An excellent guest column by Brian Garst in the Cayman Financial Review reports on the US Government’s “atrocious” mishandling of its citizens’ private information and how inevitable breaches of poorly designed and managed IRS and OECD reporting systems will soon unleash a global torrent of unsecured personal identification and financial data:
http://www.compasscayman.com/cfr/2015/04/22/FATCA-reporting-system-leaves-taxpayer-data-vulnerable/
Here’s an excerpt:
The IRS itself has been accused by government watchdogs of having serious vulnerabilities, and of moving too slowly to fix them.
Every year since 2008, the Government Accounting Office has identified 100 cybersecurity weaknesses at the agency. Specifically, the IRS has been faulted for routinely failing to encrypt data or for using weak methods for doing so, allowing greater access to data than workers require to perform their duties, permitting user passwords that are easily guessed, and being dangerously slow to install crucial software updates and security patches.
This record alone is enough to question the ability of the IRS to secure and protect the sheer breadth of financial records it will receive due to FATCA, but serious concerns are already being raised about IDES’ specific security protocols.
The system’s rules for encryption recommend use of Electronic Codebook (ECB) as its encryption mode. ECB is widely faulted by cryptography experts as being incredibly weak, as it encrypts blocks one at a time and it thus does a poor job of hiding data patterns. Upon discovering the IDES recommendation of ECB in its protocols, prominent security expert Bruce Schneier incredulously asked, “Are they serious?”
Apparently they are not about protecting taxpayer information.
@Don- Not sure how to proceed. Do you think the administrators here could get us in touch?
@Fred – I think what needs to be done initially is the following:
– Get in contact with Discrimination Law departments in a UK universities for supporters / contacts to start
– Create a duplicate IBS website for Europe
– Then start contacting US persons (even well know public ones to start) and others affected by FATCA even if that means picking up the phone yourself to start collecting a pool of talent consisting of IT, Legal, Fundraising expertise, TV/Radio Media, Social Media and Lobbying. If we can get a combination of people who donate their expertise as well as money, an effective campaign could be waged. It will be a snowball effect, the more contacts, the more awareness and hopefully it’ll grow from there.
– The stated goal must be to get FATCA/IGA ruled discriminatory, get resident UK/EU citizens exempted from FATCA reporting and have an effective machine in place to stop the Government from caving in to other US Government demands after the IGA is ruled illegal in future.
We also have the added problem of UK banks changing their terms and conditions recently allowing them to share account data directly with foreign tax authorities. UK banks must have anticipated there is a possibility the IGA could collapse in future and they now have an avenue to bypass that if necessary. If you go the telegraph.co.uk, there was an article a few months back on this issue (search under journalist Kyle Caldwell).
I hate to say writing your MP or MEP is a waste of time as seen in other countries. This has to go straight to the courts to get resolved. Most of them have been instructed to shut up by their party leadership and pass the buck to the courts.
So in the UK there may be a possibility having to sue a bank as well to get those new T&Cs ruled illegal. At the end of the day the bank would have to defend to which tax authorities outside the EU they are exactly sending out data. This ‘back office’ discrimination would have to be exposed. Somewhere in the process one resident UK/EU citizen is being treated differently than another UK/EU citizen with a US place of birth. So all things being equal the bank is discriminating. The banks will argue it doesn’t happen, they list every nationality under the sun on their website for opening accounts, and YOU also agreed to all this as well with their new T&Cs, but at the end of the day a UK citizen born in Barnsley is going to be treated differently than a UK citizen born in America. That’s one issue the banks will find very hard to dance around.
What is really at the core of this debate is ‘Does a foreign country outside of the EU have the right to obtain bank account data and tax an EU citizen residing in the EU on income and assets derived solely in the EU?” If you have no financial or substantial financial connects with the US other than your place of birth why on Earth does the US have the right to tax you? This puts someone at a distinct disadvantage with their relationships with other People (UK / EU citizens), Government, and FFIs. That’s not right. Also the IGA effectively burdens the person with almost a tax increase having to pay compliance costs to file tax returns to the US with threat of penalties that other resident UK citizens don’t have to pay.
In some respects it’s the Boston Tea Party all over again. Some would claim US ex-pats have representation, but I would disagree on the basis our votes are so diluted across 50 states that they are rendered meaningless.
When I first saw FATCA 5 years ago, my first reaction was this is not a tax issue, it’s discrimination.
Somehow the Governments around the world have taken the decision to throw their own resident citizens under the IRS bus and leave the final version to their courts. That’s not right.
That’s a rough draft on my thinking on the matter.
@Don It’s not a tax issue. It’s punishment, power and control.
That is what CBT has been about since the Civil War. It still is. FATCA is one more way to control people, financial institutions and governments around the world.
@Fred. Ah, I now understand why you are considering getting back into the system. The German banks are obviously treating their US customers more harshly than the Canadian banks. Although a few Canadian banks are refusing new customers with a US taint they so far are not closing the accounts of existing ones. So what works in Canada may not work in Germany.
But how would a customer prove to their bank they are IRS compliant? Even a person who has been filing all along and is theoretically compliant never hears anything from the IRS. Canadians at least receive a Notice of Assessment every year showing a zero balance due.
Even a CLN may not be good enough for some banks; they may have simply made the business decision (and I can’t say I blame them) that they don’t want ANY customers with a US connection (current or former) because it just isn’t worth the risk to their bottom line. What a pathetic mess.
@Don.
“Somehow the Governments around the world have taken the decision to throw their own resident citizens under the IRS bus and leave the final version to their courts.”
Not somehow. Governments have taken the decision that protecting the interests of their financial institutions is a far higher priority than protecting the rights of their citizens and the sovereignty of their tax base. This is because the large financial institutions have the ear of politicians whereas the voting public does not. It is a matter of who makes the biggest campaign contributions.
I heard someone in a TV interview recently state: “Politicians should be required to wear coveralls just like Nascar drivers and these suits should be plastered with the logos of all of their corporate sponsors so that every one can know who they are really representing.”
@max57 Yes, a CLN is not going to be enough. A bank in the UK, having seen the CLN of someone who expatriated 10 years ago, wants proof that the 8854 was filed. Generally, there is no way to prove that an 8854 was filed, just as there is no way to satisfy some banks that their customer is tax compliant.
@Don: You said, “I hate to say writing your MP or MEP is a waste of time as seen in other countries.”
This is not necessarily true. In fact, I strongly advise any UK residents to write to their MPs. I had a surprisingly positive experience when I lived in London. Due to a major FUBAR by the Home Office, tens of thousands of foreign residents’ passports were being stored in broom closets inside a parking garage in Croydon, while their new computer system was unable to process visa renewals, with up to a year’s wait to retrieve one’s passport, hence stranding all of us in the UK. I phoned the US Embassy numerous times and went there once in person. Clearly I wasn’t the only one. They were fully aware of the problem, but put no pressure on the UK government to return passports to US citizens with provisional visas. The Embassy claimed their hands were tied, as such representations were up to the Secretary of State, who was likely too busy waging war somewhere. Some prominent companies employing expats from around the world threatened lawsuits against the Home Office.
So I wrote to my local MP in south London, making it very clear I was not a UK citizen, hence not a voter, and begged him to help a taxpaying constituent. I explained the situation, that I had work in Ireland I couldn’t travel to, hence harming my livelihood, besides being a violation of my rights to allow the UK government to essentially confiscate the passport of someone who was not involved in or accused of a crime. Voila! Ten days later I received a call from the Immigration office to pick up my passport and visa. When I got there, the clerk gave me an extremely sour look and said, “You’re the chap got that MP all bothered.”
Do I need to point out that I have never in my life received anything other than a form letter in response to writing to any USA lawmaker?
It would seem to me that some MPs might find FATCA to be a worthy political issue to get behind, and even pressure the right ministers to question the policy. What harm could it do?
Correction to the above: When my husband and I picked up our visas, the clerk directed her sour comment to him, despite the fact that I’d done all the lobbying work. So, still some sexism going on there.
@Barbara – The problem is that all the party leaderships have probably passed along the ‘defend FATCA’ and ‘ignore’ message to their MPs.
Senator Charles Grassley was fond of saying ‘Why shouldn’t an American in Paris pay the same taxes as an American in Peoria.’
Well ‘Why shouldn’t a British / EU citizen resident in the UK with a US place of birth have the same financial life as a UK citizen born in Barnsley?”
That MP might have assisted you with your passport issue, but could very much ignore you totally when it comes to FATCA.
Demand an ANSWER from the opposition candidates and do NOT let them fail to answer their position on the FATCA IGA-enabling Canadian legislation.
In Massachusetts, activists went through the burdensome process of getting many thousands of signatures of registered voters in an initiative petition, which if it became law, would have banned same-sex marriages. The first step is, the Massachusetts Legislature is REQUIRED to hold a joint session and have a recorded vote; and the matter is dead unless at least 25 percent of the members vote for it. Well, too many members and leaders were too weak to want to go on record one way or the other. It works better if they mumble incoherently. There was nothing the courts could do because it was the Legislature that failed to meet the deadline for the joint session, and once it passed, it was over. This was totally in defiance of the Massachusetts Constitution but the cowards did not want to lose votes. What if they go on record and then times change? Too many voters interpret silence as okay. It’s not.
Of course, the issue facing the Massachusetts Legislature has nothing to do with IBS, but the cowardice of the members of the Massachusetts Legislature will be reflected by Members of the Canadian Parliament, and candidates.
This may get missed (it’s in “Current Surveys You Can Take – Let Them Know What You Think!”) but the NDP is currently asking “What Matters to You”. I put “Continue to fight FATCA” under other. It’s just a little reminder that we are still here and we will not accept being forgotten. I always mess up hot links so here’s the whole, very long, link:
http://www.ndp.ca/mysay?utm_medium=email&utm_source=newdemocrats&utm_content=2%20-%20Will%20you%20fill%20out%20this%20quick%20survey%20and%20&utm_campaign=20150422_HL1b_TM_EN_Update&source=20150422_HL1b_TM_EN_Update
@Tom Algiers – There’s nothing stopping someone posting all the names of Canadian MPs against FATCA and those who de facto approve through silence on the IBS website.
Name and shame before 19 October 2015 (next scheduled Canadian Federal Election).
If IBS makes a mistake, let the MP come out publicly and denounce FATCA.
@ Don
I’m liking your idea — a Name & Shame for Canadian MPs.
A) FOR FATCA
B) AGAINST FATCA
C) SILENT
They all need to be clearly categorized but how? Prior to Bill C-31 I sent individual e-mails (no cc’s) to every single MP and got only 60 replies (party lines prevailed). I asked each of them to clarify their stance on FATCA. BTW, it was a 3 day project. Does anyone know how to wring out CLEAR responses from MPs?
“… CLEAR responses from MPs?” Yes I do realize how difficult that is — nigh on impossible.
Here is a starting point: https://openparliament.ca/votes/41-2/207/ — could ask if they’ve changed their minds since their vote on Bill C-31 implementation of the IGA that brought FATCA law to Canada.
CLEAR responses from MPs?????????????????????
Clear answers? Any answer would be welcome. ADCS sent a letter a month ago to Harper, Mulcair, Trudeau, Green and several MPs.
http://maplesandbox.ca/2015/fatca-letter-to-leaders-and-mps/
Alex Atamarenko and Don Davies responded suggesting we contact Mulcair or Rankin (which we had already done).
The others have not replied even though many of the answers are Yes or No.
My Liberal candidate (whom I worked with when I did commentaries for the local TV station) initially ignored me, then responded when I invited her to the meeting last week (She was unable to attend). She said:
I told her I know what has or hasn’t been done. What I want to know now is what the Liberals will do if they are elected. I asked her to get a response from Justin Trudeau on the questions. She has not replied.
The NDP candidate was also unable to attend the meeting. Here was his reply to my message to him:
I suggested his wife might be interested in attending. I asked him to get an answer from Mulcair.
He did not reply to that message.
I invited the four London MPs (3 Cons, 1 NDP) to the meeting and all the known candidates for the four ridings to the meeting. With the exception of the two above, none responded. None attended.
Oops. That should have been my Liberal candidate–not my Liberal MP. Could one of the moderators correct it please. She has never been an MP. She was the anchor at the TV station for about 20 years. She left there to work in community relations for Canada Trust (before TD took it over) and now works for the Board of Education.
@Blaze
As you know, I’ve been in close communication with my Liberal candidate, Pamela Goldsmith-Jones. She’s even introduced me to other USP’s in our riding who’ve expressed their concerns about the IGA to her. It’s great that she, your candidate, Ted Hsu’s and Scott Brison speak out strongly against it, but where’s the Liberal Party’s policy statement on this? I wish everyone had Elizabeth May’s guts!
You mean like this, Maz57?
https://www.google.ca/search?q=politicians+nascar+suits&ie=UTF-8&oe=UTF-8&hl=en&client=safari#imgrc=_LWh1iJJ54eZrM%253A%3Bundefined%3Bhttp%253A%252F%252Fi.imgur.com%252Fj5c2S.jpg%3Bhttp%253A%252F%252Fwww.reddit.com%252Fcomments%252Fgb8jn%252F%3B2323%3B3000
http://www.ora.tv/offthegrid/politicians-should-wear-nascar-suits-0_2lxhvl72b58p
Blaze,
You might update your Liberal candidate that the *exemption* on Canadian registered accounts is for the banks not having to report to the CRA those accounts. However, they are still reportable and, until I see something that proves otherwise, at least the RESP and the RDSP (and probably the TFSA) are reportable to the IRS as *foreign trust accounts*. You might give her this example (mine — I paid US$3,661 to the IRS as I am the Holder of an Registered Disability Savings Plan for my Canadian-born, never-lived-in-the USA son). Contributions for bonds and grants for the RESP and the RDSP come from Canadian taxpayers — and the US wants those contributions taxed and siphoned directly to the IRS — the ONLY tax I owed the USA:
This is the way the Canadian RDSP is taxed by the US for US Persons in Canada:
1. If the sponsor / Holder of an RDSP (or RESP for that matter) is a US person then (US person analysis of the beneficiary is irrelevant):
a. The income generated by the RDSP is taxed to the US person sponsor currently as it is earned
b. The grant is taxed to the US person sponsor when it is distributed to the beneficiary
c. US person sponsor must file 3520A annually
d. US person sponsor must file 3520 annually
2. If the sponsor / Holder of a RDSP (or RESP) is NOT a US person, AND the beneficiary is a US person then:
a. The income generated by the RDSP (RESP) is taxed to the US beneficiary currently as it is earned
b. The grant is taxed to the US person beneficiary when it is distributed
c. US person beneficiary must file 3520 annually (no 3520A)
Neither RDSPs nor RESPs are covered by the Canada / US Tax Treaty.
If any MP or candidate wants to discuss this with me, I’m open. I don’t think one penny of Canadian taxpayer money that is contributed to these accounts should go to the IRS.
This is what our states have become. Purely fascist and bureaucratic, with means of control that extend to everyone. I really wanna see how long they will be able to protect our data, or whether it is even in their interest. Why not put everything in the Google Spreadsheet. Brainwashed, ever consuming, and indebted Canadians, they couldn’t care less.
Don: thanks. I agree; not sure I have the energy to get this running myself, but I would help other people if they take the lead. I live in Belgium. I have lost the documents from D. Bank. I have written them recently, trying to get them to document the reason they terminated my accounts.
Nevertheless setting up a site should be feasible.
I completely agree with your various points. It would be a nice twist to document discrimination based on origin.
maz57: it appears that they just want you to state that you are compliant, and give them your US taxpayer number. Which they will need when reporting to local government Under IGA.
One fear I have is the reporting of accounts which are exempt from reporting, ie some retirement accounts.
It also appears that they will accept a CLN.
@Fred, I fear that many accounts exempt from reporting will still be reported, as could many former citizens’ accounts. I know if I were in the bank’s shoes that I would err on caution and over-report rather than risk a punitive fine!
This is why it’s so important to have filed 8854 and correctly logged out of the US tax system to avoid potential ongoing IRS problems…
A wish for all of you to light a fire under the ass of the Arvay team .
I want to see a photo of him(Joe Arvay) foaming at the mouth during trial
full of the rage that is inside all of us affected by this bullshit we are being
forced fed. Here’s to another court downfall by the spineless bastard Harper
and his no-balls cronies. What a worthless bunch of amoebic fuckwads these poor bastards
are. And to think they get paid by taxpayers for their cowardly approach.
Harper should have flown to Washington, grabbed Obama and treasury secretary Lew by the balls and refused to let go until they signed repeal FATCA forms.
But no, we are the fortunate to have a bunch of PUSSIES in Ottawa who hightail and turn cheek
and Washingtons bidding. We all should be disgraced at their cowardice.