This new post very well illustrates a lot that is in John Richardson’s presentation posted HERE.
Before that, however, it may be best to let you know a little about who I am. I am an American citizen who has lived most of my adult life in Japan. My spouse and our toddler are Japanese. I became aware of this problem around two years ago when applying for a new passport. There were statements on the application that I knew to be illegal. Searching into that issue lead me to your website and, well, you’ve been there, you know the rest.
This is today’s summarization, asking for input, corrections, etc. from other readers here. He says “Tear it apart.”:
Here is a summary I came up with from memory. My notes are unavailable to me while on the trains and subways of Tokyo, when I have time post.
Tear it apart! Any inaccuracies correct. I need this as spot on as possible.
Some time ago American bankers constructed a money transfer system that functions well enough and is secure enough that it is reported to be the most commonly used route to transfer money across borders. It functioned so well that it was cheaper for bankers in other countries to pay to use this system to move money than to build their own. If I want to send money from my bank here in Japan to someone in Germany, it will most likely pass through the US on its way. Buy something online from Spain, the credit card payment goes through this system. Vacationing in Thailand or Europe and go to an ATM to pull out cash, your money most likely passes through this network set up by American banks somewhere along its way to you. The US government has hijacked this system.
In 2010, President Obama signed the HIRE act into law. Attached to the bill was the required method of funding. In this case The Foreign Account Tax Compliance Act (FATCA) is the method of funding.
FATCA requires all foreign (from the perspective of the US) financial institutions (FFIs) to report all monthly financial activity of US Persons to the US Internal Revenue Service (IRS). FFIs include banks, investment firms, insurance companies, pension funds and others.
Who exactly are “US Persons” has not yet been defined despite reporting having started on October first of this year, but do include the following; all US citizens and many who once were a citizen of the US (So, even if I had become a Japanese citizen, I would still be a US Person.) their spouses, regardless of their nationality or residence and any children from such a union regardless of place of birth and/ or residence. Anyone who works for an American founded corporation is also a US Person. It was very recently reported that there are a record three million American citizens born in the US who now live abroad. The US government estimates that there are six to seven million US Persons living outside the US who are subject to US tax law. Who are these 3 to 4 million US Persons?
Any FFI that doesn’t dance to Washington’s tune will be charged a noncompliance fee of thirty percent (30%) of any amount sent to, from, within or through the US. This would cause severe damage to the financial industry of any nation and possibly be fatal to some. But how can the US enforce this? Remember that the most common way to transfer money around the world has been hijacked by the US. In a word, extortion. My government is extorting the world.
Compliance is not cheap, however. The president of Canada’s largest bank and at least two banking organizations with in Europe have estimated the cost of the new computer system needed to comply with the reporting requirements to be $100,000,000 per large bank.
Knowing that is illegal in most countries for FFIs to give such information to anyone, especially a foreign government, without some kind of due process, the US Treasury Department will allow foreign nations to enter into InterGovernmental Agreements (IGAs) in which the signatory nations would agree to amend or bend their laws to allow their financial institutions to comply with these dictates from Washington. In return, Treasury will allow FFIs to report to their own governments which would then forward the information on to the IRS, thereby greatly reducing the financial burden on the individual banks. Faced with a choice between paying an additional 30% in fees for any money transfer across borders or buying a $100,000,000 reporting system in the absence of an IGA, bankers petitioned their governments to sign the offered IGA or risk financial collapse.
These IGAs violate not only the laws of the nations signing them with the US, but also, most likely international law and certainly do violate US law as well!
What must be reported? Although the reports are sent annually, FFI’s must report the highest monthly balance within any account held by a US Person in Dollars. This is a momentous task. Even if the balance remains the same in the local currency, exchange rates fluctuate daily. This requires a daily calculation of an account’s balance in dollars. Insurance companies and pension funds are also required to report the highest monthly value in US dollars of all policies and accounts held by US persons.
Banks simply do not have the resources to perform this task and risk the penalties stated above if they misreport. Thus, banks in Europe and around the world are now forbidding Americans from opening new accounts and closing the accounts of current US Person account holders.
Yeah, well so what, I’m not an American. It doesn’t effect me. You sort out your own problems and leave me alone!
Not so fast. By signing IGAs with the US, all signatory nations also agreed to exchange information amongst themselves. So, the UK agreed to also exchange all financial data of not only Japanese citizens who have accounts in the UK but of all Japanese residents. And so too did Japan agree to report to the UK all British nationals and UK residents who have accounts in Japan. And thus it is for all nations that have signed IGAs with the US.
This is how a friend of mine living just outside Tokyo, Japan, a British national has had his accounts in the UK closed. His now former banks have to report to the Japanese government and the reporting is too cumbersome to be bothered with. Likewise, he is experiencing great difficulty with his accounts in Japan as they have to report to the UK.
ARE YOU prepared for life without a bank account, insurance and pension?
My comment yesterday:
Thank you, Japan T, for your comment and your description of reaction of others to the subject of FATCA. I agree as many will here:
How do we, I, get such people to listen? They have no patience for anything that might upset their world view, just bat everything aside and reply in a manner that has nothing to do with what was just said. By the time it’s a reality to them, it will be too late. I have offered them this website’s address, none have bothered to check it out.
The importance of the information in the post of this particular thread and what you describe should not be overlooked. I think many have not taken their view past FATCA to GATCA.
Approaching GATCA? “Foreigners” (and not just U.S. foreigners) in Israel finding themselves ensnared …
P.S. THIS ARTICLE IS CERTAINLY RELEVANT: FATCA Costs on the Rise (Economia, November 2014).
Don’t give up trying to educate others. We must not!
All you say is true. However what has happened with FATCA and all the agreements between countries is all part of another agenda. Here inside the U.S. there has been a program put into our school system called ”common core”. It is preparation to become one world citizens and is promoted heavily by George Soros, a billionaire whose whereabouts is always in question. He was a Hungarian citizen who helped the NAZI’s collect the Jews for extermination and he said in an interview that was the happiest time of his life, because he then owned their assets.
He bought American status from one democrat president of another, but has worked his will on who gets elected and contributes big money to accomplish his stated goal of ”One World Government”. So money tranfer and taxation is his personal program. Oh, he also has an invented language he wants us all to speak, called ”sparanza”, so that one world government will work and he knows he will be dead before it all happens, he is 83 or 84 but looks older, but his father also had the same ideas and failed to do it in his lifetime also.
Money transfer and one currancy along with teaching from one agenda, speaking the same language, and having one central government would make somebody, yet to be determined, very powerful.
I had not heard of anybody else but Americans having their accounts closed. I question the veracity of this comment about somebody british who had his accounts closed in England for this reason.
Polly,
Similarly, http://isaacbrocksociety.ca/2014/10/29/approaching-gatca-foreigners-and-not-just-u-s-foreigners-in-israel-finding-themselves-ensnared/…
@Polly
I spent a considerable amount of time reading account terms and conditions for research I did on the availability of UK brokerage accounts to US persons. I can assure you that most banks have clauses in their terms and conditions that indicate they have the right to close your account if you are no longer resident in the UK.
Similarly, most brokerage accounts typically prevent you from providing instructions when not in the country. This would effectively ban you from operating your account anytime you were outside your resident country. Obviously, this makes managing your portfolio quite the chore if you travel frequently for work or otherwise.
The above is only tangentially related to FATCA. Small banks who only operate in one country are encouraged by FATCA to dump non-resident customers because it is a prerequisite (one of many) to qualifying for the FATCA local client base exemption (which means they only have to report on non-resident US persons) to have less than 2% of deposits held by non-residents.
See this article about Israeli banks:
http://aaci.org.il/articlenav.php?id=535#crackdown
“Some time ago American bankers constructed a money transfer system that functions well enough and is secure enough that it is reported to be the most commonly used route to transfer money across borders.”
The Genesis of which is otherwise known as Bretton-Woods:
http://isaacbrocksociety.ca/2014/07/20/how-usa-outfoxed-the-uk-for-usd-dominance-at-brenton-woods/
http://www.cfr.org/international-finance/battle-bretton-woods/p29748
http://www.lrb.co.uk/v35/n22/jamie-martin/were-we-bullied
For those who believe that FATCA represents some groundbreaking example of American fiscal imperialism, it is worth reviewing the history of how we got here in the first place. The same countries who first lined-up to genuflect to the US and receive their IGA communion are the same ones who let the Americans exploit them at the twilight of WWII. The world has never recovered from America’s conniving and duplicity at Bretton-Woods, where the seeds of the New World Order were sown.
@Edelweiss:
Yes, there are a few different things going on here, not all directly due to FATCA, but all coming together synergistically, if you will.
Japan has engaged in its own crackdown on unreported overseas income, and has even instituted its own version of FBAR this year. On other forums, there have been reports of residents of Japan (of any nationality) having accounts denied or frozen in the US and Canada, specifically because of Japanese residency. So I’m not surprised to hear it is happening in the UK, too. Financial institutions don’t want to get in trouble by offering services to residents of countries where they are not licensed to operate. Which never used to be a practical problem before, but is becoming one with universal information sharing agreements coming into place.
In general, we are heading to a balkanized world, where one is only allowed to have financial accounts in the country where one actually lives at the moment. Which would be bad enough, but perhaps just barely workable, as long as every country practices RBT. US persons are doubly screwed, however, if they are also denied services where they live due to the implications of CBT.
“By signing IGAs with the US, all signatory nations also agreed to exchange information amongst themselves. So, the UK agreed to also exchange all financial data of not only Japanese citizens who have accounts in the UK but of all Japanese residents. And so too did Japan agree to report to the UK all British nationals and UK residents who have accounts in Japan. And thus it is for all nations that have signed IGAs with the US.”
Can anybody here verify if the above is true? If it is, the mobility of people will quickly grind to a halt.
I don’t think it is the FATCA IGAs that are causing other countries to exchange information with each other. I think it is separate agreements between those countries. Plus, there is the new OECD multilateral agreement coming up.
Thanks all for the comments thus far.
Yes, it seems that the IGAs are not the mechanism. After some more email exchanges, my British friend wrote this.
“Let me clarify the situation as it is for UK expats.
The Japanese government does not allow its residents to use overseas financial institutions unless those institutions are registered with and approved by the Japanese financial authorities.They want overseas financial institutions that have Japanese residents on their books to declare them and,as far as I understand to close them down. This is not part of the FATCA issue but Japanese protectionism, as they want Japanese residents to only use Japanese institutions.
In addition to this,as part of FATCA Japanese residents must declare overseas assets to the Japanese financial authorities, but in a twist that probably only makes sense in Japan, they must declare their assets in financial institutions overseas to the government (a la FATCA) EVEN THOUGH they are not supposed to have them because those overseas financial institutions are not regulated by the Japanese regulatory authorities.”
This law, he believes, is from 2012.
My purpose here is to describe the “How” of this. I know that for myself that was the biggest obstacle to believing this was happening. It has also been the biggest obstacle in convincing Americans here in Japan of the danger. “Man, you’re crazy. We’re 7000 miles away! They can legislate all they want back home, they can’t get us here!” After the revalations brought to us by Mr. Snowmen, I thought, fool I was, that folks would be a bit more receptive to the idea that Uncle Sam has indeed found away into our pockets, 7000 miles away. Nope! The hostility to the idea is even worse than before.
So, how do I correct this part. It isn’t the IGAs that facilitate this. At first I thought instead of “By signing IGAs with the US, all signatory nations also agreed to exchange amongst themselves.” we could say ‘FATCA opened the flood gates to similar agreements between other countries.” Is there such an agreement b/n Japan and GB? If not, why do bankers in the UK care what the law in Japan is? Anyone know what is missing here, or at least the correct description of what is going on here?
@Calgary 411
What is the mechanism for Israeli banks to report to Europen nations (and I believe Canada?) on their citizens residing in Israel?
Also, it seems very strange that Israeli banks would turn over client info to a foreign government without due process, given their history.
Not doubting it is happening, just trying to learn the “how”. The “why”, while it interests me, is not at all as important to me as is “how”.
@JapanT
Yeah- I kinda thought there had to be more to the story. But still- times are changing. There are all sorts of new agreements to provide more transparency. What I find scary though is the thought of confiscation or the freezing of funds in the process. But is the goal here to really stop tax evasion? Or the funding of terrorist groups? That would be good. As opposed to being under the total control of a totalitarian regime…..
Japan T,
Thanks for your further comments. I will pass your question just above on to the person who sent he actual documentation required signed for the the Israeli bank, Bank Hapolaim, to see if he might know the “HOW”.
For now:
Here is the fax of Bank Hapolaim, an Israeli bank, requiring Canadians and EU member residents and/or immigrants (or CFCs) from those locations sign away their rights similar to US citizens: Israeli Bank(s) Declaration — shall apply with respect to any existing Account and any future Account, if relevant
October 29th post at Janglo: Foreigners in Israel find themselves ensnared in U.S. tax crackdown,Full Story (Haaretz)
Related (from another Brocker):
@Japan T:
See http://aaci.org.il/articlenav.php?id=535#crackdown
Specifically the banks in Israel are terrified they will get fined by Canada and Europe the same way they were by the US.
To quote near the bottom:
“Even if the banks are on legally shaky ground in freezing accounts, Benjamini contends they are not concerned because they know the client won’t sue. Taking the bank to court would bring them to the attention of the tax authorities, which they have been trying to avoid to begin with, he says.”
Thanks for reading and commenting on more of the WHY and HOW, Ben Ploni on this!!! Faster than my actions.
Japan T mentions: “Anyone who works for an American founded corporation is also a US Person.”
Can anyone say with certainty that this is accurate and where this information can be found?
LM,
Perhaps a partner in / of, rather than an employee of a US corporation outside the US (like all those inverted companies?)? http://www.irs.gov/Individuals/International-Taxpayers/Persons-Employed-Abroad-by-a-U.S.-Person (filing requirement with exemption)?
From Canadian Bankers Association, http://www.cba.ca/en/consumer-information/40-banking-basics/597-fatca-and-the-canada-us-intergovernmental-agreement-iga-information-for-clients-
http://www.irs.gov/Individuals/International-Taxpayers/U.S.-Citizens-and-Resident-Aliens-Abroad
http://en.wikipedia.org/wiki/Foreign_corporation
http://www.irs.gov/Individuals/International-Taxpayers/Persons-Employed-Abroad-by-a-U.S.-Person
@Calgary 411 –
Partner I understand, “employee” I did not.
The “employee” rather than “partner” comes from the following emails of a friend of mine
“This is getting ridiculous-I have to answer about dollar assets I have to my British stockbroker IN BRITAIN or they’ll freeze my account
Also, do I live or even visit America and how many days a year I go there”
2014 Jan 09
“Sample questions:
Do you have one US parent?
Were you born in the US?
Do you have any US assets?
Do you work for a US created corporation ?
If yes then you need to fill in a form for US tax information”
I am sure I ran across this elsewhere too.
I thought it was the fax from Bank Hapolaim that had a similar statement but upon rereading it, it doesn’t seem to. So, either I misread the fax or I can’t find this second mention.
This paper work my friend had to do to prove he was not a US Person arrived via registered mail and the response was required by a certain date or his account would be frozen.
As I recall, it was a 12 page questionaire with 8 of those pages asking about US connections. Answers required documanted proof. He was quite busy until he finished and sent it back. He told my that it was very difficult for him to gather the required documentation and he barely sent it off in time. Which is why he didn’t copy the questions.
Needless to say, this came out of the clear blue for him and privided for a very stressful time that has continued to this day, 11 months later.
In the post “Is TD Bank overzealously ferreting out US persons?” it seems that there is either confusion over the rules and banks are choosing to error on the side of caution ( for the bank) or banks are looking ahead to where this is all going and getting ahead of it.
Regardless, it is not the law nor regulation that causes trouble, it is its implementation. If banks are asking their customers if they work for a US founded company, then such people are goining to have their info reported to the US and perhaps have their accounts closed. That is my fear. Justified? Unjustified?
In his email to me, my friend states that the requirement for FIs in the UK to report to Japan on all accounts held by residents of Japan is not related to FATCA rather a 2012 Japanese law.
I’m not so sure. It may be that this law was not passed to facilitate FATCA but I doubt it even would have been submitted for debate if FATCA had not paved the way first.
Has anyone compiled a list of these automatic financial information sharing agreements and laws and there dates of passage? I bet that not a one predates FATCA. I’m not talking about tax treaties wherein the parties agree to hand over infon after due process. I don’t think anyone here has an issue with governments sharing info after a legal process shows probable cause. What I, and I believe we, are interested in is the automatic reporting of all info on as many people as they can say belong to one group or another. If none predate FATCA, then is it incorrect to say that all of these newer agreements and laws were spawned by FATCA?
These links “may” help with the information required:
OECD Automatic Exchange of Information
OECD – Tax Transparency, 2014 Report on Progress
Wikipedia: Tax Information Exchange Agreements (TIEAs) Signed
Is the above list of who is a US person by US law complete? It mentions nothing of the the non resident alien spouses of US citizens nor those who renounced in the past but did not get a CLN and many others who have posted on this site of the problems they are facing.
This is part of the problem I am trying to address. Everyone I try to tell cites the above and say they have no concerns as they are not on the list. Yet, from what I’ve read on these pages, there a lot of people who are not in the list above who have found that they are nontheless a US person. The lack of a clear definition for “US person” has been cited in various posts (sorry, I have these somewhere but lack the time to find them, hence my request for help on this summary) on this site as reasons for FFIs refusing accounts. How can we explain this part of the problem effectively?
@Calgary411
Thanks for the links!
At first glance, it does appear that automatic info transfers are post FATCA. The wikipedia link shows that there were many bilateral agreements to share info predating FATCA but that they typical allow for the info to be disclosed to courts and judicial forums only for the purpose of determination if the taxation matter in question. That seems to me that due process is involved. Other statements seem to me to confirm that this is to be done one individuals or small groups of individuals suspected of actual tax crimes, not the wholesale gathering and reporting on all persons from any given country.
US person for tax purposes is well defined in the above comments. It includes the corporation itself.
FATCA has no bounds, the banks can do whatever they want to do. So, if they want to ask about being an employee of a US corporation and threaten to close your account, FATCA doesn’t stop them. If the banker just shoots the US person standing in front of him, FATCA has nothing against it. It would solve the FATCA issues quite well.
US person can mean other things with other laws. Google or Wikipedia Foreign Corrupt Practices Act. A US person can be defined as a German who works in Nigeria for a German company that happens to have a US subsidiary. Like Siemens.
There are a number of instances, like a Siemens case, where a German national and his company were convicted under the Foreign Corrupt Practices Act, where it is against US law to bribe govt officials in other countries.
US person for that law is incredibly wide and is used to convict foreign nationals.
ps. the convictions are most aggressively pursued when a US company loses a bid and complains that some other company must have gotten the job due to bribes.