The Inter-Governental Agreement between Canada and the United States (IGA), which will implement FATCA regulations in Canada, is sufficiently complex that it will take some time before Canadians come to grips with what rights our government has traded away and what safeguards are in place to protect, hopefully, the majority of us. While I am completely against the CRA trading the private banking account information of Canadian residents and citizens with the hostile government to our south run by President Obama and his band of merry thieves, who steal from the poor to give to the rich, I do believe that the vast majority of Canadian residents can protect themselves. We now have not only to navigate the treacherous waters of IRS threatening to fine us at multiples of our total financial wealth (up to 380%), we must also know how to deal with bank’s inquisition which will begin to question all Canadians: “Are you or have you ever been a US person?”
This means that the Canadian government has left hapless citizens to know how to protect themselves. We must all be bad asses–Clint Eastwoods–with a “Go ahead and make my day” attitude not just in the face of the IRS, the US tax compliance industry in Canada, and US border guards, but also now, with the sanction of the Tory government, in the face of the inquisition that is taking place at our banks. Under no circumstances do Canadians want their banks to believe that they are US persons, because at that point, the bank will be obligated by this unlawful law (i.e., IGA) to betray their bank account information (though not RRSP, TFSA, RESP and RDSP accounts) to the criminal IRS in Washington, where we have no representation. I am not trying to scare people. But the loss of Canadian sovereignty is happening in baby steps of which the FATCA is a major accomplishment.
In the post, “Prove you are not American“, Schubert, in his classic exuberant fashion, made an important comment saying that we should not scare people with incorrect interpretations of the IGA: The banks will not be asking for proof that parents and grandparents are not US citizens. But this does not take into account the over-zealous twit who may land himself or herself a nice position as bank inquisitor. It is now their duty to ferret out “US persons” hiding their true status. Consider the closure of accounts of US persons in Switizerland, even when they are resident in Switzerland and citizens of Switzerland. To my knowledge, there is actually nothing in the agreements between Switzerland and the USA that requires Swiss banks to do this, but in their attempt at CYA (cover your ass), they have decided that the safest thing to do is to close the accounts of US persons and not permit US persons to open new accounts or even renew mortgages.
Consider the following paragraph from the IGA dealing with new accounts (p. 23; emphasis mine):
If there is a change of circumstances with respect to a New Individual Account that causes the Reporting Canadian Financial Institution to know, or have reason to know, that the original self-certification [that person is not a US citizen] is incorrect or unreliable, the Reporting Canadian Financial Institution cannot rely on the original self-certification and must obtain a valid self-certification that establishes whether the Account Holder is a U.S. citizen or resident for U.S. tax purposes. If the Reporting Canadian Financial Institution is unable to obtain a valid self-certification, the Reporting Canadian Financial Institution must treat the account as a U.S. Reportable Account.
Now imagine the following scenario:
Canadian-born Johnny banks at TD in Huntsville ON. The new manager, Jim, went to High School with Johnny. Jim knows that Johnny’s father is a US citizen, while Johnny’s mother is a Canadian. Johnny lived for ten years in the US and moved back to Canada and was a new student with Jim in grade nine at a local school. Oops. One day, Jim recognizes Johnny his former high-school mate and decides that he must call Johnny in for an inquisitional hearing. Johnny tries to prove he is not a US person, but to no avail. He has never obtained a CLN or his dog ate it. Never mind why, he can’t prove to Jim that he is not a US person and he becomes a specified account holder. The change of circumstance: the manager Jim knows Johnny personally, and since Jim is a complete dick (enough of these sort of people in every country), he gives Johnny’s account information, as specified under FATCA, over to the CRA, which then sends it to the IRS.
This is not likely to happen every day, but it will certainly happen in a country of 30 million people with as many as 1 million so-called US persons. So now I really believe that the IGA is irresponsible on the part of the Harper government, and it is a step towards the annexation of Canada by the US. But for now we have some ability to protect ourselves.
@ usxcanada
You cannot “swamp the IRS” because I’m sure it has access to that bottomless data mine in Utah. It will simply store all of this data and haul it out to punish anyone it pleases at whatever point in time it gets the notion to do so. Meanwhile, since the data passes through the dubious hands (eyes?) of the CRA, the CRA will be able to pick off anyone it pleases too.
@USXCanada, I suspect the same will happen in the UK. I believe that at least some of my financial information will thus subsequently be reported to HMRC and then, in turn, to the IRS. So even though I’ve renounced, I’ll never be able to fully be free of US personhood. It’s why I have amended and prospectively filed squeaky clean tax returns and FBARs because the stakes are too high.
I also suspect that I will be stuck investing through my dual-qualified US/UK financial planner rather than investing independently via a brokerage account because it will become much harder to satisfy them that I’m absolutely NOT a US person for tax purposes.
As I understand it, even with a CLN, I could once again be considered a US Person if I spend too many days in the US or possibly even if I didn’t file 8854 to correctly exit the US tax system. The banks and share dealing brokerages won’t want to risk it so will increasingly err on caution. I will also have to continue keeping all my accounts in my name only with none of our assets in joint names, apart from our home.
In other words, it all leaves scars. It was essentially cancer, like having had a diagnosis for breast cancer (OMG moment); learning my odds; deciding on what course of treatment; undergoing chemo and all the anguish and suffering; then waiting several years for remission (waiting out the statutes of limitation before I’m truly free); then, finally, realizing there could still be a future risk of recurring problems such as subsequently having to satisfy my building society that I’m not a US person…
@das99
In the UK, the vast majority of investment account providers have decided to implement FATCA “lite”. This involves implementing the Know Your Customer procedures but not the reporting procedures. It means banning US person customers. As a result, the vast majority of investment account providers have changed their customer terms and conditions such that it is a breach of the terms and conditions to be a US person. If you are a US person, you are in breach of the customer agreement and the result is that your account is frozen. So, in the UK, if you have an existing investment account with a provider who decides to implement FATCA lite, your account is frozen.
It’s unclear what having an account frozen means. But, bearing in mind the objective is to avoid having to report accounts, they will have to get rid of that account holder (probably prior to 30 June 2014). That could mean that you will be asked to transfer the contents of the account. It could mean that the account could suffer a forced liquidation.
In the UK, US persons are believed to be about 200,000 in 63 million or 0.3%. It is clear that investment account providers in the UK would rather lose 0.3% of their customers than spend the money implementing the reporting systems. That’s probably a no brainer. Switzerland is also about 0.3% (20,000/7 million) and they’ve been doing the same thing there. Canada has a much higher proportion but FATCA is phenomenally expensive so it’s hard to guess what the cutoff point is where it’s less expensive to implement FATCA reporting than it is to lose customers.
Do you think the CRA will get information from other government departments..ie passport information..ie all canadians with a place of birth in the usa then send this list to all the banks for them to check? My understanding is that the flow of information is from the banks to the CRA but is it really? Because if the flow is in the other direction then the banks will find out all people born in the usa..not necessarily us citizens.
@Edelweiss, how could it be legal to get rid of a class of customers, that might be citizens.
Governments signed the IGA. They should require that at least one bank accepts those customers and that the accounts be transferred to such bank at no loss to the customers. That would be a way to deal with that situation.
I still don’t understand why we haven’t heard of any lawsuits against the banks, of people being discriminated against. This has been going on for a while in Switzerland. I can’t believe there is not one guy rich enough to take that on. To use the IRS’ linguo: this is a systemic issue – not an isolated myth.
BTW, has anyone heard more about the guy who sued to prove the FBAR penalties are unconstitutional?
@Edelweiss
So, just how does FATCA lite work? Don’t they still have to register at the Portal of Mordor, get a GIIN, and be deemed FATCA compliant by the IRS? Are they just going through that normal process and then with the BAN in place, not reporting anyone as they have NO ONE who is a U.S. Person? A bit unclear how this works…
@ All. I was musing about all of this information passing that has been triggered by the IGA and it twigged my memory so I pulled out my 2012 (Canadian) tax return and there it was. “Are you a Canadian citizen?” Yes [ ] No [ ]. It’s in the box for Elections Canada.
The CRA already knows whether or not we are Canadian citizens folks. Beyond that, I doubt if the CRA knows much else and I don’t think they have any way to find out. I think if the CRA (and by extension the Canadian government) has a shred of integrity they should simply not bother to forward any info on a person who is a Canadian citizen. Really, what would be the point? Both the CRA and the IRS know that by treaty nothing will ever be collectable.
So the banks send “US reportable account” info to the CRA, the CRA cross checks to see if the account holder is a Canadian, and if so, deletes the information. Everything remaining goes to the IRS. How would the IRS even know about anything not being sent? The banks may be scared to death by the USG, but I don’t think the CRA has to be. There’s nothing in the IGA that says the CRA has to do a good job and there’s no way to quantify it anyway. If it ever got to where the USG was making a fuss, the CRA could engage in a little selective 30% withholding themselves to bring the Americans to their senses.
This, of course, doesn’t help those who are still Permanent Residents but perhaps a fast-track citizenship program could get them out of the clutches of the US asap. Maybe free seminars to help PRs FATCA proof their accounts in the meanwhile
Maybe this is all a pipe-dream but what the hell, the weather sucks anyway!
GATA approved gold bullion dealers
http://www.gata.org/node/173
Canadian Dealers
http://www.cand.org/
click membership on nav bar
Let’s JUST DO IT. Go to gold. PROTECT YOURSELF FROM DISASTER Now how are they going to find that as long as it’s not in a bank? It’s not illegal to own at all. Just treat it as any other investment and pay capital gains on it if you sell, but don’t sell it. Just leave enough cash in the bank to operate day to day or transfer to a credit union. I can tell you for sure that the credit union movement hates FATCA so I wouldn’t be surprised if no member of a credit onion is ever going to be asked anything. This is one area where the IGA can and will be ignored and they will tell Harper and his IRS Brown Shirts to eat shit. I have had a couple objections to us being compared to those persecuted by Hitler. REALLY??????? WHAT IS THE DIFFERENCE PLEASE?
People, I for one am getting weary of the constant posts regarding banks. If any readers here are still under the illusion that money in a transnational bank with a stupid Canadian name is wise then they are way behind the curve. Just GET OUT, screw the banks. Make them suffer, withdraw your money and close all unnecessary accounts and move to credit unions as an extra layer of protection. If the IRS makes a move on our credit unions by withholding any US sourced funds it will regret it severely. Credit Unions are local and the minute Credit Union Central thinks they are in the crosshairs or accounts are in trouble, spelling the death if the movement, they will simply call Harper and tell him to go fuck himself. So, let the Harper Govt try to destroy the credit unions in Canada. He won’t last another day in my opinion. Transnational banks with a Canadian name are NOT Canadian anymore than Gretzky is young and still on the Oilers team.
BUT for God’s sake stop the what ifs, act now and stop waiting for the Americans in Ottawa to come to their senses. They won’t
Many Canadian banks also sell insurance — questions about place of birth would be justified in connection with life and health (mainly for travel) — this information would be included in their databases. Also if you are required to provide proof of insurance coverage the bank could get information from your insurer
@Chears…
I wouldn’t sing the praises of Credit Unions…they aren’t impervious to the need to merge and grow…it’s not a lasting solution…
http://theexchangenetwork.ca/upload/docs/Credit%20Unions%20in%20Canada–Scaling%20Up.pdf
@ ChearsBigEars
Truthfully, although I play the game for now, I do not believe that those electronic digit assets my credit union (I won’t let myself be used by any Big Five Bank) purports to “hold” for me are real. Once my “money” was deposited into their computers it became theirs just as is the case with all banks. If the USA with Canada’s help had not murdered President Gaddafi of Libya and destroyed his nation to boot, the world would have been introduced to true currency, the gold dinar. Ghadaffi had the right idea but The Powers That Should Not Be would never allow true currency to become established anywhere. TPTSNB must have fiat currency and debt slaves to survive. I would have loved to have acquired some gold dinars which were to have been beautifully minted into wafers of varying denominations.
@ CheersBigEars Re: “The big banks. Just GET OUT. Make them suffer.”
Reminds me of when I was younger-much younger. LOL.
I had a beef with BC Hydro (for the life of me I can’t remember what) and decided to “punish” them by refusing to hook up to the grid. After a couple of winters with kerosene lamps my eyeballs were about ready to fall out of my head. Meanwhile BC Hydro was raking in record profits. I was the only one who got punished!
Don’t misunderstand me, I applaud your enthusiasm, but those banks don’t give a damn whether we are their customers or not and it won’t affect their bottom line. Now a class action lawsuit for Constitutional and privacy violations asking for milliions in damages; that might be a two-by-four between the eyes that would get their attention!
I wish some of U would stop spreading scare tactics. For example, and there are hundreds of posts that are simply wrong or paranoid, the only reason to ask if you are canadian on your tax return is to ascertain if you are eligible to vote and to keep the elector’s list up to date. Nobody needs to ask your place of birth for insurance purposes… and on and on….and on and on. Do everyone a favour and stick to facts.
By the way, did anyone follow my advice a week ago to buy gold? You’ve done better in one week than 10 years interest in the bank if you did
http://www.kitco.com/gold_currency/index.html?currency=CAD
@ Just Me
I assume they still have to be registered with the IRS or they will be hit by the sanctions.
They just focus all of their efforts on the changes to their customer onboarding process and the account identification procedures. They then prevent any new customer account from a US person. They use the indicia and the reporting limit to identify the accounts to be frozen. When it comes time to report, they just don’t report anything. In the end, they lose about 0.2% of their customer base but are a net winner because they saved tens of million in costs by not implementing reporting.
As Watcher and had said earlier today, the outright ban on US person customers also impacts the availability of government sponsored accounts like Individual Savings Accounts (ISAs) because the customer terms and conditions for most providers are the very same terms as normal investment accounts. So, even FATCA non-reportable accounts that the UK government negotiated an exemption for in the IGA are not generally available to US persons.
I totally understand the US person bans for regular investment accounts. You must have 100% confidence in your identification and reporting capability if you are going to choose to serve US person customers. If you get one wrong (following the logic of Ms. Kenneally), it could mean the death penalty for your firm.
What I don’t understand is why FATCA non-reportable accounts are not generally available. There ought not to be the same risk attached to these. Unless, of course, you believe that FATCA non-reportable accounts will be reportable in the future. That’s about the only potential reason that I can come up with.
8.5% gain in 60 days
http://www.kitco.com/gold_currency/index.html?currency=cad&timePeriod=60d&flag=gold&otherChart=no
Just a prediction but I think its going to 2,000.00 USD by years end or sooner. Be interesting to see if I’m right. So while we are debating what the banks are going to do to us we could just as easily buy gold Maple Leafs and sit and hopefully watch them rise in price at least keeping pace with the falling CAD
“If you get one wrong (following the logic of Ms. Kenneally), it could mean the death penalty for your firm. ”
This is a bluff and a fantasy. Do you REALLY think even one bank or investment firm is going to die? If so how many more until the governments say hey just a minute and do the inevitable, switch to Yuan? The US dollar is FINISHED and we are witnessing a myopic manifestation of this. We are witnessing the death of the American empire, NOT the re-birth and they are desperate for money. If they are so desperate then why not just print more of that worthless trash?
@ Duke of Devon
Absolutely right about the tax return. It’s just asking if you want your name sent to Election Canada or not. This year my husband will be able to check off that, YES, he is a Canadian citizen. I’d love to “stick to facts” but they all seem to be rather nebulous at this point, all kind of spinning around in my head. Eventually things will settle down I hope. One tries to apply logic to this mess but it doesn’t seem to stick because CBT and FATCA were created with a teflon skin and conceived out of insanity.
@ChiefBigEars…
Maybe you haven’t been following Switzerland closely, but death is exactly what has happened to a couple Swiss banks already because of the IRS offshore jihad, so don’t dismiss what Edelweiss says..
and the demise of the dollar has been predicted many times, and lots of folks have lost money on the bet. In the long term, just like we are all dead, so may the dollar die a natural death, but in the sort term, between the choice of a lot of crappy paper, the USD still has buyers. That could change of course, and I am not smart enough to predict the future or offer investment advice. Last year, a lot of gold buyers got creamed, so nothing is a sure bet… Just my opinion, and I could be wrong..
@Edelweiss
Thanks for the explanation of the process. So, than it is the bare minimum of compliance cost by total ban on part of its potential investment base. I understand doing that, and as it just comes down to a business decision..
@maz57
**So the banks send “US reportable account” info to the CRA, the CRA cross checks to see if the account holder is a Canadian, and if so, deletes the information**
But the CRA is going to be so busy with all the names they will receive from the US as part of this balanced deal… where would they have the time to do this??? Just in case u all miss it… I am damn pissed….
@ usxcanada
There are 2 problems with your send it all in and let the IRS figure it out.
1. It would be a public relations nightmare when the public figures out that you sent everything on to the IRS indiscriminatly.
2. It will be a legal nightmare when you are subject to a class action lawsuit for violating the privacy rights of 97% of your customers who are not covered by the law.
@crazyworld
Our passport info. (held by the Dept. of Citizenship & Immigration) is protected by Canada’s Privacy Act. Let’s hope that this law won’t be violated.