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.
And it’s just not the banks that are affected. I read something a few days ago about the insurance industry having to cough up not just policy numbers and pay outs, but also what premium is being paid. The insurers have no idea why the premium price is being requested, since they can’t figure out why that is relevant to tax. Stumps me, too.
@George
Thanks. I turned it into a text-based .pdf and added another link. The .pdf conversion of the original page was horrible so I just used the text version of the cached file.
Good work, George. I’ve also saved to my hard drive just in case what you’ve found can mysteriously disappear as well. THANK YOU!!
@George
Thanks for posting that cache link. I’ve saved a PDF copy to my hard drive.
One thing that caught my attention is that the author of this piece is based in Canada and he offers a Canada-centric view of opposition to FATCA. That–in conjunction with the updates to the Wikipedia article and other things in the media–are increasingly creating the impression in my mind that if FATCA is to be stopped, Canada (as well as domestic “homelander” US opponents of FATCA) must lead the opposition.
Also I noticed that the author of this piece specifically joined BankSystems and Tech on 7/1/2014.
@Publius:
Interesting. Does this mean the IRS is going to try to start enforcing the Foreign Insurance Excise Tax?
http://www.irs.gov/publications/p510/ch08.html
@Publius
Maybe the premium paid will flag u up as having boat load of money… there got to be a catch to it… but since its more of a info gathering… they are trying to gather as much as they can as fast as they can before the crap hits the fan…
@foo
*Foreign Insurance Excise Tax*
Never saw that one before… but then… loads of stuff I am reading about is the first time I am viewing it…
@US_Person_Foreigner
Data is the most valuable commodity on the planet right now. Uncle Sam is trying to extort as much valuable data as he can from whomever he can. In many cases I suspect Uncle Sam doesn’t even know what he wants to do with the data once he gets it.
Someone please help me with this:
Under FATCA, IGA, “foreign” Canadian financial institutions report to the CRA. CRA reports to the IRS.
In case of “recalcitrant” account holder who does not declare that they are a USP or not (yet are figured out on Facebook or some other means as a USP?)
a) Canadian FFI reports to CRA.
Where does it go from here?
b) According to the IGA it would then be Canadian law to seize 30% of the account value as “witholdings” and give to the IRS. I don’t believe the FFI will do the seizing. So is it under orders of the CRA? HOWEVER, I had thought that in the Canada-U.S. tax treaty it was agreed that the CRA would do no collections for the USG? That would then be illegal under Canadian law.
So then which law is then supreme, either the Canadian-U.S. Tax treaty or the IGA?? As the IGA was not approved by the Senate, perhaps the tax treaty has supremacy?
U.S. Taxpayer advocate Nina Olsen also pointed out that a key weakness in the plan was lack of safeguards in cases of errors by banks etc.
@Dash1729
Don’t u think they are already illegally gathering what they want… NSA is prime example… its always in the name of protecting everyone from the terrorists…. did they ever wonder… why the US is hated… cause they think they are all that & its the US’s way or the highway… in some articles I read… there is a huge complex database system in Utah… storing all this info… its so big… it could be called a city. All the things I have been reading… they have been collecting info for a long period of time without that thing called a warrant… or I think they called it the constitution… u know… that old piece of useless paper with suggestions of rights… It opened my eyes to that fact… privacy is an illusion…
@US_Person_Foreigner:
I don’t think it is well known, and it is probably even less complied with. I have never heard anybody talk about individuals needing to pay this tax, and it seems ludicrous to have to pay tax to the US on one’s local insurance premiums. But, I don’t see anything on the IRS page that specifically excludes individuals from having to pay this tax (and quarterly at that!).
If it turns out that individuals are indeed supposed to pay this, and the IRS tries to enforce it, I’d guess they’re more likely to generate another wave of renunciations than to raise any revenue out of it. Yet another straw for the camel’s back.
Some further information on this insurance tax:
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Foreign-Insurance-Excise-Tax-Audit-Technique-Guide#chp01
And:
I don’t know if it has anything to do with the tax mentioned above, but, yes, insurance companies are definitely subject to FATCA as well.
FFIs complaining? The time for complaining was in 2010 when the US Congress passed FATCA.
Instead FFIs decided at the time it was better to throw dual citizens and others under the FATCA bus rather than stand up against the US and tell the Canadian Government FATCA was a bad idea.
The told the Government the sky was going to fall if the 30% was ever applied and lobbied for an IGA.
The Canadian Bankers ought to make a big juicy donation to the Charter Challenge and put the Government in the position to debate FATCA properly.
Ironically if dual citizens do get a carve out, it makes the FATCA job easier with over 1 million less people to conduct the witch hunt against.
@US_Person_Foreigner
Yes, it is true that the NSA is largely doing the same thing.
However–
As I’ve said, though, data–whether obtained honestly or through extortion–is the most valuable commodity in the world. And you can never get enough of it. The fact that the NSA already has a lot of data doesn’t mean that the IRS won’t want more.
Also when it comes to Uncle Sam IMHO it shouldn’t always be assumed that the left hand knows what the right hand is doing.
I would not assume that the IRS and the NSA share data.
I would also not assume that the IRS and the NSA don’t share data.
Making assumptions either way is dangerous IMHO.
@Dash1729
U are correct…. I was always under the assumption that the US govts shared databases… I never realized they didn’t.. so u are correct in the left hand not knowing what the right hand is doing… The more I read… more my eyes are opened. On this mb… I have learned lots of things I had no clues about… that many posters explain quite easily for me to understand. Which I think u all for….
@US_Person_Foreigner
Of course they will and probably are sharing. There can be NO doubt.
As we know here at IBS, FATCA data was gleefully pointed out by Carl Levin as being of the type that could be provided to Homeland law enforcement agencies.
As I often say, if you like NSA spying, you will love FATCA.
Start reading page 10
http://bsmlegal.com/PDFs/CarlLevin.pdf
(7) Treating FATCA Disclosures As Non-Tax Return
Information
@Just Me
“Of course they will and probably are sharing. There can be NO doubt.”
This would NOT be my default assumption.
My default assumption would be that the human ego is very strong everywhere.
Data is the most valuable commodity in the world right now. Why would the NSA just share freely their data with the IRS or vice versa? They may both be part of the USG but they are different agencies both headed by humans with huge egos. Assuming they cooperate freely is not an assumption I’d make.
OTOH there are probably times when it suits the egos of everyone involved to share data–so I would not assume they AREN’T sharing data either.
Making assumptions EITHER way seems dangerous to me.
@Dash1729…
I take your point, but egos aside…
IMHO, I think it is more dangerous to think their egos will restrain the reality of linking databases… I would NOT make any risk analysis based upon the hope it won’t happen or be restrained by egos.
If the IRS is diktating to State Department what the penalties will be for failure to provide SS numbers in a passport application, you would be silly to assume that no sharing is happening.
The insurance industry article is here:
http://www.propertycasualty360.com/2014/07/10/as-fatca-overcomes-industry-lobby-efforts-ciab-hop
@Foo. I think/fear that you are probably right about this.
A new law requires foreign insurers receiving U.S.-source premiums to submit a form to the IRS…
According to [Scott] Sinder, [CIAB’s legal counsel and a partner at Steptoe & Johnson in Washington, D.C.] the industry believes FATCA is burdensome because, among other reasons, the reporting mandate includes premiums on property and casualty policies even though such policies have no cash value and provide no financial investment income, and even though the foreign carriers that provide such coverage almost never offer cash value policies that would be subject to the FATCA reporting requirements.
“We believe that FATCA was not intended to cover such payments, and unnecessarily burdens insurance brokers and their clients with costly compliance obligations.”
UPDATE #2 – mystery of the disappearance of original article solved (as much as we’re going to find out) — “there was a problem”:
From: Katherine Burger
Sent: Friday, July 18, 2014 8:36 AM
To: caroltapanila
Subject: RE: Article July 16, 2014
Dear 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
@calgary411
I still have a nice clean copy on my cellphone browser. Do you want me to paste it here?
Thanks for following up on that Calgary411. I don’t see anyone on Twitter or Facebook that looks like they might be him. Maybe others would have better luck. Imagine someone not being on either, tsk, tsk 😉
Hi, Just Me,
George has it covered with Deckard’s “here” in the post. Thanks lots.
@Just Me
“you would be silly to assume that no sharing is happening.”
And equally silly to assume that sharing IS happening in circumstances where it is to someone’s benefit that sharing happen–which it definitely sometimes is.
Depending upon circumstances, making assumptions either way can be equally dangerous.
Imagine, for example, that you are crossing the border into the USA. The safest thing to assume is that, when it comes to any bad information about you, sharing happens freely between gov’t agencies–and when it comes to any good information about you, no sharing happens at all and you’d better be prepared to prove it yourself.