It was Mark Twain who first mentioned the Responsible Officer (RO) liability issue to me a few weeks ago. It is one of the more obscure questions about the FATCA compliance that I hadn’t fully considered or focused any attention on. From my reading, this problem is becoming more and more apparent.
The Responsible Officers’ will carry the brunt of the FATCA compliance burden and risk
As far as I know, this FATCA fact has not been brought to the Canadian Bankers Association (CBA) attention in a way that might give them pause about their rush to compliance capitulation.
Brocker communication with the CBA has centered, rightly so, on how FATCA violates Charter rights, with or without an IGA.
In response, the CBA have feigned shared privacy and Charter concerns, while their back room lobbying and public statements show that they probably are more worried about getting that exemption from 30% withholding which the IGA promises, then they are concerned about any rights that might be violated. It trumps everything for them! They will eagerly take the 30 pieces of silver to hand ‘U.S. Persons’ over, if the Canadian government gives them an easy path, without thinking too much about their future liability risks!
Should we re-direct their attention to this issue?
Maybe we should point to the fact that some poor sod amongst their executive ranks, the Responsible Officer, is going to be personally liable for their FATCA compliance. Could this be an important arrow in our opposition quiver, so far not used? Time to strike a little fear in the hearts of those who just want to comply, comply, comply…?
“Hey! Listen up all you CBA Responsible Officers! You are personally on the FATCA hook! Are you paid enough for the liability you have signed up for?”
I am now seeing some questioning and discussion amongst the FATCA Compliance Complex (FCC) types on several linkedin FATCA threads. The questions indicates to me that the light is just turning on, with “Oh S#@%!, we aren’t personally responsible are we?”
There have been a couple other posts recently, when combined with the newest Treasury 50 page Fatwa II “Next Steps”, we could be using to spread a little fear in the hearts of the financial institution (FI) executives who are just meekly entering the FATCA Portal of Mordor, or lobbying for their IGA bailout.
They will NOT be bailed out from personal liability!
Just as the NSA uses 9/11 and terrorist fears to justify whatever-the-hell spying they want to do, let’s use this issue to our advantage.
Here is the blog that I have mentioned previously on the FATCA Question thread that deals with it fairly clearly.
MYTH #6: “THE INTER GOVERNMENTAL AGREEMENTS (IGAS) HAVE SIMPLIFIED FATCA”
You wouldn’t know it from the Myth title, but in the blog UK author Haydon Perryman makes this important point:
To top it all off, when you look at form 8957 you can see that the RO is signing up to personal liability under penalties of perjury; the form makes no reference to exceptions for IGAs.
This can lead to the RO wondering what the heck she or he is signing up to.
This leaves many banks pursuing the most draconian interpretation of the combination of the US [544 pages of Regs] and IGA versions of FATCA.
This is hardly a helpful simplification. It is however, a totally understandable position for Financial Institutions to take as part of their FATCA policy.
additionally he goes on to say… (speaking of cross jurisdictional FFIs)
The deadline for portal registration of April 25, 2014 (in order to be on the IRS list of June 2, 2014) has a few prerequisites, not least of which is that the RO is identified and named.
What RO would be content to accept that they are not personally liable for the institution’s FATCA Programme in IGA countries when, at the same time, the IRS portal makes no such distinction?
Also, of what practical use is not being personally liable in IGA countries, when the same individual is personally liable in [non] IGA countries? This is not much of a consolation, especially when you consider that the non-IGA jurisdictions have far more pressing regulatory deadlines that are already extremely tough to meet.
and then there is this from the guys that love FATCA… The Association of Certified Financial Crime Specialist
New US Treasury-IRS FATCA ‘Notice’ puts FFI compliance onus and risk on ‘Responsible Officers’
If financial crime compliance professionals think that becoming the FATCA Responsible Officer (RO) at their non-US financial institution is an easy way to a career boost, they should read the latest “Notice” from the US Treasury Department-Internal Revenue Service. They will see there is nothing easy about the job they aspire to. The Notice also included a draft agreement the foreign financial institutions (FFIs) would be required to sign.
So, it seems to me, that along with connecting our FATCA privacy concerns with the NSA spying scandal, (FATCA is just another back door access for them) I think we should also target the personal liability angle of those compliance mongering banking executives that pressure the Canadian government to sign an IGA.
I am not above spreading this fear message as necessary. I have been schooled by the masters, the IRS. 🙂
Yup. Again, I take less credit. It was some poor Little FATCA compliance jockey on Lunked in who brought it up, and it just takes a Little gasoline to help put out the flames.
I think a little flyer like this would be a wonderful hand-out for our demo at that November 13-14 meeting of FFI types in Toronto!
I’ll pass this suggestion along by private email to the organizers of that event, just to make sure this doesn’t get overlooked.
As Mark Twain says, nothing like a jerrycan of petrol to help put out the fire …
@Just Me, Mark Twain, Schubert1975
I just settled down in my computer chair after laundry and baking and find that there is an incredible amount of reading to do. I shall read these sites and get back to all.
I remember BF (Before FATCA) I would be painting, reading, or visiting with my friends. I am now busy with reading and being on the computer. I don’t resent it but I do resent FATCA for putting a change of path in my life.
“We serve as FATCA Responsible Officers (FROs) and can confirm that the risk is clearly personal whether Model 1 or Model 2 as registration is directly with the IRS in either case. We have found much misunderstanding on this point as some still believe that IGA 1 mitigates the personal liability risk. IGA 1 only makes subsequent reporting easier to the local tax authority. The only way to mitigate the personal liability risk is through the conscientious performance of the FRO who must, according to the IRS, be a bonafide director or officer of the FFI. ”
From a Compliance Jockey on the Lunked In page
I would think that finding RO’s wouldn’t be any more difficult than finding people to clean up Fukushima. Some people will do anything for the right amount of compensation.
Duh, the comment from Another Compliance Jockey
“I wonder what kind of legal repercussions a submission in a foreign country can have. This responsibility is not included in the foreign legislation and I am not sure how the US can enforce it.”
(These are people whose jobs are dependent upon the extraterritorial application of US law). Unfortunately I was a Little too slow in a comeback (I had a tough time surviving my fraternity house—too slow on the comebacks). So, I gave them this:
FATCA is an extra-territorial application of tax law. For criminal law (including criminal tax law), your US-trained lawyer might consider US person in the same sense that the Foreign Corrupt Practices act is applied. The standard case in the first International Contract Law class is Siemens.
” Siemens AG was subject to prosecution in the U.S. because it sold securities within the United States. But the three Siemens subsidiaries are foreign companies, headquartered in other nations. The subsidiaries’ only connections with the U.S. were meetings held in the U.S. in which improper payments were discussed and U.S. bank accounts used to facilitate improper payments. The DOJ determined that these rather tenuous connections constituted actions within the U.S. that furthered bribes in other nations, warranting prosecution of the foreign companies. This case makes clear that if a company performs an action – even a minor one – within the U.S., and that action furthers corruption outside the U.S., the company is risking FCPA prosecutions.”
The internet only gives examples, but here is where the above quote was taken from.
Siemens is only one example. There are usually 3 such cases studied in the first law course. Certainly, if you hire an US lawyer specializing in International applications of US law, you can receive more case examples, and also a discussion of how it might apply to FATCA applications.
“US person” may or may not have different meanings in the context of taxation or criminal law. Each country will have different policies as to extradition or enforcement of US criminal or US criminal tax law. Perhaps you may need to consult both a US international tax lawyer and a US international criminal lawyer to fully understand your risks.
And then a Little of this (gasoline, to keep the home fires burning):
Daimler AG has also been declared a US person. There are more examples, its just that my book from law school is somewhere else right now and that Im not a lawyer. Daimler has a difficult time of not exposing itself to collections.
I would think this is a very good attachment to the RO flyer.What does everyone think?
Good post. Interesting how these U.S. extraterritorial laws attempt to impose liability on various third parties. I was thinking about this problem in relation to lawyers counseling “U.S. person” clients. Could be very very dangerous. What about the liability of a lawyer and the FBAR Marriage?
The phrase spoken during nuptials: “Therefore if any man can shew any just cause, why they may not lawfully be joined together, let him now speak or else hereafter for ever hold his peace” will be repurposed in a post-FATCA world.
Mama, don’t let your babies grow up to marry mercuns.
I think I will do that
In a Post FATCA world these words of wisdom will be given: ..
Mama, don’t let your babies grow up to marry Americans.
…”An RO subscribing to a falsified document or making a fraudulent statement should, however, still be concerned with the tax crime of submitting false documents under section 7207. These cases typically involve false, altered or fictitious documents presented by taxpayers under audit in response to requests for substantiation of claimed itemized deductions or other deductions or credits on the return; however, section 7207 can apply more broadly…..
Interesting. Swiss bankers can’t even leave Switzerland. One was arrested in Italy on behalf of the United States. So now all the Canadian bankers are on the hook.
Well a Nazi analogy has just come to mind. But I won’t mention it since it would probably cause a firestorm of controversy.
Good luck with them all in moving up in their banking careers. How many of us would touch that job opportunity?
The price of an RO in AT:
EUR 66.000,- annual gross salary incl. overtime – additional payment according to skills and experience
And here a nice education:
at 65 minutes, the moderator states that not providing proof of local birth when opening an account is grounds for becoming recalcitrant. In most countries (same as USA), this means that any normal identification method using normal id such as drivers license or national id card is grounds for being recalcitrant.
I assume in theory recalcitrant accounts can be retrieved as a legitimatised form of fishing expeditions?
FATCA: How to Reduce Ops Risk
This update from a Linkedin posting…
IRS confirms limited RO role for FFIs in IGA Model 1 countries
Project manager FATCA/EMIR/DFA bij Rabobank
Half a year ago I started a discussion on this forum under the heading “Responsible Officer role in FFI registration process IGA Model 1 countries”. My statement was that in IGA 1, FATCA is a national authorities affair, no relationship to the IRS. The RO role was strictly limited to the administrative action to obtain a GIIN. However, the text in the IRS Registration Portal still left room for (a lot of) doubt about wider responsibilities for IGA 1 country ROs. In a newly published Frequently Asked Question (FAQ), Q6e in the group Responsible Officers and Points of Contact. The IRS now confirmed the limited reach of the RO role in IGA 1 countries: “(…) has limited applicability to FIs treated as reporting Model 1 FFIs because the FI does not have ongoing FATCA compliance obligations directly with the IRS. Instead, the compliance and reporting obligations of an FI treated as a reporting Model 1 FFI are to its local authority.”.
Read all FAQs here: http://www.irs.gov/Businesses/Corporations/Frequently-Asked-Questions-FAQs-FATCA–Compliance-Legal#Responsible.