The law of unintended consequences remains far more powerful than any half-baked legislation coming out of Washington, as this article from South China Morning Post reminds us:
Fatca regime may have unintended consequences for financial system
Crackdown on Americans’ money in overseas accounts may lead to the growth of shadow banking and the financial power of other countries
Many financial institutions are still completely confused and unable to comply with the US government’s Fatca regime. “Foreign Account Tax Compliance Act” sounds like another innocuous tax regulation. But it represents the most ambitious tax and personal data collection strategy in financial history. It will embolden and encourage more global intrusions by US government agencies. More people will be driven underground to seek shadow banking services.
Fatca is controversial because it dramatically shifts the burden of disclosure from the American person to their banks. Foreign financial institutions are now more than just tax bounty hunters for the US Internal Revenue Service (IRS), but pawns in an historical power play for control over the global financial system.
Good article Deckard1138 and thank you for posting. I’m wondering about this sentence: “American residents in Asia seeking to hide assets only have to find a strictly local Asian bank with no links to the US banking system.”
The article fails to mention any specifically, that would be a needle in the haystack, wondering which he refers to and would be quite a find. Almost any bank in Asia will have a US correspondent account (unless you are talking about Iran)
@isaac
Also my understanding was that FATCA essentially divides the non-US world into two parts–countries, banks, and individuals–into two parts: those who are FATCA compliant and those who are not FATCA compliant. Part of what is required in being FATCA compliant is that any time when money is transferred from the FATCA world to the non-FATCA world, the 30% withholding is applied.
So if this Asian country has an IGA, then by local “law” the banks there have to report “US persons” to their central tax authority, even if they have no direct links to the US banking system.
If they don’t have an IGA, then it is true that some banks will choose to comply and some won’t. But if you transfer money to a non-compliant bank, then the 30% withholding is applied.
At least that is my understanding of how the US wants it to work. Whether the US really has the muscle power to arm twist the whole world into this regime remains to be seen of course.
Like I have said before, I suggest that all banks charge the tremendous investments they have to do in order to comply with FATCA to the USG. Maybe that will wake them up a bit and realise that the IRS can’t expect this to be free ride. Like in any other business you have Revenue, Cost of Goods which results in a Gross Margin. The Cost of Goods should be invoiced to the USG. I can’t make it any simpler!
If nothing else, watching this chess game play out will be … interesting.
The camel’s nose is under the tent.
“Foreign financial institutions are now more than just tax bounty hunters for the US Internal Revenue Service (IRS), but pawns in an historical power play for control over the global financial system.”
I LOVE this phrase – how true, how true!!!!
Interesting – has anyone actually used UnionPay? I wonder if this shadow non FATCA banking will take off.
There are always unintended consequences for every action. (For every action there is an equal and opposite reaction) It is the job of those in power to see these reactions and fix them before they destroy those whom the pretend to be helping.
Unfortunately the D.C.Pukes (U.S.Gov) couldn’t find their collective back sides, with both hands and a map.
I have a Unionpay credit card. IIRC I got either a free TV or some grocery store vouchers when I applied (it was a while ago. I hope it was the TV, because I’m sure I never filed the relevant IRS form declaring the grocery store vouchers as offshore debt instruments or whatever.) So I suppose now my purchases are being monitored by Beijing rather than Fort Meade. And I have the emotional satisfaction of not generating any revenue for American companies, same as when I buy Mexican avocados instead of California avocados and Australian instead of U.S. beef.
So I made my small contribution to decreasing Washington’s power over my local bank, but unfortunately, it’s not going to make a difference soon enough to help anyone who still has FATCA problems. Your credit card is still issued by a bank, and your bank is still being threatened by the IRS so that it will hand over all the information it has about you.
FWIW, when HSBC & one of its local subsidiaries switched their ATM cards to Unionpay last year, it caused all sorts of problems because Unionpay is still not widespread overseas:
http://www.scmp.com/business/article/1261120/hsbc-end-unionpay-chaos-new-plus-atm-card
What is “Unionpay?” Can I get anything like this in Canada?……or similar?
@Eric – thanks for the info. I guess the only way to use the UnionPay somewhat out of the system would be to also use a non FATCA compliant bank. Basically, never mixing the two systems. The knock down effects of FATCA are only starting to surface. Wait until pass through withholding is implemented. Personally, I have seen many variations of what people characterized as ‘US Person’ are doing in their own life. Mostly, it is a separation of husband/wife accounts putting all in the wife’s account (non US) (or husband’s if he is the non US); wife (nonUS) opening a non US company and account and giving access to the US spouse via Internet banking, etc etc etc. People do what they have to to survive what is an unfair, oppressive and hypocritical US tax system that is the opposite of the rest of the world’s standard.
My hope is that this will all backfire on the Democratic Party ( and some idiot Republicans) that supported this nonsense.
Union Pay Canada http://en.unionpay.com/englobalization/all_globzlization/enus/Canada/
Apparently as of 2011 over 60% of Canadian atm’s accepted it. http://en.unionpay.com/news/newsroom/file_62650643.html
Moneris, which is Canada’s largest payment processor, expects to launch UnionPay card acceptance as part of its service offerings to merchants in fall 2014.
http://www.moneris.com/en/About-Moneris/NewsAndEvents/2014/Month/Feb%2027.aspx
That’s interesting. I would love to have an alternative to Visa or Mastercard, i.e. anything which has no ties to the USA. Unfortunately my bank in Germany doesn’t offer UnionPay cards (yet?).
Steve and all,
“I have seen many variations of what people characterized as ‘US Person’ are doing in their own life. Mostly, it is a separation of husband/wife accounts putting all in the wife’s account (non US) (or husband’s if he is the non US); wife (nonUS) opening a non US company and account and giving access to the US spouse via Internet banking, etc etc etc. People do what they have to to survive what is an unfair, oppressive and hypocritical US tax system that is the opposite of the rest of the world’s standard.”
How true your statement is. That husbands and wives are reduced to taking actions such as this reveals an egregious human rights abuse which the US government is perpetrating against people who are associated with that country in the smallest way. A formal complaint to a major international human rights body will be filed by the end of the week. There are still a couple of days left to read the complaint and add your name to the submitters’ list. Please click on the Human Rights Complaint link on the sidebar.
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