http://www.banktech.com/hey-regulators-how-about-more-carrot-and-less-stick–/a/d-id/1297320
UPDATE: The original article was mysteriously removed today so the link above no longer works. George, however, located a copy via Google Cache and it is available here for now. A .pdf text version is also available here.
UPDATE #2 – mystery of the disappearance of original article solved — “there was a problem”. Lucky for us — George found a copy via Google Cache (see above):
From: Katherine Burger
Sent: Friday, July 18, 2014 8:36 AM
To: caroltapanila
Subject: RE: Article July 16, 2014Dear Carol – thank you for the note and feedback. However, the article no longer is available – there was a problem and we had to pull it from the site. However, Fred Cook is one of our regular contributors so hopefully there will be new content from him soon.
Kathy
Kathy Burger
Editorial Director
Insurance & Technology
Bank Systems & Technology
UBM Tech
O: 212-600-3062 I E: katherine.burger@ubm.com
From: caroltapanila
Sent: Wednesday, July 16, 2014 6:35 PM
To: Katherine Burger
Subject: Article July 16, 2014
Ms. Burger,
Information Week’s Bank Systems and Technology journal had online briefly this morning a very good, very honest article on the Foreign Bank Account Tax Compliance Act (FATCA) by Fred Cook. The title was:
“Hey, Regulators: How About More Carrot & Less Stick?”Can I get a copy of that article or can you let me know how I can get in contact with the author, Fred Cook?
Thanks very much for your assistance in obtaining a copy of the above article.
Carol Tapanila
Calgary, AB, Canada
*****
Looks like the financial industry is finally realizing that FATCA is no one night stand but rather a shotgun wedding from hell – and the honeymoon is over.
We hear a lot about how the FATCA compliance industry is gleefully raking-in wheelbarrows full of consulting fees to design and commission new data management systems for banks and other financial institutions, but rarely have we heard from those on the inside who have to manage a growing plethora of complex and costly compliance programs. A scant couple of weeks after FATCA’s inauguration, there are already signs of “FATCA fatigue” setting-in and, perhaps, a belated realization that something is just not ethically or legally right about FATCA.
Here are excerpts from an article by Fred Cook in Information Week’s Bank Systems and Technology journal:
Hey, Regulators: How About More Carrot & Less Stick?
For banks to afford the resources needed to handle today’s regulatory demands, it may be time to discuss changes in compliance enforcement with the regulators.
I do appreciate the need to provide information related to potential criminal activity for the benefit of society at large, but the recent Foreign Account Tax Compliance Act (FATCA) still has me shaking my head. This new regulation requires institutions to report taxable information on US citizens (living in Canada) via the Canadian Revenue Agency (CRA) to the US government. This means that, when we open accounts in Canada, we’re now required to collect customers’ citizenship details. We also have to ascertain the citizenship of all our current clients, even though citizenship is not a requirement for opening or servicing a financial account. We are also required to report, through the CRA, details of any US citizen living in Canada with account balances of more [than] $50,000. Ironically, until now asking for personal information such as citizenship was in direct violation of Canada’s privacy laws.
How is implementing the overhead of FATCA regulations a benefit to the institution’s business? Is it not just doing the US Internal Revenue Service’s work for it? I would make the same case for tracking deposits larger than $10,000, reporting suspicious transactions, or determining politically exposed people and providing details about them to government and police agencies — for free. Though managing these “offloading” regulatory requirements doesn’t have any direct benefit to managing the bank’s core business, they must be followed to stay in business under threat of substantial fines and criminal charges.
These government and policing agencies have zeroed in on the fact that banking is a necessity, and that the institutions providing these banking services have access to very personal information otherwise not readily available on consumers and their monetary habits. Therefore, my expectation is that our regulations will continue to expand while new ones are added.
Is that collect citizenship information just for USP or for any citizenship of any country?
Sounds like there is some noncompliance here with Canadian law. If comments are coming out like this now then it sounds like not fully implemented.
However, well done Fred Cook for raising these issues.
Canada should pass a law invoicing the USG for Canadian financial industry implementation costs of FATCA.
The big Canadian banks may on the other hand like such regulation as it makes live more difficult for smaller industry players.
It looks like we got the computer code. If transaction $10,000 or greater then flag. If account balance $50,000 or more then flag. He must be talking Canadian dollar value. This is different than FBAR requirement of $10,000 or more for all accounts.
@JC. Good point! Banks should invoice the IRS and/or Treasury for all cost items (itemised) related to this legislation.
Very good point – particularly the one that up until FATCA gathering such information from a customer would be a violation of Canadian privacy laws! It is UNBELIEVABLE that the USG could effectively force every country that has signed up to change the nations privacy laws and protections just so that the country can comply with a US law – would we ever have thought this possible?
Don’t feel the slightest sympathy at all for the banks. They chose to “sleep with the enemy” and sell us all out.
I do feel sorry for the medium to small size banks who are being killed off with the burden of regulations which is assuring that only the TBTF banks survive. We will all suffer from the increasing lack of competition and consolidation which over regulation and compliance cost assure that only the Very Biggest with their implied government guarantees survive.
I’m with the Animal. They should take it up with the Canadian Bankers Association. Outrageous that the banks are now saying that the Canadian government is over regulating them, when truth be told their representatives lobbied the Canadian government very hard for the Canadian FATCA IGA.
Feel not few. ugh.. Too early in the morning for me to be commenting from bed on my cell phone…
The thing this guy is saying, from a small to medium size perspective is true. These Banker’s Associations primarily represent the giants in the industry, the Too Big to Fail types, and the smaller guys are still getting creamed by the regulatory burden, generally speaking…
American Banker had a similar article back in 2013, and it has only gotten worse since then…
This title needs an update to 2014…as it is even more true now…
Why the Tax Gap Means Hassle for Banks in 2013
In a perverse way, FATCA benefits the TBTF types of institutions.
Lol, Just Me. I recommend a tablet – it leaves one hand free to hold your coffee!
I wonder if the TBTF’s too will blame our government for all the burdens of FATCA. In the end it really is the failure of our government not to have stood up to another government imposing itself on all of our financial institutions. I hope the Harper government lives to regret their ill-advised decision to inflict mayhem on Canada’s banks – and more importantly, it’s citizens.
@Deckard1138
That link isn’t working for me. It just sends me to the general “Bank Systems and Technology” website and, while there, obvious searches like for “FATCA” or “carrot” don’t seem to be finding the article.
“I would make the same case for tracking deposits larger than $10,000, reporting suspicious transactions, or determining politically exposed people and providing details about them to government and police agencies — for free.”
This attitude on the part of the banks is what caused them to make their current bed which they now seem to regret having to sleep in.
Banks shouldn’t be in the business of law enforcement. Period. Banks should be in the business of making loans and determining the risk level of a loan.
There is a word for it when big business gets out of the business of business and gets into the business of “assisting” government with law enforcement. That word is “fascism”. I believe this problem existed well before FATCA although FATCA–if allowed to stand–is in the process of making it far worse.
Interestingly a Google search shows that that article did, indeed, exist briefly. I wonder why it was taken down.
@Dash1729…
I read it this morning, and it was definitely there. I even created a bitly link, but it is gone now…
http://ubm.io/1mh27qX
CUNA and World Council of Credit Unions continue to raise issues re implementation cost/burden on the US domestic side of things;
“……CUNA, World Council letter precedes passage of FATCA amendment
WASHINGTON (7/15/14)–An amendment that transfers $1 million to the Internal Revenue Service Inspector General’s office for an economic study of the newly implemented Foreign Account Tax Compliance Act (FATCA) passed the House of Representatives by a voice vote Monday evening, hours after the Credit Union National Association and the World Council of Credit Unions submitted a letter to U.S. Rep. Bill Posey (R-Fla.).
Posey’s amendment to the Financial Services and General Government Appropriations Act of 2015 (H.R. 5016) would transfer the funding from the IRS enforcement division.
“We believe this study is necessary given the complexity of implementing FATCA, the complex rulemaking that has taken place, and the myriad unintended consequences of the law on U.S. financial institutions and U.S. citizens living abroad,” says the letter signed by CUNA interim President/CEO Bill Hampel and World Council President/CEO Brian Branch. …
http://www.cuna.org/Stay-Informed/News-Now/Washington/CUNA,-World-Council-letter-precedes-passage-of-FATCA-amendment/
I tried to find a copy of the letter online, but perhaps a US resident or a Posey constituent abroad might be able to obtain one from his office to see what the US Credit unions said?
So, Just Me and Dash1729,
We have Deckard to thank for capturing some of that now missing article. Did someone somewhere not like it???
Congress just voted to cut back the budget for the IRS enforcement arm as a retaliation for the IRS targeting of conservative organizations.
@Dash
The requirement to report cash transactions of $10,000 or higher in the US at least was passed into law during the Presidency of one Richard Milhouse Nixon if anyone is curious
@Tim
There is a big difference between following the law regarding cash transactions over $10,000 (fairly rare except for certain kinds of merchants who handle a lot of cash) and for a bank to advocate for reporting ALL transactions over $10,000 on its own–which is what the article says. I would imagine only a tiny percentage of transactions over $10,000 are in cash.
Also $10,000 was fairly big bucks in 1974–it is significantly less now in real buying power.
@All
I believe the financial industry wagons were circled today and someone told Fred Cook or Information Week to take down this remarkably candid article. Unfortunately it wasn’t captured in time by the Wayback Machine.
I am grateful to Mr. Cook for lifting the lid, even momentarily, on the inner workings of our financial institutions and how they are actually responding to the FATCA steamroller. The fact that his words have been so swiftly eliminated from the internet speaks volumes about the high-stakes PR battle that surrounds FATCA and why our humble little blog is so vital to help curate, archive and disseminate this kind of information.
In the future, I would recommend that anyone who sees a potentially controversial, short-lived article like this one immediately adds it manually to the Wayback Machine site, as follows:
https://archive.org/web/
Just copy/paste the URL into the Save Page Now box in the lower-right and an archive will be instantly created. I know what I’ll be doing from now on when I stumble across another rare gem like this one.
Also it is logistically much more difficult to effectuate large transactions in cash these days than it used to be because around the same time (early 70’s) the big bills ($500-$10,000) were taken out of circulation.
Thanks, Deckard,
Example of what is described in the article in Em’s comment: http://isaacbrocksociety.ca/2014/07/16/a-bank-made-of-brics-vs-a-buck-made-of-straw/comment-page-1/#comment-2256062
Seems like even the credit unions can’t escape the FATCA jackboot at their throats – Fred Cook works for one.
But there is Google Cache……
http://webcache.googleusercontent.com/search?q=cache:0V9IMOfi99wJ:www.banktech.com/hey-regulators-how-about-more-carrot-and-less-stick–/a/d-id/1297320+&cd=1&hl=en&ct=clnk&gl=uk&client=firefox-a
Flag for $10,000 transaction has, I believe, been part of USFI for decades.
A real question is what about the compliance cost of USFI for FATCA? Aren’t they now asking all the nationalities of their account holders? That would be a true indication that the US intends to live up to the reciprocity they promise as part of the IGAs.
@George
Thanks so much for finding this alternate snapshot of the article – you’re the hero of the day! I wasn’t aware of this other caching engine.
I’ve added an updated link to the article.
@Deckard, please print it to a pdf and then upload the pdf as a tiny url.
When google cache revisits the page it will go wonky..