A reader of Isaac Brock sent me the following letter:
Dear CBA:
It’s time for your organization to start standing up for your customers on this issue. You can do much more than encourage the Government to sign onto an egregious foreign governments demand (IGA) to throw Canadian sovereignty out the window to simply protect your members bottom lines.
There comes a time when every person and or organization has to take a principled stand and now is that time for your organization. When the government of Canada says no to signing onto an IGA, which would be tantamount to political suicide, it’s going to land squarely in your court. Are you going to compromise the rights of your loyal customers to respond to what amounts to IRS extortion? Do you think your members and shareholders would support a strong, principled, well funded resistance? Absolutely, once they know the facts. Get the facts out there. Spend some of our money edifying people on this issue. Use the press, use your members resources like the annual rational for increasing fee structures.
It is what it is: The school yard bully wants your lunch money. How do we instruct our kids to handle bully’s? Bully’s don’t expect a fight. It’s time you guys gave them one. It’s time you guys gave something meaningful back to your loyal customers and helped the government of Canada on this issue. Stand up and show some courage and initiative.
I’ll be the first one in line to sign onto a class action if any of my banks ask me where I was born. I’m a Canadian ….end of story.
Sincerely,
[Name withheld by request]
@Canadian Bankers Association
While we are aware of your activities regarding FATCA, I’m sure many here feel that the your efforts lobbying against FATCA pales in relation to the resources spent in compliance.
Recently, I was able to listen to an information session on FATCA given by another Canadian financial industry organisation, with whom you share many members. The amount of time discussing the customer was extremely minimal. The focus was entirely on the nuts and bolts of compliance.
The CBA and its related associations have the financial clout and contacts to really make a difference on this issue.
You have failed.
The most important response is to find a way to Place your investments elsewhere. And to encourage as many people as possible to do likewise. Indeed there are many options. Most of the people that have noticed that they are affected are those that are nearing retirement age and have saved appropriately in their local banks. This shows now to be an unattractive investment. Other options should be investigated and implemented when something more attractive is found.
One million USD of investment is a baseline for a person at retirement age–whatever up or down from that relates to situation. All persons should move those assets appropriately to their situation.
Actually, encouragement isn’t necessary—-the transition will occur by itself.
Personally, most of my actions have already been taken according to the stance that I know my countries have and the stance of my bank. I am near to retirement feasibility. I know that the countries and banks involved have not benefited from my decisions as I have acted in my own interest.
It’s important to take actions prior to being enslaved by government restrictive actions.
CBA is the organization that has the most to lose in the World–with the highest population of US persons. CBA’s actions will have consequences. Excuses mean nothing in a financial market.
@Canadianbankersassociation
@All
Everyone is obsessed with FATCA regulations and IGAs to the extent that nobody even remembers what FATCA as written says. The enabling legislation is very short and very simple. It is Chapter 4 and sections 1471 – 1474 of the Internal Revenue Code.
Here is S. 1471:
Note that “United States person” is never defined in the legislation making it clear that the definition can and will be expanded subject to the whims of the U.S. There are of course free to make all the world “United States persons” for tax purposes.
Commentary: Noting that “Secretary” means IRS and “United States person” is anybody or anything that the U.S. either now or in the future deems a United States person, what this really says is:
If the Canadian banks do NOT exactly what they are told to do: today, tomorrow and at any point in the future by the IRS commissioner, in relation to anybody or thing that the U.S. deems to be a United States person today, tomorrow or in the future, 30% of any payment in U.S. dollars is to be confiscated by the payee to that financial institution.
That all it says and that’s exactly why the world needs to come together and resist this insanity. There is a reason that FATCA has been called the “neutron bomb of the financial system”. For a country to comply with FATCA is to surrender the country to the IRS. Once the surrender is complete – which is exactly what the Canadian banks are lobbying for – it will almost impossible to resist FATCA.
Furthermore, for those who believe that the consequences of the surrender won’t matter much. Consider this:
The effect of FATCA will be to turn an ever increasing share of Canada’s GNP over to the IRS. This is because U.S. tax laws operate in opposition to Canada’s tax laws. (Simple example of many: tax free principal residence vs. taxable principal residence).
Any kind of co-operation with the United States on FATCA reminds me of a German play written in the 50s called:
Biedermann und die Brandstifter)
http://en.wikipedia.org/wiki/The_Fire_Raisers_%28play%29
Funny I had forgotten about this play since reading it many years ago. Do you see any similarities between the description and the FATCA decision?
With what appears to be a capitulation by CBA to this US law called FATCA I have come to the conclusion that perhaps eventually the only safe place to keep honestly earned, completely taxed in Canada, money is ANYWHERE BUT A BANK. In actuality, banks are not all that interested in deposits anyway. It is making loans of money that they create out of nothing that produces their “profits”. That’s why loans are called assets or credits by banks. Making loans, playing the game of “investments” and pleasing their own stock holders are the primary focus of banks, NOT providing safe storage for their customers’ savings. At this point, all I can feel grateful for is the fact that we do not have any bank loans and unless the Canadian government gets very desperate and allows banks to, without warning, “Cyprus” Canadian savings we should be able to extract our bank deposits in a relatively short period of time … if we have to, I guess. Everyone will have to come up with their own “sauve qui peut” strategy of course.
My newly Canadianized, soon (we hope) to be de-Americanized, husband opened an account recently at one of the big five banks. First reason — curiosity. He wanted to know if they would ask any citizenship questions. Good news — no questions asked. The second reason — possible future protest. If the banks continue to play the FATCA game then my husband wants to be able to walk into that bank in a hissy-fit and transfer his money to a Credit Union or simply withdraw it as a personal protest. Before this, neither of us had anything in anything other than a Credit Union and a provincial “bank”. This probably sounds like we are being perverse … and we are.
@Em, It’s only perverse until everyone starts doing it.
@CBA
I’d like to be able to say that CBA is doing the right thing about FATCA and an IGA, but they are not. One seriously has to wonder on what assumptions they are basing their strategy.
Consider this absurdity:
“Unfortunately and despite worldwide efforts, U.S. officials have no intention of repealing FATCA.”
First off, the US is not a parliamentary system. “U.S. officials” at IRS and Treasury have nothing to do with repealing FATCA or any other law. Nonetheless, “We also went to Washington to meet with IRS and U.S. Treasury officials and Canadian Embassy officials. Last year, the CBA also made a presentation in Washington at public hearings before Treasury and the IRS . . . ” – worse than useless.
Second, no mention is made of Congress, though I understand CBA has made some efforts to convince Senators and Congressmen of Canadian banks’ concerns – also pretty much useless, since U.S. legislators understandably care about their own constituents, not foreign banks’ headaches (even if they are caused by a U.S. law).
Third, not only do such efforts by CBA not qualify as any kind of strategy to try to effect FATCA’s repeal, there certainly hasn’t been any “worldwide effort” to that end.
CBA is working on the assumption that having failed to achieve a goal that hasn’t even been attempted (repeal, through a strategic and professional Washington-based effort) there is no other choice – in the face of FATCA’s supposed inevitability – than pushing Ottawa to sign an IGA.
But even Treasury admits that they can’t compel FATCA enforcement without IGAs. (From the April 2013 FY14 Budget request: “In many cases, foreign law would prevent foreign financial institutions from complying with the FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 by reporting to the IRS information about U.S. accounts. Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by FATCA to the IRS.”) This impediment applies to Canada. Without an IGA, Canadian banks can’t legally comply with FATCA, which would leave Treasury with the choice of declaring economic war on our biggest trading partner (they won’t) or backing down (they will). CBA’s advocacy of an IGA seeks to relieve Treasury of the dilemma – and save FATCA. Inevitable becomes a self-fulfilling prophecy.
As for the notion that an IGA can ameliorate FATCA’s violation of Canada’s sovereignty and abrogation of Canadians’ rights, that doesn’t even deserve a response. Suffice it to say that the IGA text on offer is essentially set in stone, with only marginal changes permitted. Some “negotiations.”
The worst of it is that this is all so unnecessary. Treasury’s IGA strategy is on the ropes. They desperately need an IGA with Canada to save FATCA. Even now, CBA (and IIAC) could stop counterproductively trying to get an IGA signed and instead throw their considerable weight and resources into working for FATCA’s repeal. To once again beat a dead horse, I have never yet seen a law so vulnerable to a lobbying and media push, but which continues to stumble forward only because those who stand to save the most if it goes down are instead working to save it.
@James Jatras
Bravo, thanks for weighing in. The CBA doesn’t seem to want to do what it takes for some reason. I’m afraid that those who run the banking industry in Canada today aren’t made of the same stuff of those who built it.
@CBA
Pay attention to James Jatras. You have really done NOTHING to help repeal FATCA. Are you so eager to sign up to an IGA because you are that meekly compliant with anything America wants?
You don’t get changes out of these guys (the FATCAnatics) by meeting with them in Washington where they graciously grant you a hearing for your petty little complaints. You send them solicitous letters begging their reconsideration and really expect that they will listen? Are you that naive? You need a good professional lobbying and marketing effort. You might be smart about banking, but you are showing your total ineptitude on how to influence change in DC.
If you had spent a small percentage of what you have already wasted on FATCA compliance efforts, this effort would be much farther down the road to repeal. There has NOT, in spite of what you say, been a world wide effort to repeal FATCA. Frankly, you don’t need a world wide effort, you need some strategic money professionally spent in DC.
@ CBA
Listen to Jim Jatras and Just Me.
The simple fact of the matter is that the banks are too gutless to do the following two things:
a) remove any sort of investment from the United States; thereby ensuring that the United States sinks financially.
b) tell the United States to go “pound sand”.
Add to that a gutless Canadian Prime Minister who thinks nothing of bending over for the United States and this is what we end up with. The CBA rolling over and Harper who wants to sell Canada down the river to the United States.
What the hell happened to Canadian pride? And the majority of Canadians are such lemmings that they’ll let it happen. The only ones who are really truly awake are on IBS.
We would like to address some of the comments made in this forum. We agree with your opposition to FATCA as we have said all along. We have raised those concerns on numerous occasions with the U.S. Treasury, the IRS and other U.S. officials in both public and private meetings. We have raised those concerns with the Canadian government and the Canadian embassy in Washington in public and private meetings. We are opposed to the extraterritoriality of FATCA as you are and we have said so publicly on many occasions.
However, the reality is we are past the point of whether Canadian financial institutions can choose to comply with FATCA or not. The U.S. government is not going to repeal FATCA and the Canadian government is negotiating an IGA with the U.S. According to public statements made by Finance Minister Jim Flaherty, the final IGA is coming soon, and once finalized, its requirements will be reflected in Canadian tax law. Canadian financial institutions will then be required to comply with whatever those requirements end up being under Canadian law.
We have made our concerns about FATCA known to the Canadian government, but it is now up to them to negotiate an IGA that will hopefully address your concerns and ours and balance out Canadian law and rights with the requirements of FATCA. We have no control over the negotiations or the content of the IGA and neither do the banks or other financial institutions.
To address some of @LynneBlaze’s points raised here and on Twitter, the financial services industry has not capitulated and we are not enthusiastic about an IGA. Our concerns about FATCA have not changed but the reality is that an IGA is coming.
You have also asked if banks and other financial institutions will ask all customers where they were born and what would give them the legal authority to do so. The requirements are unclear right now but we are expecting the details to be outlined in the IGA.
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@CBA
I’ll cut to the chase. Why haven’t you used a DC lobbying firm to at least TRY to repeal FATCA?
Adding to Bubblebustin comment, why haven’t you used a fraction of the resources you have put into complying with FATCA into resisting it.
When your opinion piece was not published in Washington Post or Wall Street Journal, why didn’t you run it as a paid ad instead?
Most importantly, why haven’t you found a way of reaching out to and working with your customers who are most directly affected by FATCA?
Sorry, anything Canadian banks are saying now is ringing hollow with me (and I think with others). The fact you are now advocating for an IGA to violate our rights says it all.
I have recently transferred a significant portion of my assets out of my bank, where I have been a customer for 32 years. When my branch manager asked why I said “I don’t trust you not to FATCA me.”
More will be transferred when it comes up for renewal.
@The Canadian Bankers Association
Your “have to comply” message is very discouraging to hear,
Have you spent 1 dollar in lobbying efforts with a professional organization on K Street who knows how to undo these things?
If the answer is no, then with all due respect, you have done nothing.
All your talking to “officials” has obviously gotten you no where, but you seem not to understand what is required to turn back bad or modify bad legislation in America. Hell, Treasury doesn’t even listen to SIFMA, so why would they pay attention to your petty little complaints. Don’t you understand the arrogance and hubris of the folks you are pleading with?
Change strategy before you just betray your customers for your 30 silver coins.
@CBA
I appreciate the fact that Canadian banks have to follow a critical path in order to not be caught by withholding. I have found that at least one bank (Scotiabank) has already spent several months and probably significant money implementing FATCA with the FATCA Trac Program, but the future costs and risks of FATCA will be ongoing making these initial implementation costs relatively insignificant in the long run. Why not a simultaneous effort to repeal FATCA? It’s already on life support (ironically, thanks to IGA’s).
The solution is simple. Stop doing business with the US, and Canadian banks. Despite my handy CLN, clearing up my pesky accidental US person status, my family will be withdrawing completely from the big Canadian banks, if an IGA is signed. If that requires a safe in my home, so be it. I’m sure the banking fees from the first year alone will more than cover the expense of a safe, without even going into the vast amounts of interest paid out to banks each year.
It’s obvious to me that CBA doesn’t have the will or the know-how to fight the US FATCA. They must have weighed the cost of a true lobbying campaign as Jim Jatras proposed right from the beginning, against the cost of capitulation. Frankly I think capitulation will end up being many times more costly than that campaign would have been but that was their choice. I guess since they will be passing along ALL of their compliance costs to either their specifically burdensome US connected customers or, more likely, ALL of their customers. They can pass along the costs but how will they ever regain the trust they will lose? I never thought my retirement money would be a problem to those I trusted with its safe-keeping but I’m fully prepared to undertake the safe-keeping myself and remove the problem from their ledger sheets. I don’t trust them either, Blaze.
@Em
In the long run it will cost them more, as banks will no longer be seen by ALL customers as a safe place to keep your money. The fact that there will be errors in withholding will only compound this perception.
I know the Scots built the Canadian banking industry in Canada, but now’s not the time to live up to their worst stereotype.
@Jim Jatras ends his comment with:
Through its comments on this thread the CBA proves that it is playing the major role in ensuring the implementation of FATCA. I wouldn’t believe a single one of their claims to the contrary.
Fact:
IGAs are for the benefit of the banks.
Fact:
IGAs ensure that (as the CBA states in this thread) that they will be following Canadian law rather than U.S. law in passing customer information to the IRS.
Fact:
If the banks are following Canadian laws it will be harder for the public to challenge them for being in violation of Human Rights Codes.
Fact:
IGAs ensure that ALL banks must play by the same rules insulating the banks from a financial institution that might attempt to be FATCA free.
Fact:
People are forced to have bank accounts. Therefore the compliance costs can be simply passed on to the public.
Fact:
As Jim Jatras suggests and the CBA in its comments confirm:
The banks have done NOTHING to attempt the repeal of FATCA.
Fact:
IGAs are NOT contemplated by the enabling FATCA legislation. FATCA and the IGAs are factually, logically and contextually independent of each other. Therefore, the CBA can and should be working for the repeal of FATCA whether an IGA is signed or not.
Fact:
As Peter Hogg and other constitutional lawyers have argued, a FATCA IGA may well violate the Charter of Rights. If the IGA is struck down and the banks continue (without a Canadian law to follow) they will be in violation of various provincial human rights codes. My point is that the banks have every incentive to work for the repeal of FATCA with or without an IGA.
Inference from these facts:
The Canadian banks are attempting to find a way to obey their IRS Overlords and cut the public loose. Why would they do this? Because, as I said in the first comment to this thread:
It helps the Canadian banks to hurt the Canadian public.
But, what else is new?
As Jim Jatras said, the CBA is behaving in a way that makes FATCA a self fulfilling prophecy.
@Em: Whatever happens, I will never again trust my bank. They are like a cheating spouse sneaking around behind my back planning an illicit affair with an abuser who is stalking and threatening me.
Mty bank and CBA are just trying to figure out a way to betray us with the abuser without getting hurt themselves.
@All, This is a very interesting dialogue. It boggles my mind, how the CBA cannot see that even though it thinks it is operating in its best interests by viewing an IGA as the least worst scenario; it is in fact the worst scenario for the banks. All hell is going to break loose when/if an IGA is signed, and it will be bad news for the banks as well as the customers. The mindset that FATCA is a done deal, is getting tiresome to hear, and is totally untrue. WAKE UP CBA!
Personally, I am in the process of slowly moving my funds out of one of the big 5 banks, and into a couple of credit unions. Whether I get a CLN or not, I will never go back to a big 5 bank as I have lost all respect, UNLESS they do an about turn, and start putting their money where their mouth is and actually make a REAL ATTEMPT at repealing FATCA. It’s NOT too late!
to CBA: Who is your FFI responsible person? How much do you pay him? What is it worth, 3 years in a US jail?
http://www.linkedin.com/redirect?url=http%3A%2F%2Fwww%2Efsitaxposts%2Ecom%2F2012%2F09%2F03%2Ffaq-responsible-officer-certifications-fatca%2F&urlhash=lvKt&_t=tracking_disc
Any person who willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; shall be guilty of a felony and, upon conviction thereof:
◾Shall be imprisoned not more than 3 years;
◾Or fined not more than $250,000 for individuals ($500,000 for corporations);
◾Or both, together with cost of prosecution
@Dear CBA,
Most of the 600-700 estimated ‘US persons’ in Canada, along with their directly affected spouses and children, never mind their extended family and friends, have never heard of FATCA. If you think their is a backlash now, just wait until an IGA is signed!