Although both the US government and the Canadian government seem to believe that little can go wrong if and when Canadian financial institutions begin reporting on the banking and investment accounts of all deemed “US Persons for taxable purposes” in Canada. The draconian penalties assessed by the United States for even the smallest mistake is reason enough to believe that Canadian financial institutions are likely to err on the side of extreme, and even paranoid, caution.
A good example of what could happen can be found in a recent report Canada’s Privacy Commissioner issued about another agency in Canada tasked with the job of keeping an eye on suspicious activity in the banking sector.
The federal agency responsible for monitoring financial institutions for evidence of nefarious activity is still collecting and keeping personal information it should not have, even though it was warned to stop gathering such data four years ago, the federal privacy commissioner says.
A new audit of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) — the department responsible for monitoring consumer bank accounts across Canada for signs of terrorist fundraising or fraud — has found information is collected and kept seemingly without reason.
Despite having been told four years ago to cease and desist, FINTRAC is still amassing, and saving, information about the banking transactions of ordinary Canadians to the tune of 165 million files and counting.
More than 300,000 organizations and government departments, including all of the major Canadian banks, report suspicious activity to FINTRAC. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act contains severe penalties for organizations that fail to report suspicious monetary activity. As a result, organizations send far too much information about trivial matters and activity that is in no way suspicious, Bernier said. They also send personal data, such as social insurance information, that isn’t required.
While the US seeks to assure countries with whom it is currently attempting to negotiate IGA’s for FATCA implementation in 2014, the more likely scenario of a FATCA regime is over-reporting and over-identifying of possible “US Persons” rather than the simple double-check on the earned income of Americans living overseas to prevent “tax evasion”.
FATCA is just as likely to become the recipient of massive amounts of personal data – some of which it isn’t even looking for – that will be kept indefinitely for purposes yet to be named.