Here’s the story:
Swiss Accounts, Insider Trading, Mortgages: Compliance
The date of the Bloomberg article is older, so this is most likely when Mr. Reiss was charged. He was sentenced on 11 Dec. 2012 for a 1,2+ million FBAR penalty. I could be wrong, but this appears to be the first DOJ case against a non-US Citizen working in America was charged. The rest had been mostly a few US born resident-nationals, and many foreign naturalized US citizens, some of who even earned their money abroad and paid taxes abroad, yet the IRS is desperate to get their piece.
Based on what I know about the FACTA, if a foreign national is living in America, generally foreign banks generally don’t want to risk servicing this customer that is working/residing in America. This means, essentially, that any foreigner who plans to live and work in America will be forced to move his or her banking to America, or risk getting hit with FBAR penalities. Is that worth it? I don’t think so!
According to the Bloomberg article, Mr. Reiss is a cancer researcher working at Princeton. It goes on to say that he could be “deported” after his sentencing. Go ahead America, shoot yourself in the foot yet again!
I believe that a foreign national living in America can have overseas accounts, as long as these accounts are reported in FBARs. Now with FATCA, the overseas banks will also be required to report the accounts to the IRS. Some banks are closing these accounts because they do not want to deal with the IRS. For people already settled in the US, yes it appears they would have little choice but to move that money to the US, or deposit it into someone else’s account overseas.
I’m not sure what you mean by “Is that worth it?” People in the US who are affected this way are unlikely to all be able to pack up and leave the US, and so it is a situation that should be brought forcefully to the attention of the FATCA creators. It is another way in which this legislation has unintended consequences for millions of innocent people.
Foxladyhawk, thanks for your comments. Here’s a good example. I’ve already seen a few anecdotal cases of this, and I know personally, for a fact, that people in this category go to America regularly. The US actually has a pretty sweet “investor” green card program already. It’s cost: $500,000.
An entrepreneur, who already has a nice sized bank acount moves to America. Since he is smart, he pays attention to the developments on the Isaac Brock Society, so he knows that he must delare his foreign bank accounts through the FBAR, which he promptly does. Later, he gets a Green Card, and he opens a business in America. Eventually, he gets a letter from the bank in his home country notifying him that he must transfer his balances to a US bank, which he promptly does.
Eventually, he gets tired of paying for the 52% of the population that collects welfare. He sells his US business operations to a competitor. When he call his home (foreign) bank to tell them that he needs to re-open his account, they tell him he can’t because he has a US green card and he has paid taxes to America, and he is still in America. In the meantime, he notices that the US Dollar has devalued by 20% compared to his native currency.
In frustration, he searches through the posts on the Isaac Brock Society where he discovers his only recourse is to hand in his green card. He decides to fly back home. At the gate, he tries to hand in his green card. The agents do not want to accept his green card back. They threaten him to keep it, but he is persistent and eventually they accept his Green Card.
While back in his home country, he discovers that he must file a final tax return in America, even though he left. He finds a “cross border professional” that charges $400 per hour who agrees to take him on as a client. Not only must he pay tax as the result of selling his business, he but he also pays arond 20% of his net worth due to market-to-market grains on his investments.
I could have really drug out this story. Imagine if he became a citizen, or married an American woman. What a mess!
Now is it worth it? If I were a foreigner, I would avoid this situation altogether. Just stay out of America. America is good for non-skilled immigrants who’s earning power is in the lower tax brackets who usually have little to no money. But for people who have a mid-high earning potential, I would avoid that place like the plague. There’re many, much better alternatives.
geeez, I understand that your passionate purpose is to warn people not to go to America because of the tax entanglements that could follow them forever. I suspect that most people who check out the Isaac Brock Society are already entangled, and they have already decided what to do or they are pondering their options. Telling them not to go in the first place is a bit counter-productive.
This site is intended to provide them with the information they need to pursue the option they choose, and to receive support from others who face the same problems. No matter what their circumstances or their choices, this should be their soft place to fall. Here they will find practical information for moving forward into their chosen path, sympathetic support regardless of their situation, thoughtful discussions of emerging issues, and sometimes a bit of fun (http://isaacbrocksociety.com/2012/01/11/the-antidote-from-just-me-open-thread/).
We all have strong opinions about America, but not everyone here is anti-American, despite the IRS, and some cannot renounce. They need a home here too.
There are actually two sets of laws that could effect this type situation and I suspect at this point are actually causing most of the account closures not FATCA. One is most US states has laws(often very old and arcane) prohibiting unlicensed banks in the state chartered sense from accepting deposits. These laws are overriden by the US Federal National Bank Act(remeber National banks came after state banks in the US) plus to a lesser degree the FDIC act vis a vis an FDIC insured state chartered bank soliciting deposits outside of its home state. However, nothing protects a non FDIC insured foreign bank from prosecution under these laws. The only exception I heard is their is some type of understanding between the Florida Department of Financial Institutions and either OSFI or CBA that Canadian banks won’t get in trouble for serving Canadian “snowbirds” in Florida.
The other set of laws are the various securities acts i.e. 1933, 1934, 1940, Commodity Furtures Act that prohibit “unlicensed” brokers. In these acts foreign brokers have a very limited exemption that generally only applies to institutional clients and that they do business through a US based and licensed affiliates. Now in the case of the securities acts they generally only apply to US “residents” however, their is a enough vagery with the terminology that certain brokers in Europe for example have rejected both US citizens and residents and with everything going on tax wise an increasing number are joining this group. The one exception is again in the case of the proverbial Canadian “snowbird” there is an agreement between the SEC and OSC(Ontario Securities Commission) that gives Canadian brokers a safe harbor in some circumstances to service clients in the US. This agreement doesn’t cover state securities registration laws which are a whole nother can of worms. The argument though with snowbirds is Florida as a state through its regulatory powers doesn’t want to anything negative towards people retiring in the state or spending tourism dollars(Florida has no state income tax) so it unlikley through its state securities laws to action against Canadian brokers. On the otherhand you can guarantee the big US states like California and New York will be quite eager to take their piece of pie from both a regulatory standpoint and a tax standpoint in cases like UBS.
foxladyhawk, It’s not my place to say who is the intended audience of this blog: Actually, my belief is that Petros intended this for (1) the audience you mentioned, people who are suffering (2) anyone else who may come under the wrath of the US/IRS, directly or indirectly, in the past, present, or future.
For the record, I’m not ant-American. I disagree with their immigration and tax policies. Any law or system that ensnares innocent law-abiding people should be denounced! To think that if I don’t renounce and my son doesn’t renounce, citizenship could be passed to grandchildren many years into the future without their consent. To me, this is just mind-boggling.
Moreover, I think it’s our duty, as Americans and former-Americans, to tell people the consquences of making such decisions as to move to the USA, or affiliate with the USA. Many people are uninformed on this matter, and many have already fallen into this trap, like the gentleman involved in this story. And just because we may be suffering, should we withhold information to make sure we get more people coming here in despair? I think that prevention is the best cure here. If the US starts receiving less skilled labor, they may be forced to re-think some of their policies.
And for that matter, someone else posted an anti-Green Card video yesterday in a post, so tell them their video is inappropriate.
Tim, the cases I have seen have been cases of European banks telling their customers (non-us citizens working in the US) that they will no longer service their accounts. This all happened around the time of the UBS issue, so I’m assuming it’s related to that, the FATCA, or both.
All of the recent lawsuits related to overseas commodities (foreign exchange and CFD – contracts for difference – instruments) brokers has been pursued under the Dodd-Frank act.
At least from what I have seen, all the major republican candidates want to abolish Dodd-Frank, but I doubt it will ever change anything long-term, even if that does happen.
I’m getting the feeling that laws are like prices: They only get even worse!
I think of myself as being more American than most Americans but paradoxically renounced my US citizenship with great pride.
America’s Founders were previously British citizens who had renounced their citizenships en masse in 1776. In a way, I actually feel honored to be following in their footsteps.
Many years ago I had helped some war refugees immigrate to the United States. If had known then what is happening now (Patriot Act, renditions, water-boarding, indefinite detention, FATCA, FUBAR etc) I certainly would have helped them settle somewhere else.
All great empires eventually repress their own citizens. Unfortunately America is on the same trajectory.
It was not my intention to label your post inappropriate and I apologize if I gave that impression. I specifically support the idea of providing information, and your posts can help that endeavor, but in no way did I come close to suggesting I want to “make sure we get more people coming here in despair”. With the shutdown of the expat forum this site is more important than ever as a place people can come for information and support. But renunciation isn’t the only valid choice to make and your posts often strongly assert that no other choice is acceptable. For some people, renunciation isn’t desirable or even possible. Those people need to know they can express their views here without being accused of ignorance or willful blindness. Like I said, we can agree without being disagreeable.