FATCA Discussion Thread (Ask your questions) Part Two
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Please ask your questions here about FATCA.
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NB: This discussion is a continuation of an older discussion that became too large for our software to handle well. See FATCA Discussion Thread (Ask your questions) for earlier discussion.
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So Manafort had 15-30 million in 5 or more foreign bank accounts which h never reported on his taxes and didn’t file fbars either.
Yet the jury was so confused by all of the facts and figures that they only convicted on 1 count of failure to disclose. A true crooked whale is convicted on 1 of 5. And you are worried about not mentioning your puny TFSA or RESP or the credit balance on your Tim Horton’s loyalty card.?
Manafort is a crook. That trial’s not in any way relevant for other individuals who happen to have been born in the same country.
Opening a bank account is not a crime.
I received a Google alert about an article “FATCA Update: First-ever conviction signals increased enforcement risk” (https://www.lexology.com/library/detail.aspx?g=0a226b2f-74b9-4680-bb27-cbf428d216b1)
Hong Kong, USA September 26 2018
The former CEO of Saint Vincent-based Loyal Bank pleaded guilty and was convicted on 11 September of conspiring to defraud the US by failing to comply with the Foreign Account Tax Compliance Act (FATCA). This is the first conviction obtained by the US Department of Justice (DOJ) since FATCA came into effect in 2014 and was the result of a sting operation. The FBI worked with the US Internal Revenue Service (IRS), the US Securities and Exchange Commission, the City of London Police, the UK Financial Conduct Authority and the Hungarian National Bureau of Investigation. The offender’s sentencing date is yet to be scheduled and he is facing a maximum of five years in prison.
This conviction, on the heels of a US governmental report critical of the IRS’s limited use of FATCA, could mark a more active enforcement environment going forward. Under FATCA, certain foreign financial institutions (FFI) must report US citizens’ account information to the IRS and the US has intergovernmental agreements with Hong Kong and other Asian jurisdictions to facilitate this. The DOJ has indicated that financial institutions in Hong Kong and Singapore are on the US authorities’ priority list in terms of FATCA enforcement. As such, both US citizens and financial institutions in the region should remain cognisant of FATCA’s requirements and ensure compliance.
Overview of FATCA
Enacted in 2010 and effective from 1 July 2014, FATCA is a federal law introduced to improve US taxpayer compliance with reporting foreign financial assets and offshore accounts (see our earlier article for further details on US offshore tax enforcement initiatives). Under FATCA, certain FFIs are required to register with and report to the IRS the identities of US citizens and certain account-related information, including the value of their assets held in their accounts. Individual taxpayers are also required to report specified foreign financial assets to the IRS if the aggregate value of their foreign financial assets exceed certain dollar thresholds.
Unless otherwise exempt, FFIs that do not comply with FATCA or fail to register with the IRS may not only be excluded from the US market, but may also be subject to a 30 percent withholding rate on US source payments made to them.
The DOJ established a successful self-reporting procedure for FFIs under its Swiss Bank Program. This resulted in numerous Non Prosecution Agreements with Swiss banks that voluntarily disclosed information about accounts held by US tax payers. The DOJ indicated in 2016 that, with the Swiss Bank Program largely complete, it would ‘follow the money’ to other offshore jurisdictions. It specifically named Singapore, Hong Kong, the Caribbean, India, Israel, Lichtenstein and Luxembourg.
The first-ever conviction under FATCA
The guilty plea was landed through an undercover operation conducted over the last year. An undercover agent contacted Loyal Bank’s former CEO (the offender) and identified himself as a US citizen involved in stock-manipulation schemes. He expressed an interest in opening corporate bank accounts. In June 2017, the undercover agent met with the offender and informed him that he did not want to appear on any of the account opening documents for his bank accounts at Loyal Bank, even though he would be the true owner of the accounts. The offender responded that Loyal Bank could open such accounts and provide debit cards linked to them. The undercover agent again met with the offender and described how his stock manipulation scheme operated, including the need to circumvent the IRS’s reporting requirements under FATCA. During the meeting, the offender stated that Loyal Bank would not submit a FATCA declaration to regulators unless the paperwork indicated “obvious” US involvement.
In July and August 2017, Loyal Bank opened multiple bank accounts for the undercover agent. At no time did the offender or Loyal Bank request or collect FATCA Information from the undercover agent, despite Loyal Bank having registered in 2014 with the IRS as a FFI under FATCA.
The offender was charged in March 2018 and was extradited to the US from Hungary in July 2018.
TIGTA’s criticism on the enforcement of FATCA
The above win for the DOJ and IRS comes shortly after the release of a report from the Treasury Inspector General for Tax Administrator (TIGTA) critical of the IRS’s efforts to ensure compliance with FATCA. TIGTA initiated an audit to evaluate the IRS’s efforts. Its report dated 5 July 2018 stated that despite spending nearly US$380 million on IT and other costs for the FATCA program, the IRS had taken limited or no action. TIGTA also found that the IRS had delayed taking actions on a majority of the planned activities outlined in the FATCA Compliance Roadmap. The Roadmap is used for compliance planning involving FATCA data and provides a baseline for future compliance and implementation activities across the IRS. The IRS has reportedly disputed the TIGTA report, stating that it leaves the reader with the incorrect impression that FATCA is not being enforced.
International efforts facilitating financial account information exchange
To aid compliance with FATCA, the US has signed intergovernmental agreements with multiple jurisdictions for FFIs to report US-related account information to the IRS directly or through their host country tax authority.
In 2014, the Common Reporting Standard (CRS) was introduced by the OECD, which all member states are expected to join for the automatic exchange of information. CRS is largely based on FATCA, and provides guidance on reporting and due diligence to financial institutions. Over 100 jurisdictions have committed to exchange financial account information under CRS, allowing international tax authorities to better understand the financial assets held overseas and tax compliance by their residents. Many countries, including China, started exchanging tax-related information from 1 September 2018 under CRS.
Tax authorities in the UK, the US, Canada, Australia and the Netherlands have also joined forces to launch the J5 alliance against transnational tax crime and held the first meeting in June 2018, further reflecting the growing trend of international cooperation in this area (see our earlier bulletin here).
The level of international cooperation in this case, and the use of an undercover operation, indicate a stronger commitment by the US authorities to combat tax evasion. In light of TIGTA’s recent criticism, we could see an uptick in the investigation and prosecution of those who promote and facilitate the use of offshore bank accounts to evade US tax. Previous statements by the DOJ indicate that it will look to funds in offshore jurisdictions including Hong Kong and Singapore. It is therefore possible that financial institutions operating in this region will come under scrutiny in relation to FATCA compliance.
Herbert Smith Freehills LLP – Kyle Wombolt, Robert Hunt, Pamela Kiesselbach and Jeremy Birch
The above report appears to be more about bank fraud than anything else.
FATCA is largely a paper tiger.
“The above report appears to be more about bank fraud than anything else.”
Only bankers and such like can be convicted of failure to comply with FATCA/IGA reporting requirements, given that only bankers and such like are required to identify US-born individuals and hand over their account information.
It’s apparently one of the reasons anti-FATCA litigation in the US courts runs into the standing issue.
First FATCA conviction. Should anyone be concerned?
“First FATCA conviction. Should anyone be concerned?”
Not expat USCs. Only FIs – and them probably not much, given that to get even this single conviction seems to have required a rather ridiculous sting operation.
“given that to get even this single conviction seems to have required a rather ridiculous sting operation.”
Nothing is far-fetched anymore; imagine one sting operation for every non-compliant US person across the globe. (Perish the thought.)
Not happening though, is it. Just FATCA/IGA/CRS causing pointless difficulty for a lot of people who aren’t doing anything to be stung on.
Most USCs living outside the US don’t file US tax returns and never have a US tax problem – whereas those who do file US tax returns sometimes do have US tax problems.
‘Twas ever thus, and FATCA hasn’t changed it.
Those who want something from the US (e.g. the passport, right of entry, right to claim US tax benefits) have an obligation to comply with US tax law as a condition of keeping the benefits.
Those who want nothing from the US have no such obligation.
It’s quite bad enough to be discriminated against by banks on the basis of one’s place of birth. No need to put up with the added insult of being told by sanctimonious US tax advisers and sleazy US politicians that people born in America have any kind of lifelong obligation to the place.
“It’s quite bad enough to be discriminated against by banks on the basis of one’s place of birth. No need to put up with the added insult of being told by sanctimonious US tax advisers and sleazy US politicians that people born in America have any kind of lifelong obligation to the place.”
Renouncing US citizenship is the very opposite of any kind of lying or deception. It’s the straightforward, obvious way to get America out of one’s hair for good, for those who can meet the US criteria and pay the US fee. And it’s extremely easy.
US-born individuals in IGA1 countries who would like to renounce their US citizenship but can’t, are indeed being treated most unfairly by their countries of residence who are reporting their accounts to the IRS without consent.
I disagree. Renunciation cures the problem completely. The difficulty is that it’s not available to all, and those who can’t renounce have no escape from the IGA’s discriminatory invasion of privacy.
If successful, perhaps the lawsuit may result in a solution for the invasion of privacy being inflicted on US-born US-CDN citizens residing in Canada who can’t or don’t want to renounce.
(Lying is IMO not a solution for anything, but is actually exactly what the treaty partners would rather US citizens would do. IMO)
Plaxy, you say, “Renunciation cures the problem completely.” No it doesn’t. The renunciation option (for those who exercise it) does NOT nullify the charter breach. Nor does it do away with the tax compliance issues which may come back to haunt. Whether one renounces or not, as long as FATCA is law in Canada, ALL Canadians have a Charter that is an illusion of protection.
I hope you don’t take offense if I ask you this, is there any possibility that you work for someone who wants you to comment here? I’m just trying to figure out why you are so prolific with your comments. You said you renounced, not that that means you would no longer want to hang out here, but you seem to be more than a bit obsessed with having your say here. Are you just bored on your way to work? Do you find the topic fascinating and just want to share your thoughts? Curious mind wants to know and would love it if you could share. Please don’t be upset about my thinking you could be paid to be here. Stranger things have happened and I think Ive become much more suspicious of motivations since FATCA.
As I said, renouncing gets America out of your hair for good. If that’s not the problem you’re trying to solve, renunciation may not help you.
Nor does it do away with the tax compliance issues which may come back to haunt.
“Nor does it do away with the tax compliance issues which may come back to haunt.”
More of the scarey-scarey.
No, renunciation does not necessarily get USA out of your hair for good if you have not been tax and fbar compliant.
I think you made a typo as you copied my words as your last line of your comment but did not put in quotes nor commented on them: “Nor does it do away with the tax compliance issue which may come back to haunt.”
Are you going to try to answer my question regarding your never ending dialogue at Brock? I think it is important that you confirm that you are NOT paid to be here rather than ignore the question. My apologies if this seems harsh.
I am not paid to be here. I am here because my criminal nature makes me want to help others lie, cheat and steal their way around FATCA and US tax obligations, to protect themselves. I am also here to keep myself informed of recent changes, as a non-compliant dual US-Canada citizen with US birthplace.
That being said, given my relaxed work schedule and abundant leisure time, I probably post too often.
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“renunciation does not necessarily get USA out of your hair for good if you have not been tax and fbar compliant.”
Obviously, renunciation is not a cure for US obligations you’ve taken on.
If you’ve been filing US tax returns, pay the tax you’ve agreed to pay, file the forms you’ve agreed to file. Then renounce, if that’s what you want to do. Then file any residual forms you have obliged yourself to file, pay any resulting US tax, and you’re done.
“I think you made a typo as you copied my words as your last line of your comment but did not put in quotes ”
@Plaxy, so are you paid to be here? And if not what motivates you to comment to the degree that you do?
As a veteran of Brock since 2012, I can attest that plaxy although having a keen mind and a great understanding of many of the issues involved , always likes to have the last word. I think it would be healthy for her and a relief for others here for her to get out a bit more. 🙂
Not filing US tax returns isn’t against the law in other countries; filing wrongly may be, depending on the degree and purpose of the wrongness. Telling a bank you’re not tax resident anywhere except your IGA1 residence county is certainly not illegal.
Banks have obligations under the IGA legislation; customers don’t.
Canadians don’t have any need to lie about their US birthplace, since the guidance explicitly tells banks they’re not required to ask the question.
If they do lie about their birthplace to a bank, they’re not breaking the law.
Banks are legally obliged to comply with IGA1 legislation; customers are not.
I tend to agree with the above. Failing to disclose US personhood is scarcely “tax fraud and perjury” as described by the Moodys lawyer in his presentation. (If one were caught up in a multimillion dollar tax evasion case I suppose they might try to throw those charges onto the pile, but that’s not quite the scenario we’re talking about.)
The only thing I found specifically on the subject of punishment was mention of a generic $100 CRA fine for “failing to provide requested information” if someone did not fully complete the generic CRA-issued FATCA/CRS form. The major banks seem to use their own forms, which fail to mention any penalties for failure to complete.
But the main point being, per the CRA guidance on FATCA and the IGA, Canadian FIs are only required to ask questions about citizenship and/or tax residency, not birthplace; unless they have other hard evidence on file of US citizenship or birthplace, have no reason to challenge a customer’s response. Once they’ve asked the question and obtained an answer, their due diligence is complete. Even in the case of customers found to have US indicia (which the data is likely limited to addresses, phone numbers or records of regular cross-border transfers) they are only required to clarify citizenship and/or tax residence status, and must accept a “reasonable” answer.
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People in Canada have been asked for their place of birth when opening an account. In general, if a bank (or anyone) is not required to ask something, they don’t have to ask it, but are not forbidden to ask it.
BTW, I don’t remember that the Guidance explicitly states they’re not required to ask the question. Could you let me know where that is in the Guidance? Thanks.
Busy now but will at some point later dig through the guidance. However I suspect it’s a can’t prove a negative kind of thing where it doesn’t specifically say “not required to ask about birthplace” but rather just doesn’t anywhere state that they are required to ask about birthplace. If that makes sense.
I have also heard of people being asked about birthplace, though it’s going back a few years. It’s certainly not on any of the online or paper forms now used for FATCA/CRS compliance. I suspect it was direct conversation with bank employees during the early days when procedures were still being sorted out and everyone was in a bit of a panic.
Also, being asked about birthplace is one thing, being asked to show documents to validate the answer is quite another. Though if one is caught off guard or unaware of the risk (which happened in the case I’m remembering) the “correct” answer cannot be undone. And I’m sure that answering questions incorrectly violates something in the T&Cs one signed, with some unknown consequence if caught, but probably no worse than loss of account unless part of some enormous fraud.
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