http://www.executive-magazine.com/business-finance/finance/fatca-answering-to-uncle-sam
FATCA – Region preparing for Uncle Sam
Forthcoming US rules loom large over Middle Eastern banking sectors
An excellent article by Paul Cochrane, Middle East Correspondent for International News Services.
The word “sanctions” in relation to FATCA seems to be growing in common usage, and this story is no exception:
“If a country is not FATCA compliant it will be financially sanctioned in a new way, ‘the FATCA way’, and the readiness in the MENA is not sufficient in my opinion for a FATCA go-live situation,” said Camille Barkho, chief compliance officer at Lebanon and Gulf Bank.
The potential sanctioning of the Lebanese banking sector is a grave concern in Beirut, given the high degree of the economy’s reliance on banking.
The article also raises the issue of data privacy and security for US citizens in the Middle East:
More pressing in the immediate term is the issue of privacy and the safety of American citizens. “One thing the Treasury has not thought about is how do you protect US citizens? In a country like Lebanon, with Hezbollah and other US designated terrorist organizations, banks will identify US citizens, which could put them at risk,” said the BDL source.
Jim Jatras is also quoted in comments about the negative economic impacts of FATCA on the US:
Further questions may arise if there is a dawning realization about negative economic impacts on the US itself. “What happens when we start shorting payments on our Treasury bonds (TBs) by 30 percent? A sovereign holder is not subject to withholding, but for a private institution, what if the interest payment is done through SWIFT to a commercial bank that has not signed an IGA? Treasury will take the interest,” said Jim Jatras, Manager of RepealFATCA.com, which is lobbying against the law in Washington. “This is the kind of thing that could promote dumping TBs, and affect interest rates and the dollar as a global currency, which are issues nobody has thought out.”
A very good article.
Investing in the US now runs the danger of being sanctioned if your government runs afoul of the US. Maybe there are less risky places to invest?
From the article. “banks will identify US citizens, which could put them at risk,” said the BDL source.”
NO, the lives of US Citizens WILL (not could) be put at risk.
The State Department issues travel warnings to US Citizens not wear blatant US dress. But instead treasury will require a that banks prepare a hit list.
US Indica WILL be a death sentence in some areas of the world.
Jim’s comments are interesting about shorting TBs by up to 30%. Perhaps the FATCA backlash will be financially against the USG via higher debt costs. The US may collect a few extra bucks and tax revenue only to be flushed out with higher interest payments to private investors.
So if the market shorts TBs to mitigate against the risk of the 30% withholding tax, wouldn’t the same apply to US equities, and investments.
You’re a Homelander selling a property or company to a foreign purchaser (and let’s face the foreigners have the money to spend, not the shrinking US middle class) and demands a 30% discount to offset FATCA risk. The Homelander won’t be very happy his assets have been devalued to a foreigner because of FATCA.
So there you have it, FFIs shutting out USCs abroad, but foreigners who invest in the US demanding substantial discounts to offset FATCA risk. Why invest in the US at all? Go the FATCA free Canada.
The biggest problem is seller in the US can never guarantee that the foreigner won’t suddenly be considered a ‘US person,’ in future so the FATCA risk always remains.
The USG can also move the goal posts instantly so FATCA can never be ‘future proofed.’
Good article. The point questioning how countries will handle dual citizens is a good one – many countries to not allow dual citizenship. For example, in Asia, Japan, Malaysia and Singapore do not allow dual citizenship. I postulate that there will be a lot of pressure on duals not to acknowlege they are a US citizen (i.e. lie on the forms) to stay out of hot water with the local governments. The local government position on IGA enforcement may be to simply require the banks to look for those that used a US passport to open an account regardless of the ‘indica’ because dual citzenship is not allowed. Also, a goverment could crack down on duals by requiring banks to disclose if a customer admits having dual citizenship. All of this I suspect is unintended consequences from a bad law.