The Inter-Governental Agreement between Canada and the United States (IGA), which will implement FATCA regulations in Canada, is sufficiently complex that it will take some time before Canadians come to grips with what rights our government has traded away and what safeguards are in place to protect, hopefully, the majority of us. While I am completely against the CRA trading the private banking account information of Canadian residents and citizens with the hostile government to our south run by President Obama and his band of merry thieves, who steal from the poor to give to the rich, I do believe that the vast majority of Canadian residents can protect themselves. We now have not only to navigate the treacherous waters of IRS threatening to fine us at multiples of our total financial wealth (up to 380%), we must also know how to deal with bank’s inquisition which will begin to question all Canadians: “Are you or have you ever been a US person?”
This means that the Canadian government has left hapless citizens to know how to protect themselves. We must all be bad asses–Clint Eastwoods–with a “Go ahead and make my day” attitude not just in the face of the IRS, the US tax compliance industry in Canada, and US border guards, but also now, with the sanction of the Tory government, in the face of the inquisition that is taking place at our banks. Under no circumstances do Canadians want their banks to believe that they are US persons, because at that point, the bank will be obligated by this unlawful law (i.e., IGA) to betray their bank account information (though not RRSP, TFSA, RESP and RDSP accounts) to the criminal IRS in Washington, where we have no representation. I am not trying to scare people. But the loss of Canadian sovereignty is happening in baby steps of which the FATCA is a major accomplishment.
In the post, “Prove you are not American“, Schubert, in his classic exuberant fashion, made an important comment saying that we should not scare people with incorrect interpretations of the IGA: The banks will not be asking for proof that parents and grandparents are not US citizens. But this does not take into account the over-zealous twit who may land himself or herself a nice position as bank inquisitor. It is now their duty to ferret out “US persons” hiding their true status. Consider the closure of accounts of US persons in Switizerland, even when they are resident in Switzerland and citizens of Switzerland. To my knowledge, there is actually nothing in the agreements between Switzerland and the USA that requires Swiss banks to do this, but in their attempt at CYA (cover your ass), they have decided that the safest thing to do is to close the accounts of US persons and not permit US persons to open new accounts or even renew mortgages.
Consider the following paragraph from the IGA dealing with new accounts (p. 23; emphasis mine):
If there is a change of circumstances with respect to a New Individual Account that causes the Reporting Canadian Financial Institution to know, or have reason to know, that the original self-certification [that person is not a US citizen] is incorrect or unreliable, the Reporting Canadian Financial Institution cannot rely on the original self-certification and must obtain a valid self-certification that establishes whether the Account Holder is a U.S. citizen or resident for U.S. tax purposes. If the Reporting Canadian Financial Institution is unable to obtain a valid self-certification, the Reporting Canadian Financial Institution must treat the account as a U.S. Reportable Account.
Now imagine the following scenario:
Canadian-born Johnny banks at TD in Huntsville ON. The new manager, Jim, went to High School with Johnny. Jim knows that Johnny’s father is a US citizen, while Johnny’s mother is a Canadian. Johnny lived for ten years in the US and moved back to Canada and was a new student with Jim in grade nine at a local school. Oops. One day, Jim recognizes Johnny his former high-school mate and decides that he must call Johnny in for an inquisitional hearing. Johnny tries to prove he is not a US person, but to no avail. He has never obtained a CLN or his dog ate it. Never mind why, he can’t prove to Jim that he is not a US person and he becomes a specified account holder. The change of circumstance: the manager Jim knows Johnny personally, and since Jim is a complete dick (enough of these sort of people in every country), he gives Johnny’s account information, as specified under FATCA, over to the CRA, which then sends it to the IRS.
This is not likely to happen every day, but it will certainly happen in a country of 30 million people with as many as 1 million so-called US persons. So now I really believe that the IGA is irresponsible on the part of the Harper government, and it is a step towards the annexation of Canada by the US. But for now we have some ability to protect ourselves.