Liberty and justice for all United States persons abroad

The Isaac Brock Society

1,012 thoughts on “FATCA Discussion Thread (Ask your questions) Part One”

  1. Top ten risks..

    Market Vulnerable to FATCA – Fraud and Data Base Abuse   By Risk.net.  

    Greater mandated information exchange, under legislation such as Fatca and the intergovernmental agreements supporting it, opens the door still further to data theft or misuse. It may also leave banks and other financial institutions vulnerable to penalties under national data protection laws, if their information exchanges are not conducted carefully. Increased reliance on outsourcing involves the same danger, with customer data being sent outside the company’s control to a service provider located in a different country, with less intrinsic assurance of data security, and subject to different laws on privacy – and government oversight.

  4. Now Thailand FFIs are asking their government to intervene so they can have an IGA too.

    Fetco asks for help on US Fatca law

    The Federation of Thai Capital Market Organizations (Fetco) has asked the Finance Ministry to have the Thai government set national measures to deal of the US Foreign Account Tax Compliance Act (Fatca), which will take effect in 2014, to make the process less complicated.

    Fetco wants the government to set up a central organisation to collect and transfer withholding tax penalties and report them to the US Internal Revenue Service (IRS), preparing a legal amendment following Fatca enforcement and facilitating institutional compliance.

  5. Pingback: The Isaac Brock Society - 20 Ways to Catch a United States Person Living Abroad

  11. The FATCA Compliance Complex telling us yet again, that FATCA is here to stay, and throw in the GATCA message.

    Hope we can prove them wrong, but it will be tough. 

    FATCA Requirements Are Here To Stay

    So, despite all the backlash and hostility around FATCA, the requirements are here to stay. The increasing number of countries entering agreements shows other governments are open to changes in their tax information reporting and are recognizing the need to address this issue on a global level.

  12. Opposition to FATCA is growing in Brazil. The foreign relations committee of the Brazilian senate recently rejected ratification of an agreement between the US and Brazil on tax information sharing (unrelated to FATCA), on the grounds that the US is asking for too much information that not even the Brazilian government has access to. Also, an influential Brazilian senator, Francisco Dornelles, strongly criticized FATCA in a speech at the Brazilian senate:

    Mrs. President, Mr. and Mrs. Senators, the United States government has been seeking to exercise its taxation power in other countries. Raids of this nature carry with it the bitterness of extraterritorial application of domestic law.

    The United States government approved in 2010 the Foreign Account Tax Compliance Act, better known by the acronym FATCA. The new act unilaterally leaves the field of cooperation to true imposition. It is suitable, therefore, to realize the consequences of the new law for residents of Brazil and verify the absolute omission of the Brazilian government regarding the subject.

    This act, under the grounds of attacking tax evasion, makes foreign financial institutions, including Brazilian ones, identify and report custodial accounts, investments, deposits or balances held by US persons, a term which has huge scope and is not only limited to nationals of the United States.

    In case these financial institutions do not adhere to the FATCA agreement, they will pay 30% tax on income and principal with respect to amounts traded in the US, as well as in other institutions participating in FATCA abroad. So, to avoid withholding, the participating institutions, in this case Brazilian ones, shall identify a US person and request authorization to inform banking and registration details directly to the US Revenue Service. If the identified person does not agree to report his data, his account shall be terminated. In summary, the option for the individual is to relinquish his secrecy or terminate the account; for the institution, it is to inform or to be taxed in the percentage mentioned.

    To have an idea, it can be can noted that certain banks in Brazil have more than five thousand people who fit the category of US person. As I said before, this condition is not exclusive to United States subjects.

    So far not a word from the financial and diplomatic authorities has been noticed. The Ministry of Finance and the Ministry of Foreign Affairs are silent. The Central Bank, the Federal Revenue Service and the National Treasury, so far, have not commented either. It would be essential, Mrs. President, to know, for example, how China, Russia, India and South Africa are dealing with the subject, maybe a position harmonized with the other members of the so-called BRICS.

    In Brazil, the subject shall raise numerous questions. Privacy, banking secrecy, equality, consumer rights, the principle of equality of law, the right to free enterprise, consumer protection, organization of the financial system and regulatory powers are some of the issues subject to questioning.

    Thus, the time has come for the Brazilian Government to have a national position and discuss the impacts of FATCA in our country with all those interested. The Brazilian Government should not be a pioneer in taking a decision on the subject, nor should it leave the decision-making process to the twenty-fifth hour.

    Above all, the Brazilian Government should advocate, at the international level, for multilateral solutions to problems that affect more than one country. It is imperative that, in addition to being democratic, it is the most fair. The path of cooperation should always be preferred to the imposition by anyone.

    Thank you, Mrs. President.

    http://www.senado.gov.br/atividade/plenario/sessao/disc/listaDisc.asp?s=117.2.54.O (in Portuguese)

  13. 11. The United States Is Not Willing to Provide the Same Information on a Reciprocal Basis. Perhaps the strongest reason why FATCA is sheer idiocy is because the United States is not willing to subject U.S. FIs to the same types of reporting burdens that it is imposing on foreign FIs. This is simply outrageous.

    In Article 6(1) of the reciprocal Model I FATCA IGA, the United States said it ‘‘acknowledges the need to achieve equivalent levels of reciprocal automatic information exchange’’ with its FATCA partners and ‘‘is committed to further improve transparency and enhance the exchange relationship . . . by pursuing the adoption of regulations and advocating and supporting relevant legislation to achieve such equivalent levels of reciprocal automatic exchange.’’51 (Emphasis supplied.) It is clear, however, that the U.S. Treasury Department has now backed off from this commitment.

    This was made abundantly clear in a letter of Oct. 10, 2012, from Mark Mazur, Assistant Secretary of the Treasury for Tax Policy, to Sen. Rand Paul (RKy.), 52 in response to the Senator’s concerns about reporting that might be required of U.S. FIs as a result of the Joint Statement of Feb. 8, 2012 (which indicated the United States planned to enter into FATCA IGAs with France, Germany, Italy, Spain, and the United Kingdom). In his letter, Assistant Secretary Mazur states, ‘‘The United States cannot expect foreign governments with shared policy goals and practices regarding transparency and fairness to facilitate the reporting of the information required under FATCA by their financial institutions if we are unwilling to help address tax evasion under their tax systems.

    We think the most straightforward approach would be to share information, in appropriate circumstances, that pursuant to existing law already must be reported to the IRS about accounts held by their residents in the United States.’’ (Emphasis supplied.) He then goes on to state the following:

    The information that the United States would agree to exchange under the reciprocal version of the Model Agreement differs in scope from the information that foreign governmentswould agree to provide to the IRS. In fact, the information specified to be exchanged by the IRS under the reciprocal version of the Model Agreement is limited to the information that U.S. financial institutions will be required under existing regulations to report to the IRS about nonresident accounts for 2013. While the reciprocal version of the Model Agreement includes a policy commitment to pursue equivalent levels of reciprocal automatic exchange in the future, no additional obligations will be imposed on U.S. financial institutions unless and until additional laws or regulations are adopted in the United States.53 [Emphasis supplied.]

    At the very least every country should demand, if considering signing an IGA with the US, that it will not do so until additional US law and regulations are adopted in the United States!

    As well, Just Me, gives the 12th reason FATCA must be repealed:

    And, Sulolit Mukherjee, Tax Manager, Operations at E*TRADE. http://bit.ly/WetLKr

    In answer to the question, “What are the risks?”, he replied…

    what are the risks associated with this?

    SM: “Identity theft is the biggest and most prominent risk of information sharing, whether within the USA or at a global level. In today’s world of electronic exchange of sensitive information, a customer’s personal information is ever at risk of being hacked into when moved between systems and institutions. Proper procedures must be developed by financial institutions to guard against such scenarios.

    Also, even though the global financial sphere is more cohesive now than ever before, there still exists many discrepancies in information collection, storage rules and procedures in different countries. Also, several countries have unique privacy laws that forbid personal customer information collection. In light of this, globalized standards threaten creation of multiple standards of information collection and can result in inconsistent application of FATCA regulations. This is already visible through amended information collection and certification requirements spelled out in the recently released FATCA Intergovernmental Agreement models (IGAs), where financial institutions in certain countries can avoid levels of scrutiny while others are not so fortunate.”

    So, security risks, from my standpoint, is item number 12, to this list of what is wrong with FATCA!!!

    Number 12. Unacceptable security risk to Americans Abroad.

  14. @shadow raider

    I wish someone in the Canadian government would take such a stand as Mr Dornelles of the Brazilian government has. The only position I’ve heard so far was capitulation and stated to me directly by Kevin Shoom of the Finance Department: Canada hopes to enter into an IGA by years end. With so many households effected in Canada, and certainly more than Brazil has, why isn’t Canada taking such a stand? This is infuriating!

  16. @bubblebustin…

    If Badger doesn’t, I will later today.  It needs more highlightening than just a comment on this thread.  

  18. @just me

    Excellent suggestion to add a 12th reason. It’s good to give feed back to those who are fighting FATCA, if only to have us feel less like a voice in the wilderness.

  19. Blanket approach to FATCA could miss unit-level intricacies.

    So, here is one of the FATCA Compliance Complex members pointing out the complexities of uniform compliance across a large Wealth Management organization.  Why they don’t just say NO, amazes me.  I guess it creates IT jobs.  

    In some larger firms, project teams are developing strategies from above specific business units in an attempt to create group-wide FATCA strategies that clearly demonstrate compliance from the highest level. This is wise when the US authorities are hunting for any sign of non-compliance. However, this also poses a challenge.

    Transposing a FATCA strategy developed by a standalone team directly onto a wealth management unit ignores local (i.e. unit-level) operating intricacies. Granted, deviating from a company-wide approach will increase complexity, but in collaboration with a FATCA IT solution and organized two-way communication, local implementation can be more effective.

  20. @just me

    I have to give it to the FATCA Compliance Complex if they can administer this klausterfokken called FATCA. Many, if not all of these financial entities are customer oriented where the institution must instil trust in that customer that they are a safe place to keep their money. Putting a customer (US or not) through the wringer when on boarding will send many packing, especially if the customer becomes aware that the IRS is calling the shots. This just gets more insane every day. 

  21. One of the Kings of the FCC , DeLoitte is out with “Good News” for Australian financial institutions…

    Positive developments for FATCA compliance

    Two recent developments for implementation of the Foreign Account Tax Compliance Act provide Australian financial institutions with more time and ease to meet their requirements for compliance

    They then spend a few pages explaining to them all the wonderful advantages of the IGA.  

  23. @Shadow Raider

    Here is an interesting note about that speech.  Mr. Dornelles was at one time the head of the IRS in Brazil.

  24. @Bubblebustin..

    My tweets to Boris to speak up…

    First in response to this article:

    HMRC Update on UK/US FATCA

    HMRC Update on UK/US FATCA http://bit.ly/Yl47aU Requesting comments on UK law change to accept FATCA CRAM DOWN!  Speak up @MayorofLondon

    and this in response to the one you posted.

    Deloitte says UK HMRC FATCA draft guidance notes crystallise the breadth of IGA CRAM DOWN impact http://bit.ly/ZPf6d0 @MayorofLondon

  25. @Just Me, Thanks for the info, I didn’t know that.

    Russia offered a FATCA agreement on behalf of BRICS, but officials in China and Brazil (the two largest BRICS economies) are against it. Maybe they could convince Russia to form an opposition, along with India and South Africa. China and India could lead other Asian countries, Brazil could lead the rest of South America and the Caribbean countries that are already against FATCA, and South Africa could lead the rest of Africa. This would align the developing world in opposition to FATCA. I know, this is a very long stretch, but I think it would be more likely than an opposition from Europe or Canada. Consider that most developing countries aren’t aware of the problem yet.

Comments are closed.