Liberty and justice for all United States persons abroad

FATCA: Facilitating Attacks by Terrorists on Citizens Abroad

Michael Young (Twitter: @BeirutCalling), the opinion editor of Lebanon’s Daily Star, has a new column exploring a relatively undiscussed problem with FATCA: its impact on the privacy and security of U.S. persons abroad, an issue of particular concern in the Middle East.

However, there is one aspect of FATCA that has not been sufficiently examined, but that remains potentially hazardous. The American government is effectively asking foreign institutions to prepare detailed data bases of American citizens, with no guidelines explaining how this information must be protected. For a country obsessed with the security of its citizens in the aftermath of the 9/11 attacks, such behavior is paradoxical, indeed astonishing.

Foreign financial institutions will effectively become vast repositories of information on Americans—including what they earn, the sources of their income, what they spend, where they live, who their family members are, and so on. In their zeal to implicitly label Americans living abroad as tax cheats requiring monitoring, the sponsors of FATCA have shown utter indifference to the safety of their citizens.

Go read the whole thing.

58 thoughts on “FATCA: Facilitating Attacks by Terrorists on Citizens Abroad

  1. great response, just me. I’m in the process of writing a single letter addressed to both my MP and congressman, which I will cc to Canada’s Dept of Finance, all as co-conspirators to the mayhem this about to befall their constituents.

  2. Interesting comment in this article.  Ignore the title, although I will post it.

    Fair and Accurate Credit Transactions Act (FATCA): Achieving Operational and Infrastructural Efficiency

    Quote:  “blah, blah, blah, blah” and then this…

    Question: In the case that FATCA sets a global standard for information sharing agreements, 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.

  3. @just me

    “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.”

    In the case where the US has sanctions against that country, scrutiny will be non-existent altogether. What does it say when friendly nations such as Canada’s financial institutions are subjected to crippling FATCA guidelines whereas other less friendly nations aren’t?

  4. @bubblebustin…

    A whimsical thought…

    I really think we need to play up the security risk issue more than we do and lack of standardization in the current IGA approach. That security story out of Lebanon was a good start to build on. FATCAs FATAL FLAW

    Now, with this comment by the E*trade’s Sulolit Mukherjee, Tax Manager, Operations, got me thinking… (always dangerous)

    Counter intuitively, I can almost see us making an argument for “More FATCA Standardization” .

    We know that it is impossible in such a diverse world, but insistence that it must be in place before we start such a global FATCA system, assures that it doesn’t happen.  

    Maybe we should change tacks and be emphasizing our support for the 50 country IGAs, but just say it is NOT enough.  

    We absolutely need the other 143 countries before we can possible precede towards our GATCAwellian world vision.

    Argue against the inadequate US incremental 50 IGA approach as not good enough in this world of security risk.

    A 50 country IGA “Good Start” is NOT the replacement for “uniform and standardized universal global adoption” perfection we desire!    

    I say, we argue for FATCA  this standardization perfection via adoption of a global GATCA using a UN resolution and Treaty to this effect. We, as idealist want to impose our Utopian vision on the world and the UN is the vehicle.  

    Maybe we could get Eritrea to submit it to the General Assembly and that would assure that American politicians will line up in opposition and kill it, just like they just did on the Disability Treaty, Kyoto Treaty or refusal to join the World Court!  

    Force the news media visibility via the UN general assembly, instead of letting some secretive committee like the OECD that few Americans know exists continue to operate under the radar.  

    Maybe instead of beating up on Susan Rice we should enlist her to organize a new universal resolution towards GATCA.  She claims not to be a political figure, so let’s see how naive she is?  All right, I am being a bit tongue in cheek here. 

    But fighting the momentum down hill doesn’t seem to stop this, so maybe we should be helping push it off the cliff instead.

  5. @badger

    That is an interesting one.  I tired to post a comment, but nothing works, so emailed the guy instead.

    Mr. Rijock: 
    I am having difficulty using the accounts that allow me to post a comment on what you recently wrote...

    So, thought I would just email you…

    To the last question of your post, I think the answer is definitely “YES”.

    What starts out as one good intention, to stop homeland offshore tax evasion, morphs into an overly broad and terribly complex approach full of unintended consequences that you rightfully point out.  

    I hadn’t fully considered the “power of attorney” issue, and that opened my eyes to yet another problem this misguided law creates. However, won’t the POA person now have an FBAR responsibility, and doesn’t that even complicate the problem more?  Who would want that? The penalties that come along with it for failure are Draconian. I am a little unclear on that issue, and will research more.  I could be wrong. 

    Maybe Congress thought they were launching a precision drone strike against their homeland offenders with FATCA, but in the hands of the Treasury FATCANATICs, and cheered on by the OECD, the International Revenue Service is now engaged in carpet bombing the world’s financial institutions in their attempt to identify the overly broad class of “U.S.Persons.” 

    This program, plus the UK’s most recent ‘Son of FATCA’ and the attempts by those in the OECD to force a global GATCA or automatic BIG DATA tax exchange program onto an unsuspecting world, from my perspective is GATCAwellian in application. 

    FATCA is the ‘tip of the spear’ to force compliance around the world to their Utopian vision of total asset and financial transaction transparency. 

    Maybe you see that as good idea, but there are many systemic risks with this whole operation. No one has yet to make a convincing argument to me, that it is good for global capital formation, innovation and economic growth. 

    The Biggest Risk, un-addressed in this headlong rush towards FATCA IGAs is in the area of identity theft, as discussed in this interview with Etrade’s Sulolit Mukherjee, Tax Manager, Operations at E*TRADE.

    Additionally, out of Lebanon is one of the better analysis about what is happening with this global effort to find and report on U.S. Persons living around the world.  There are Serious concerns that this creates when all Americans aare identified around the world, and their data rests in third party or unsavory financial institutions and/or government hands.  

    I do think you should consider joining the “repeal Fatca” movement.  I know there is reputational risk to be seen as against something that can be demonized as “favoring” tax evasion.  

    In this case, the FATCA medicine is way worse than the disease.  
    It is the modern government equivalent of ‘Bloodletting’ to cure or prevent illness and disease.  It won’t work, and it may kill the patient.

    Here is what is happening in Canada to try and push back on the misguided application of unilateral hubris by the Congress and the International Revenue Service.

    Country specific resistance to FATCA IGAs is another strategy for pushing back on FATCA that is not specifically calling for repeal, but would certainly force modification, if a few countries had some cojones. 

    Thanks for your interest, and your post.

  6. @badger

    FYI,

    I did get a comment back from this gentlemen.

    Thank you for your incisive comments on what FATCA hath wrought. I will continue to cover the subject on my blog. I did look for, and find, the Lebanese commentary.

    I am sure we will be talking about this, you & I, in the future.

    To which I replied and he acknowledged back again…

    Kenneth,
    I appreciate the reply.  It isn’t often that it occurs, so thank you.

    There was a FATCA Fact finding Forum in Canada over the weekend.  Not well attended, but as you know the subject of FATCA is not well publicized even after 2 years, so sadly not surprised. 

    Here are the reports on it, if you are interested

    Report 1

    Report 2

    Report 3

    Look forward to your future posts.

    If you need any assistance in the future, be sure and ask. I have been following this subject closely since 2009! 🙂  I know, I should get a life… LOL

  7. 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.

  8. @Just Me, glad that the author of the Panama article was interested, and responded. His article raised yet another avenue of harm for US persons abroad and anyone they relate to.

    The default position of the US towards its citizens and ‘taxable persons’ outside the US is an automatic: ‘Off with their heads’.

  9. Another Lawyer blogger raising the question…

    Does FATCA pose an unacceptable security risk to Americans abroad?

    In order to meet all of the FATCA data gathering and reporting requirements FATCA will require the banks to keep data on a plethora of information including residential addresses, green card status and even the names of the Americans’ relatives.  The information is far, far more detailed than that which has been previously held by any financial institution with which I have ever had dealings.  Never before would the banks have had to gather and isolate such detailed records specifically relating to US citizens.

  10. TIGTA is saying IRS effort to control identity theft are not good enough and identity theft continues to rage out of control.
     
    http://www.treasury.gov/tigta/semiannual/semiannual_sept2012.pdf

    To which, Patric responds…

    This report is dynamite!  The inspector general says in his forward that they identified paying out $5 billion to 1.5 million people in fraudulent tax returns!  That’ FIVE TIMES the revenue they estimate they’ll receive from FATCA!  On top of that he said that this could be up to $21 billion over five years because of identity fraud.  

    And what has the IRS done that will protect the identities of overseas Americans?  More particularly since all of the reporting will require OAs to give details of social security numbers, bank account details and bank balance. If I were a cyber crook, this is a high target rich trough of info to steal people around the world with no one being in a position to either stop me or adjudicate any crime at all.

    Imagine I’m sitting in the Bahamas, stealing the IRS data on overseas Americans, then filing false false fund transfers to my account in the Cayman Islands – who is going to charge me, and how would they know?

    The IRS info gives me names and addresses, the banks name and account number, social security number, and bank balance, and names of employers and bank manager’s details.

    This is simply rife for bank fraud and identity theft the likes of which no one in the USA faces at all!

    Tactically, we should piggyback VERY strongly on this issue.  Even say to Congress and the IRS that if they are really going to go ahead with FATCA, the IRS has to satisfy the strictest of security conditions to prevent identity theft AND indemnify overseas Americans against identity theft.  This will kill FATCA faster than any of the other arguments because to do so will require the IRS to spend more money guaranteeing this protection than it will ever collect.

    I suggest we start pushing TIGTA’s report very strongly and push IRS into the corner on this immediately.  The FATCA regime simply will not be able to withstand this issue.

  11. Pingback: The Isaac Brock Society - Phishing Alert. Trolling the Internet with FBAR Warnings for the Unsuspecting American Abroad

  12. http://www.qatarisbooming.com/2013/01/10/doha-hosts-fatca-us-tax-legislation-symposium/

    Governor of Qatar Central Bank (QCB), HE Sheikh Abdullah bin Saud Al Thani (pictured), who is also Chairman of Qatar Financial Centre (QFC) Regulatory Authority and the Board of Directors of Qatar Financial Markets Authority (QFMA). The one-day event will discuss a number of themes including: Foreign Account Tax Compliance Act (FATCA): Overview; International Governments’ Responses; and What financial institutions should do to get ready for FATCA?

    Representatives from U.S. Treasury will address the purpose and scope of FATCA, the implementation timetable, the model of international agreements, and an assessment of international responses to the new law.

    The International Governments’ Responses panel discussion comprises treasury and tax officials from US, Europe and the GCC. Discussion, who will focus on managing the implementation of FATCA and progress on Intergovernmental Agreements (IGAs) to be entered into by the U.S. with other Governments to facilitate compliance with FATCA.

     

     

     

  13. Another chance to make a comment on Security…

    IRS Tips Won’t Protect You From Identity Theft Tax Fraud
    Added this comment which was “called out”… IE made available to wider audience on Forbes properties.  It means the author of the story read it, and considered it… 

    Glad you are writing about this Janet, as it is security of IRS data and identity theft needs more attention…

    I am afraid that this problem will accelerate with the global FATCA data collection regime that Treasury/IRS is creating. Americans abroad are really at an increased risk of this when more sensitive tax numbers and assets information is in 3rd party hands ripe for plucking by hackers or inside thieves.

    One of the few stories that really deals with the issue and asks the hard questions is out of Lebanon, and given the neighborhood, they should know what they are talking about.

    FATCA’s FATAL Security flaw http://bit.ly/X1J8ES

    Right now, I am in a civil country, New Zealand, with normal banking at a local bank. I am tax compliant and FATCA/FBAR form compliant, but right now the bank does NOT know I am a U.S. Citizen. It does not have my social security number in their data banks.

    So, with FATCA all that information gets shared with new vendors far from the American Homeland, whose security of data protocols are unknown. I am just left to hope that in the collection and transmission of my data, somehow it will arrive at the IRS DATA banks at the center of the universe, without being breached or stolen.

    Now, if I was living in the Middle East, and worried about terrorist activity and my identity being discovered, how would I feel about FATCA?

  14. If tax identity theft and subsequent fraud is endemic and epidemic INSIDE the US, then what does that say about the potential under FATCA – for those living outside the US, in countries with even less ability to ensure that our asset, banking and personal information, to be collected and automatically reported to the US is secure?

    See: ‘Florida hit by “tsunami” of tax identity fraud’ http://ca.news.yahoo.com/florida-hit-tsunami-tax-identity-122604700.html …”a massive, and dangerous, illegal industry that could cost the nation $21 billion over the next five years, according to the U.S. Treasury Department.”….

  15. Michael Young, opinion editor of Lebanon’s Daily Star, published another FATCA article in July 2013 called “Taking your money and your life”. Here’s an excerpt:

    “Can the information gleaned through FATCA be shared with other government agencies, especially those seeking to uncover terrorist activities? According to the Association of Certified Financial Crime Specialists, the answer is yes. A closer examination of the US tax code, the ACFCS has argued, proves that anyone who actually “believes that his or her problems with US agencies from disclosure of non-US accounts will be limited to tax issues is mistaken.”

    Title 26, Section 6103 of the tax code opens doors that allow US government agencies, including intelligence agencies, and even Congress, to gain access to information obtained through FATCA. For instance, ACFCS notes, Section 6103 “permits disclosure of ‘return information’ to certain Federal officers and employees and law enforcement agencies for purposes of combating terrorism.”

    In that context, Shiite Lebanese-Americans may be particularly vulnerable to surveillance, given the possibility of ties with Hezbollah. That’s not to say that such action would be defensible, but given the frequency of ethnic profiling after the September 11, 2001 attacks, don’t assume the authorities will err on the side of caution, especially when they have the authority allowing them to push further.

    As the NSA’s surveillance has shown, the US government will usually interpret its mandate in the widest possible terms when it can justify this on the grounds of national security. FATCA gives it a new lever with which to work. The law rides roughshod over individual privacy, and if it passes, it will create another window, and a frightening one, that the intelligence agencies can open on American citizens.”

    https://now.mmedia.me/lb/en/commentaryanalysis/taking-your-money-and-your-life

    Also, apologies if this has been previously posted.

  16. Robert Stack is the Deputy Asst Treasury Secretary responsible for the FATCA IGA roll-out and is a former tax partner at the Washington DC law firm, Ivins, Phillips & Barker (IP&B). One of the issues with FATCA regards data privacy. Here is what another IP&B partner, Patrick Smith, had to say about privacy concerns regarding DATCA and the recent Florida Bankers Association’s lawsuit. Please note the final sentence of this quote:

    Tax Notes, January 20, 2014:
    “Particularly in the context of the RFA (Regulatory Flexibility Act), the associations’ argument about the prospect of capital flight because of privacy concerns was fairly substantial, said Smith. He said that the court found, however, that the government had reasonably determined that those privacy concerns would not lead to capital flight. Just because treaties require the information to be protected doesn’t mean it will be, Smith said.”

    http://law.fsu.edu/events/stevejohnson_Jan2014.pdf

  17. @ Innocente

    I agree FATCA will make it easier

    I have no doubt that somebody somewhere has been waiting with gleeful anticipation of accessing a data base filled with information on “US persons”. So thoughtful of the US to supply the rope to hang their own citizens.

  18. @Moderator, In light of the link by Innocente, maybe we could bring this to the front page again.

  19. Pingback: The Isaac Brock Society | Why is security of financial privacy and security of person for those that FATCA identifies ignored by both the US and countries who have signed Treasury’s IGAs?

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