The following response to the Isaac Brock Society appeared in a comment.
I am with the CBA and we have been following your discussion. We certainly understand the concerns that you have with FATCA. However, you seem to be under the impression that Canadian banks are planning to willingly go along with the FATCA requirements and this is certainly not the case. In fact, the Canadian banking industry agrees with your concerns and we have been and will continue to fight to change the extraterritorial reach of FATCA and lessen the impact it will have on Canadian banks and their customers.
We have information on our stance on FATCA on our website:
For more than two years, the CBA and the Canadian banks have raised our concerns with the IRS and the US Treasury Department and have also done so through our membership in the International Banking Federation. We have also had discussions in Washington with IRS and US Treasury officials and Canadian Embassy officials. In May, the CBA made a presentation in Washington at public hearings before Treasury and the IRS and our president spoke out against FATCA in speeches in Calgary and Vancouver this spring. Here are the links:
Last week we also submitted an opinion piece with our concerns about FATCA to the Washington Post and we are waiting to hear back about whether it will be printed.
In Ottawa, we have raised concerns with officials from the Department of Finance, the Minister of Finance and the US Embassy. Finance Minister Jim Flaherty has supported our position and expressed his own concerns publicly and we appreciate the support from the Minister and his officials. And we are not alone in fighting this legislation. Governments and banking groups from around the world share your concerns and ours. You can find more documents here:
If banks were required to identify US persons under FATCA, they would not be doing this willingly. However, they may have no choice as FATCA is currently written because the non-compliance would have a much larger impact on more of the financial institutions’ customers. The penalty for being unable to comply with these complex rules is very severe for both banks and their clients. The penalty includes a 30 per cent withholding tax on all U.S. source income flowing to the bank and its customers, and a 30 per cent withholding tax on the gross proceeds of the sale of U.S. securities by the bank and its customers, and withholding on some portion of so-called “foreign pass-thru” payments. According to Statistics Canada, as of 2010 Canadian direct investment in the United States totalled nearly $250 billion. As outlined on our website, banks would only provide information to US authorities with a customer’s consent (http://cba.ca/en/consumer-information/40-banking-basics/597-us-foreign-account-tax-compliance-act-fatca-information-for-clients).
There is nothing in the Canadian Bank Act or the Access to Basic Banking Services (ABBS) Regulations that prohibits a bank from closing an account. The ABBS regulations give reasons why a bank can refuse to open an account for someone, but they don’t give any restrictions on closing an account. You can find information here: http://laws-lois.justice.gc.ca/eng/regulations/SOR-2003-184/page-1.html
I hope this is helpful in explaining why Canadian banks would comply, however reluctantly, with FATCA if it became necessary and why Canada’s banking industry, with the support of the federal government, will continue to fight for changes to the FATCA legislation. As your concern seems to be the requirements under FATCA, you may wish to add your voice to the growing opposition to this legislation by raising these issues with the US Treasury, the IRS and the U.S. embassy in Ottawa.
Director, Media Relations and Communications
Canadian Bankers Association
The following comments were received:
Thank you for your comments. I appreciate your interest in our concerns. As individuals, we have been speaking with our banks and credit unions and comparing notes. Some have also corresponded with some of your members. We have also written to Minister Flaherty, and other political representatives, as well as the Privacy Commissioner. Some have contacted US politicians, and the ACLU.
I appreciate the presentations that the banks have made – and I have read the presentations where available on the net, as have several others here. Opposition to FATCA in any form or origin is welcome. But, I’d quibble a bit about the nature/form/motivation of some of the opposition, since some of the CBA member’s investment affiliates have advocated not against FATCA itself, and the impact on clients, but in opposition to the ‘compliance burden’, and costs, thus are advocates for a government-to-government reporting approach to take the onus, costs and heat off themselves. It would help to deflect negative attention away from financial institutions and investment firms if they could point to government as the source of the implementation instead. If the Canadian government does agree to do that, there would of course be a cost – which would be paid for by all Canadian taxpayers. And since we all pay taxes to Canada, whether we also hold US taxable status as well, everyone in Canada will share in implementing the costs – with zero benefit. Whereas, banks, insurance companies, etc. will continue to have unimpeded access to US markets, with less direct cost borne by their shareholders. This is where our interests diverge quite a bit – I don’t want FATCA at all, and have no interest in settling for a less expensive version.
For example I don’t have the full article below, but I think this illustrates my point;
“FATCA Partners” agreement would limit compliance burdens, Canadian trade group says Feb 14 2012
by Emmanuel Olaoye
“Ian Russell, president of the Investment Industry Association of Canada (IIAC), said the changes would be a “very positive step” for Canadian firms if Canada signed on as a FATCA partner.
“It would resolve the problems of conflicts in privacy laws. We are obliged to provide information to foreign….” http://www.complinet.com/global/news/news/article.html?ref=152318 The IIAC has a member list here: http://www.iiac.ca/welcome-to-iiac/about-us/iiac-members , and you will see that there are members who have relationships with major Canadian banks.
I think I’d be more inclined to appreciate the efforts that banks have made, without as much criticism if they had tried to alert their customers in ways that would help marshall popular and political resistance against FATCA – rather than only post information on a website they would have no reason to look at. I note that banks aren’t alone in that. Pension plans have not followed up on the suggestions by affected account holders to notify their members of the pending crisis either. I haven’t seen any full page newspaper and media ads to that effect – unless I missed them. There has been surprisingly little coverage of FATCA domestically or in the US.
Re your comments:
“However, they may have no choice as FATCA is currently written because the non-compliance would have a much larger impact on more of the financial institutions’ customers. The penalty for being unable to comply with these complex rules is very severe for both banks and their clients.”
From the CBA site, this is the broad group of mostly Canadian citizens who will be affected:
The CBA site says the affected would include:
- A citizen of the U.S. (including an individual born in the U.S. but resident in Canada or another country, who has not renounced U.S. citizenship);
- A lawfulresident of the U.S. (including a U.S. green card holder);
- A person residing in the U.S.
- You also may be considered a U.S. person if you spend a considerable amount of time in the U.S. on a yearly basis. For example, some Canadian “snowbirds” may be considered U.S. persons for U.S. tax purposes. If you are unsure, contact your tax advisor.
- U.S. corporations, estates and trusts are also considered U.S. persons.”