Global News has the following report:
U.S. sues Vancouver dual citizen for over $1M for not reporting accounts
This is big news. And it reveals and confirms my prediction of what FATCA would be used for: To go after the bank accounts of “US persons” living in foreign countries by using FBAR fines and FATCA information. I called it the Master Plan.
A few observations on this article:
(1) Clearly this lawsuit should help the ADSC lawsuit. Here is a case of real hazard that failure to protect Canadians from IRS intrusiveness will result in.
(2) This case is not based on tax owed, and so this is purely an FBAR matter. But IRS code has no jurisdiction in this matter.
(3) The article doesn’t say where the lawsuit is taking place, but then says that the papers were deposited in Seattle in Federal court.
(4) The fine of $100,000 or 50% of account is wrong: Or did it go up from $10,000?
(5) President Donald Trump has made no difference in the persecution of so-called “Americans abroad”.
(6) This is a Canadian living in Canada. He is therefore an innocent person being sued by the government of the USA, for small money. I.e., he is a minnow, and what Nina Olsen has called a benign actor.
(7) The lawsuit shows that QI provisions are not sufficent for the USA government to seize Canadian accounts in Canada.
(8) The Justice Department is not suing this person in Canadian court. But perhaps that will come next.
See also:
U.S. government suing Canadian resident for $1.1M over bank form
@Nononymous
“Just saying, Turks and Caicos + Switzerland ain’t the best optics.”
True, but I wonder if better optics would matter. Not saying we shouldn’t search for them, just that we shouldn’t pin any hopes on them.
“No such thing as SOL for fraudsters. Sun never sets.”
The IRS told me that there is, when the fraudsters are IRS employees (inclutading Monica Hernandez and her cohorts). Last month I filed yet another lawsuit, waiting for the IRS to reply. Maybe the IRS will say their embezzlers get to keep the stolen money — some of the embezzlers are in jail but maybe the IRS will say an SOL lets the embezzlers keep the money.
Fish. If he had Swiss accounts and Turks and Caicos that does not fit the profile of someone living on small Canadian pension and social security.
@Nononymous: indeed document 2 makes for an entertaining and intriguing read. It also makes me somewhat doubtful they’ll get anything out of this guy. Amusing how they explicitly trample foreign and international law when they need to, but turn around and cite the Hague Convention when useful. Makes government lawyers seem like true brigands.
Seems obvious to me that some cases are just bad PR for our cause (I leave this case out because I don’t know enough about it). We must remember that we get all worked-up here among like-minded souls (at least on this subject) but that “others” are, first, ignorant of the situation, and second, naturally against people with foreign accounts. As much as we may root for the right to privacy, as much as we nod in agreement when we tell each other that it was good that some victims of the Nazis were able to have foreign accounts and use them to flee to safety, that tax fraud is much smaller than usually estimated, that the USA constantly over-reaches and will continue to do so under Trump… these are thoughts born of years of pondering and researching the subject and addictive consultation of the IBS website. In my humble opinion it is best to publicize and explain continuously how FATCA and FBARs are toxic because of CBT, and that our local French, Belgian, Canadian accounts are NOT foreign because that’s where we live.
The problem is that the IRS will not spectacularly go after small fish living across the pond. Not because they are smart, but because it is not worth it. It the currently discussed case, if they can get $1m from the guy, it’ll pay for their triplicate FedEx packages and for some salaries. And they probably hope to have something on him in the US, because trying a case abroad will be even more difficult.
It would seem that with the level of “structuring” and multiple offshore jurisdictions “Turk” Islands, Switzerland + shell company: this would be the sort of case that the govt would want to grandstand on.
But we need more facts. Currently the case is still in the phase of certifying service of the lawsuit to the defendant. Can we get more info on the Tax Court case pending or adjudicated on this guy? When (or if) the new case goes to discovery, it would be interesting to see what is actually alleged as the source of funds.
Was the defendant a relatively small fish just trying to use whatever international financial instruments he could to protect the proceeds of an asset that he earned the hard way in Canada (house, life-savings etc.) or was he up to something else and/or living in the US also?
It is important to have more facts. The compliance condors are going to use this case to scare the hell out of people again, and we need to ensure that the whole truth gets out.
@USX, My understanding is that the no Statute of Limitations on fraud is for fraudulent tax filings.
Besides, there is no such thing as a fraudulent unfiled FBAR. That is BS. FBAR starts as a crime against the privacy of the individual.
And if one claims that the person committed some other heinous crime through the unfiled form such as tax evasion or terrorism–then these crimes themselves are the ones that do not have SOL–not the FBAR. Pomerantz isn’t being charged with criminal FBAR. This is a civil case. And so let’s see? There is no Statue of Limitations on misdemeanors in the USA? Really?
The accounts include two with the CIBC and one with RBC
-How were these found? FATCA?
@JC, Others have pointed out that this FBAR fine is before the FATCA IGA kicked. Over the last two years, information on 150K and 300K accounts have been handed over to IRS by the CRA.
Yet even though this account information was not given to the IRS by the Canadian government it shows the extreme hazard that the CRA providing information to the IRS can place a person. Thus, I stand by my assessment of the Master Plan concept. What the IRS/US Justice Department needs is only a mechanism to correlate unfiled FBARs with the information that the CRA has provided to the IRS.
For others who see this person as more than a minnow, I base that assessment on three things:
(1) this is a civil fine.
(2) this is a small fine by FBAR standards. If this were a “whale” the fine over three years would be much larger.
(3) this is not related to Mr. Pomerantz’s tax audit but strictly about unreported FBARs.
But by the grace of God there go I.
Follow-up article by Elizabeth Thompson:
http://www.cbc.ca/news/politics/taxes-cra-irs-banking-1.4028793
Whatever the actual situation of Mr. Pomerantz, he is now a Canadian citizen and resident and appears to be wanted by the IRS.
What protection will be provided to him if he was a Canadian citizen and resident at the time of the alleged “offense”, or a US resident at the time, or perhaps a bit of both? Is that at all relevant?
“The Canada Revenue Agency has confirmed that it will not help the U.S. Internal Revenue Service collect penalties imposed against dual citizens (or any Canadian citizens) for failing to meet financial information filing requirements under U.S. tax laws.”
http://business.financialpost.com/legal-post/cra-will-not-assist-irs-in-collecting-penalties-against-dual-citizens-subject-to-fatca
@Stephen, The article is not exactly follow-up from Pomerantz’s being sued by Justice in Seattle. It is dated from 2014. On the other hand, it gives the government of Canada plausible escape route: “We won’t collect the FBAR fines, so we are not at fault.”
But the point is that the CRA is now giving the information to the USA to hang Canadians out to dry. This is not equal protection. It is the extraordinary rendition of a person private banking information to foreign and hostile power.
And this line is interesting:
“The ruling means that dual citizens who do not enter the U.S. (or U.S. airspace) and have no assets in the U.S. will be shielded from these penalties.”
Uneffing believable that the article suggests that you cannot even treat the USA as flyover country! (As I have done since 2010–except for my one trip to the USA as a family emergency)
@Stephen Kish
You comment:
The U.S. Department of “Justice” (what a misnomer) is suing Mr. Pomerantz in a U.S. court. This is completely irrelevant to any Tax Treaty issues. In other words, the USA is making no attempt to ask the Government of Canada to assist in collection.
Now, what will be interesting is whether (assuming the DOJ is successful) the USA will attempt to try to enforce the U.S. based judgment in Canada using some sort of “reciprocal enforcement of Judgement” registration provisions. I have never considered whether the Common Law Revenue rule could be used as an excuse to not allow such a judgment to be registered in Canada. This is an interesting question.
I am beginning to think that all this discussion of “legal this” or “legal that” is obscuring the core issue. The core issue is that FBAR is wrong, that FATCA is wrong, that the Governments are evil and that people are going to have to figure out to better defend themselves.
Even though the Pomerantz case has nothing to do with FATCA (and should not be construed as the IRS targeting Canadians) it is a glimpse of what the future will be.
The question is this:
What are individuals going to do to protect themselves from the combined effects of these evil laws and evil governments. There is NO point in looking to home country governments and to the courts to find protection.
The escalation of the war against “U.S. Persons” is visible, significant and intolerable.
At a bare minimum, those afflicted with the cancerous tumour of U.S. citizenship had better get it surgically removed “quick time”.
“I am beginning to think that all this discussion of “legal this” or “legal that” is obscuring the core issue. The core issue is that FBAR is wrong, that FATCA is wrong, that the Governments are evil and that people are going to have to figure out to better defend themselves.”
BINGO
USCitizenAbroad wrote: “Even though the Pomerantz case has nothing to do with FATCA (and should not be construed as the IRS targeting Canadians) it is a glimpse of what the future will be.”
I have changed the title from “The Master Plan Fulfilled” to “The FATCA Master Plan Revealed”
Passing the buck:
CBC News, Elizabeth Thompson, March 17, 2017: “Canadians should be told if their banking info shared with IRS, says MP — Canada Revenue Agency says banks should tell their clients”
Emphasis added to extract from 17 Mar 2017 Thompson article:
Now. Is there any known instance of such proactive communication? Communication is a requirement? If that requirement is not met, what legal liability accrues to the financial institution?
Questions, questions, questions.
Blockquoting overrides tagging for emphasis. So, repeat extract without blockquoting, to display emphasis:
“The legislation implementing the Canada-U.S. Intergovernmental Agreement (IGA) requires that Canadian financial institutions communicate with account holders of pre-existing accounts if there is information suggesting that they are a U.S. citizen or resident (e.g., their client file contains a U.S. contact address or phone number,)” said spokesperson Chloé Luciani-Girouard.
@usxcanada Blockquoting overrides tagging for emphasis
Yep, the local stylesheet is weird. “strong” and “em” instead of “b” and “i” work, though:
@usxcanada
Questions anyone can ask the Director of Competent Authority, as I have. I heard back from them regarding my most recent letter to the Revenue Minister addressing this specific issue. I wrote:
Dear Minister Lebouthillier,
First of all I must apologize for my delayed response in thanking you for your July 14, 2016 letter in response to my personal request as to whether my banking information has been turned over to the IRS through the CRA as per the FATCA IGA. The CRA has since doubled the number of “information slips” sent to the IRS last year – is there a plan in place to notify Canadian residents of the data transfer as per Privacy Commissioner Therrien’s suggestion before the Standing Committee on Access to Information, Privacy and Ethics on the Transfer of Information to the United States Internal Revenue Service last year? If not, why?
Also, do you have knowledge as to how the IRS will respond to the information it receives? As many Canadians are unaware of their US tax filing obligations, it is critical to note that without knowing their Canadian banking information has been sent to the IRS, there is the very strong possibility that the first time these Canadians hear about any tax obligations will be from the IRS itself, denying the “US person” the ability to enter one of the available IRS amnesty programs for delinquent tax filers. In all likelihood, that means Canadians who have been previously unaware of their US tax filing obligations will be hit with the FULL FORCE of IRS penalties on delinquent tax and FBAR reporting!
I support your recent efforts to crack down on offshore tax evasion, but these efforts do not appear to include Canada pursuing the important reciprocal element of the FATCA IGA. It appears, especially with a unified Republican government, that it is unlikely Canada will receive its “fair share” under its agreement with the US in obtaining the data on Canadians who aren’t paying the appropriate amount of Canadian tax. In all fairness to Canadians such as myself who pays her “fair share” of Canadian tax, Canada must withdraw from the agreement at the next available opportunity.
Thank you for the contact information for Ms Sue Murray, Director of the Competent Authority Services Division.
Yours truly,
[BB]
Now the RM’s office claims that banks are putting its customers with indicia “on notice”. That is simple not the case, as the CRA’s own FATCA IGA FAQ’s states:
6. Does my Canadian financial institution have to notify me if information on my accounts is reported to the CRA?
Canadian financial institutions must be open about their policies and procedures for complying with the agreement and must be prepared to make this information available to anyone who asks about them. Although financial institutions do not have to automatically notify their account holders about reporting to the CRA under the agreement, they must, upon request, allow account holders to have access to the personal information that has been reported.
The CRA is confused. Anyone who wishes for the Competent Authority to clarify should contact its Director as supplied in the letter the Revenue Ministrr wrote to me last July. Note Gwen Mah has replaced Sue Miller:
http://isaacbrocksociety.ca/2016/08/17/bubblebustin-passes-along-some-information-to-help-other-canadians-searching-for-whether-or-not-their-banking-information-was-sent-to-cra-for-fatca-information-reporting/
So I read that as a bank is required to communicate with an account-holder if it believes the account-holder to have US indicia. Which is not the same thing as a bank being required to inform an account-holder that it has passed their information on to CRA for further passage on to the US.
I’ve never heard from my regular bank because, like most normal bank accounts in Canada, there’s nothing on record about citizenship or birthplace. I was asked about possible US citizenship by the investment firm that handles my RRSPs, even though those were old accounts. I assume I was asked because either it was routine for them to ask all existing clients (their customers are typically worth several orders of magnitude more than I am) or because they knew via my parents that I had US citizenship. I told them I wasn’t a US citizen (false) and that since RRSPs aren’t reportable under the IGA, they had no business asking.
This is from the CRA’s FAQs:
“How does my financial institution determine if I am a U.S. person?
If you are a client at a financial institution as of June 30, 2014 and your account needs to be reviewed, your financial institution has to review certain information it already has, such as a U.S. address, for indications that you may be a U.S. person. If there is such an indication, your financial institution must seek to obtain or review certain information from you to verify whether you are a U.S. person.
If you are a new client at a financial institution after June 30, 2014, your financial institution may ask you to certify whether you are a U.S. person when you open your account. It will then confirm the reasonableness of this certification based on the information you provide when you open the account. Alternatively, your financial institution may follow a process similar to that described above for existing clients, based on a review of the information you provide when you open the account.
For both existing and new accounts, if the information associated with your account is later changed in a way that suggests you may be a U.S. person (for example, you change your address to a U.S. address), your financial institution must take steps that may include following up with you to reverify your status.”
Correct me if I’m wrong, but I take this to mean that Canadian banks aren’t actively searching for indicia in existing accounts, but will if the account “needs to be reviewed” for some reason other than US indicia. That review with then look for indicia.
Also Canadian banks “may” ask a new account opener if they are a US person. I wonder what determines which ones do or don’t.
It’s all super vague and subjective.
I have no US indicia with my regular bank. I’m sure that if I go in to open another account they might ask to review and update my personal information, but if so it would just be a verbal question about US citizenship, which I would answer by saying no.
With the investment firm, I might have US indicia, but I’m not sure. It could be that they just went and asked all their clients as part of their FATCA compliance procedures. It could be that they knew about my US citizenship via my parents, who had probably mentioned it when discussing estate planning. Or I could in fact have an old US address on file, now that I think of it, because I had my parents use this firm to open a small RRSP in my name to reduce the tax bill on my Canadian scholarship income while I was going to grad school in the States. I any case I told them I wasn’t a US citizen and they didn’t seem to object to this falsehood.
I get the feeling that banks and the CRA aren’t going to go out of their way to find US persons. When I pointed out to Gwen Mah at the Competent Authority yesterday how FATCA falls short of finding all US persons due to the fact that many US citizens have Canadian birthplaces and therefore no indicia, instead of condemning the agreement as ineffective as I hoped she would, she instead seemed happy about that fact. She said that she felt bad about those people the IGA affects, so they’re probably happy that a lot of Canadians won’t be caught. As much as I don’t wish this upon anyone, I am offended that the Canadian government would think it’s ok to offer up those with US birthplaces as sacrificial lambs for the FATCA gods for a regime that falls woefully short of its objective – which is to find US persons.
Petros: I think at least one of the articles said that the lawsuit against Mr. Pomerantz was filed in May 2016. That’s 10 months ago. So I’m still left wondering why it took so long to get this story into the media.
Bubblebustin: Just saw your comment on the reason it may have taken so long. Thank you!