable leverage if financial institutions
none of they can not pass through its meshes. Applicable
to the original January 1 this year, the law had to be postponed by one
year by the Americans, because of the complexity of its implementation
as well as international negotiations it has provoked. Banks of all countries are in working order … forced.
Imposed by FATCA?
The law assumes that any American citizen or company in the country based abroad is a potential tax evader. She wants to list them all and make sure they do not commit any offense against the IRS. In
its original version, FATCA thus requires each financial institution in
more than 50 countries to sign a contract with the IRS (IRS), in which
it will engage under pain of severe penalties (see -cons)
to transmit all the information about its nationals from $ 50,000 of
assets or number of transfers or payments made by them to the United
States.
What impact on banks?
They are numerous and relate to asset management, private banking and investment banking priority. Banks
will have roughly adapt their information systems and reporting in all
countries where they are present to detect their U.S. customers and all
transactions made with the United States. With a major threat: if a subsidiary has not provided the information, it is the group that is found at fault. “These are heavy adaptations for all banks,” notes the compliance officer of a French bank. In France, the figure of 500 million euros in additional costs ran last year without being formally confirmed.
What concrete translation?
Société
Générale does not beat around the bush on its website to explain to
customers that it has no choice but to become “FATCA compliant.” She said that she would otherwise have to pay “damages major business and reputation.” In Germany, “some banks have decided not to serve U.S. customers in the future,” said the banking federation BdB. France,
Germany, Spain and Italy would be “close to reaching” a bilateral
agreement similar to that of Great Britain, based on reciprocity. It
also provides that banks do not communicate the information to the IRS,
but their national administration, in order to avoid being cantilevered
overhang vis-à-vis their own legislation on data protection and business.
Note
The United Kingdom, Denmark and Mexico have signed with the United States.
Réjane Reibaud, Les Echos
Thibault Madelin, Les Echos
Victoria, honestly, it wouldn’t bother me at all if marrying outside “the faith” or becoming a citizen somewhere else was an automatic boot. I am beyond tired of this and the assumption that somehow I must be doing something criminal just because I don’t choose to live there anymore. Being automatically stripped would be fine with me.
I was never a rah-rah America fcuk yeah person. The indoctrination didn’t take any better than the Catholic school thing did with me. But I never despised them before now.
I had my semi to annual meeting with my RBC bank advisor yesterday, and she advised me that the Canadian government is very close to signing an IGA with the United States…in fact it is pretty well a done deal (according to her information).
Also…to my surprise…RBC, (or possibly her opinion…she would not elaborate) states that a Canadian/US citizens who has relinquished there US citizenship may still be fingered by FATCA regardless if one produces a Certificate of Loss Nationality. This is due to the fact that they may satisfy one of the requirements of “US Indica” like being born in the United States.
I don’t believe this of course…don’t shoot the messenger.
Mach73 – I wouldn’t be surprised. FATCA pretty clearly states that it is US “persons” it is after, which is a very nicely undefined term that the USG can modify as they see fit. Dumping citizenship will end up meaning that you pay the exit tax and STILL end up having them be given access to all your finances anyway.
You can run away from the plantation, but it will always be your birthplace. Nothing like being branded.
*Mach 73 Your advisor clearly has no clue. The regulations clearly prevent the bank from ‘fingering’ someone who produces a CLN.
@Duke of Devon
I agree, that is why I didn’t believe a word she said. Seems instead of educating themselves and giving there clients (me) good solid information, they would rather jump to conclusions on conversations they heard at the water cooler.
In my line of work I have to keep on top of all the new regulations and operating procedures…it’s something that I have to do at home on my own time to maintain my professional edge. I find it hard to believe that these so called ‘financial’ advisors don’t do the same thing.
I was the one who told her about FATCA over a year ago…and gave her websites and information to get up to speed. It is obvious now it was a waste of time.
Maybe it is time for me to look for a new bank!
@Mach73
That’s why my lawyer advised me to give my CLN and personal information (such as a letter from him saying I am taxable NO FURTHER by the IRS – it’s amazing how many foreigners still believe in the old law where you were taxable a further 10 years after expatriating) to all banks where accounts were over a certain amount, on my own initiative. Sure, there’s always the fear the banks will still kick you out or hold you accountable as a US person. But this is the ongoing cost of having indicia one can’t get rid of – unless of course one becomes a citizen of a country whose passport doesn’t show birthplace (as in the Swiss passport I believe).
@Welllington,
Yes, I agree.
Has anyone looked closely at the UK IGA?…I would be interested to know if it contains a caveat that if one produces a CLN that they do not fall under the Fatca reporting requirement.
@mach73
Yes, the IGA does allow for CLNs. Excerpted from the text itself:
Other escape hatches include self-certification on W-8 or similar, and a “reasonable explanation” of why an account holder lacks a CLN or did not gain US citizenship at birth. No definition of “reasonable” of course, presumably so that the IRS can later redefine it to mean whatever they choose it to mean.
@mach73 @Duke of Devon,
I am not surprised that you would get that information out of your bank. The final regs on FATCA, as reported on a KPMG linkedin Group, are supposed to be out soon. They are now up to 500 pages. We will see whether or not this FCC insider knows what he is talking about, but given the complexity of the stupidity, and the likelihood that not every clerk or banker will go to their school or buy their consulting services to understand all the intricate nuances of the Regulations, and I pretty sure there is a LOT of room for misunderstanding and faulty reporting. In fact would be surprised if that is not the case.
So, CLN or No CLN, charter or no charter, I could certainly see your information being transmitted, if nothing else just due to misunderstanding or incompetency. I mean, as a group we all have some pretty good understanding of FATCA, but who amongst us has really read all the fine details and can say for certainty that we understand it correctly, so why would we expect different out of our Bankers? To error is human, and to really screw up, you just need a bureaucrat’s book of regulations as a guide.
It is going to be a nightmare of errant transmissions, so the FATCA Compliance Officer that the rules require better get an 800 number hotline, or maybe the sheep will just passively be shorn without ringing in bah bah or complaint of question
FATCA Sheep, the movie
http://isaacbrocksociety.ca/?attachment_id=15253
“It is going to be a nightmare of errant transmissions, so the FATCA Compliance Officer that the rules require better get an 800 number hotline ..”
@ Just Me
I think the FATCA Compliance Officer will need a good lawyer because if s/he sends an innocent to the IRS gallows there will be big time lawsuits in the making. Remember that data errantly transmitted cannot be retrieved or expunged with any certainty. There will be a whole new lawyer industrial complex primed to make money by representing non-US persons holding CLNs whose private financial details were wrongly handed over, either directly or indirectly, to the IRS. There is great potential for harm there, including detainment at a border crossing.
Good grief! Maybe this is the plan — making money from both sides — those in the compliance industry and those representing people harmed by the compliance industry. Makes my head spin even more than usual thinking about it. They say earth is a spaceship. I think it’s transporting too many psychopaths along with its billions of bah-bahs so I just want to don a spacesuit and drift away from this insanity.
@Just Me
I respectively disagree with this comment:
I mean, as a group we all have some pretty good understanding of FATCA, but who amongst us has really read all the fine details and can say for certainty that we understand it correctly, so why would we expect different out of our Bankers?
Because This is there job to know, and if they(Bankers) have been given a gag order from head office, or the information is not readily understood, then they should shut the frack up and stop talking as if they did there homework.
I almost think they delight in seeing us struggle to uphold our banking privacy!
Most of us have jumped into this legislation, and although we don’t have the full picture as of yet, at least we have a damn good working knowledge of what to expect.<
@mach73
I understand what you are saying, but maybe I am not making myself clear.
While I understand that in a perfect world, the BIG organization has a responsibility to have a subject matter expert and training processes in place to be sure that the middle management who are responsible for the “oning” process knows the requirements and limitations of FATCA and apply it properly.
However, I am talking about the realities of how that happens or fails, and why I am not surprised that it happens.
Think about some of these BIG multinational banks, operating under differing jurisdictions faced with the challenge of apply varying models of FATCA based upon IGA model I, IGA model II, or just plain ole PFFI model, then having to devise training programs to assure that ALL management, everywhere, gets it right using that 500 page rule book as a guide! Look at all the questions now surfacing in UK about how they are supposed to apply FATCA under the IGA, and the UK government is now having to come up with long explanations of what the IGA means for them. Perfect Compliance will be a daunting task.
I worked for a large Corporation as a Division Controller and experienced the difficulty of getting a bunch of operations managers spread across the nation to understand the newest or latest regulatory requirement. I was working when Sarbane Oxley legislation changed our business practices. I know first hand the difficulty of understanding it myself, and then getting our operations manager’s attention to new accounting practices. That was just a pain in the ass for then and distracting from their normal way of doing business. While I could empathize with them, the requirement didn’t change. I saw how difficult it was to get them apply the new processes with uniform consistency and required detail that we, back in corporate headquarters, were now demanding of them.
Again, the Corporation will certainly have a responsibility to train and implement, but how that will be done across many organizations will vary. There certainly will be failures. Some that training will be by simple memo. Some may call a meeting for a one way fire hose of information plus hand outs. Others might have an online training program, or actual training classes. It all depends on the culture of the Organization, how much it is willing to spend on training, and how much attention they pay to the details.
All I am saying is this: I would expect training failures and all kinds of mistakes to be made knowing how complex this law is. Even in a perfect world, where every manager of every bank went to the same KPMG workshop on how to screen properly for U.S. indices, someone will surely not understand it correctly. Even if every back office software programmer was applying perfect knowledge to their software solutions, someone is going to be asleep in class, or not attend due to a child’s illness, or lose their cheat sheet, or fail to use the computerized check list, or write a bad line of code. Mistakes will be made. Failures will happen. You will never get 100% understanding, application or adherence to the new policies you expect to be followed with something as complex as FATCA
So, for the 4th time. FAILURES WILL HAPPEN. It is the human condition. How much and how often, I don’t know, but I expect it. I have observed it, experienced it, and tried to get managers to pay attention to the latest greatest and most important new requirement out of Corporate headquarters. I have lived with the frustration of seeing the failure even with our best of efforts to help maintain their focus.
For recent examples, you only have to look at systemic failures of Banks in the US who were pencil whipping foreclosures in one office, probably because they thought it was ok, even though some in the corporation knew the correct process. In the field, probably due to some training failure, or lack of management oversight, something entirely different was happening.
Or how about the loan modification programs that Banks were supposed to follow before they foreclosed, and yet you had one office foreclosing while another office was processing the loan modification. Again, complex regulations that someone knew about, but the real understanding and coordination between departments with thousands of employees did not happen. Management failure, yes. The Banks get fined later, as they just did. However, the damage is done anyway, with little consolation on those that were foreclosed on.
So, like I originally said, it does not surprise me. If it can go wrong, it will! Expect it!
Gotta agree with Just Me here. Murphy’s Law and all that. Got me thinking though about CLN’s in a context other than the Canadian one. Will one’s contact in a French bank understand what a CLN is? Is this going to require lengthy explanations? Knowing how very often “the customer is wrong” plays out here will they take it without hassle? Not to mention that document will not be be acceptable as is since it is in English. Those CLN’s may have to be translated by a certified translator.
Even more room for error and misunderstanding when you are talking about countries far far away from the US with very different cultures not to mention the language barriers. How many FATCA compliance initiatives will be launched by Corp HQ and delivered in ENGLISH to the subsidiaries? I’ve seen it happen. Results were never too good but hey the folks back in the US or France were always proud to put their “achievement” in a powerpoint. “SOX training was successfully delivered to our subsidiary in Tokyo….”
I used to laugh and laugh when I read this stuff.
*The French are after reciprocity – they think they lose a lot more in revenue from French residents with American accounts than U.S. citizens with French accounts. I can’t imagine the US really granting this, because US banks have done zippo to detect such accounts, and the cost would be enormous. I say this as a French resident with an account in a US bank in the US (for those who are wondering, completely legit, since we report it to the French authorities, but I imagine many such accounts are not).
@dax, I think the French are right. I mean there are maybe a grand total of 100,000 US citizens in France. Most of them are strictly lower or middle-income.
But on the US side there are all kinds of French citizens who have built businesses in places like Silicon Valley. I saw somewhere in an article about this that there are a lot of French who have done very well in the US. I don’t know too many Americans in France who can say the same – that they “struck it rich” in France – though some have done very well for themselves.
I think the US would be a real loser if real reciprocity were applied here.
*@Victoria: I’m not even thinking of French citizens who reside in the US. Since France uses a resident-based taxation system, French citizens who reside in the US are not taxable for US accounts. On the other hand, there are undoubtedly many French citizens in France who have U.S. accounts or investments, which should be taxable in France but are not, because the citizens haven’t declared the accounts to the French revenue service. Any reciprocity agreement should see US banks turning over information on these accounts to the French, and that, I think, is about as likely as finding a snowball in Hell. The US just won’t do it; it’s far too costly to its banks.
The US trade balance is huge and increasing. The US is treating every US-person and business as tax-evader and IRS hunting down by using laws meant to find terrorists and drug-traffickers. The small business and dual-citizens can fuel the export growth. The big businesses exporters like Google, Entertainment-industry (Hollywood) or Microsoft have resources to exploit (or even create by lobbying) loopholes. Many hi-tech businesses can manage arms-distance relationships to sell their goods to local partners. But real growth only can come from non-tech industry and services, which needs people on the ground. Going after them by using laws meant for terrorists and drug-traffickers causes irreparable damage to exports and jobs in the USA. Some fools may use excuse that they are going after billionaire tax cheats, if that is right, no attempt ever made to provide guidelines for not-rich dual-citizens (who don’t owe any taxes). It is only hurting honest law abiding dual-citizens (who wants to become compliant), because the IRS can’t prosecute dual-citizens in their country of residency. The IRS must offer a simplified process for middle class dual-citizens in good faith, if they don’t want to decimate US exports.
@Victoria / dax
Shouldn’t the EU unite on this FATCA war and tell the US that they might contemplate to sign an IGA with US if and only if the reciprocity issue is 100% congruent and if it were not that the EU would impose a 30% witholding tax?
I think that would postpone FATCA for a while 🙂
@Uncle Tell: The fact is that the USA could never reciprocate (although the US don’t admit) and report on the accounts of foreign nationals. So if any country insists on simultaneous reciprocation, the FATCA will die (although the IRS don’t admit until most forget about it).
@Bharat
“…… no attempt ever made to provide guidelines for not-rich dual-citizens (who don’t owe any taxes). ….”
I’m not so sure how long there will be any “not-rich-dual-cititens (who don’t owe any taxes) left due to the 3.8% Medicare Tax that started this year. If I’ve read this correctly then a married US Person who files his return separately and has an AGI over 125k USD is subjected to this tax on his un-earned icome. Since the US AGI includes my Swiss SS payments, my obligatory Swiss Pension fund payments and the payments that my employer contributes, then take into account that the $ hasn’t been going any where but down lately compared to the CH Franc, I might have to pay the Medicare Tax to the US. As I undestand it so far you can’t use either the FEIE or the Foreign Tax Credit to offset this tax and with 125k USD you are by no means RICH here in Switzerland 🙁
@Dax, Victoria, that is interesting. I didn’t think there were actually that many French RESIDENTS with accounts in the US. Which category are you thinking of?
Entrepreneurs how started a company here, then returned? Investors who bought property and collect rent? We’re definitely not talking even higher middle class. Not taking into account all IT and company expats, I doubt the number of these wealthy people is higher than the number of Americans expats in France, but again, I have no clue.
Plus there is the “issue” of accessing the funds. Bank wires as well as credit card transactions come with crazy high fees. It’s not money you want to touch or access frequently, unless you travel there and use it locally, unless the amount is high enough that you don’t care. My point is that it is just not convenient, to have a bank account 5000 miles away, unless you travel much and use it locally, or use it to really evade taxes. That’s my naive view.
FATCA reporting does not differentiate between residents and non-residents. That might be the biggest problem. If they were to add that to the law, then a lot less people would be against it, as it would be clear that it would target more people who have a bigger chance of evading taxes.