With FATCA’s 1 July deadline right around the corner, many desperate non-U.S. banks are turning to technology companies purporting to offer “compliance solutions” to help them hunt down all those tax-evading, money-laundering, drug-dealing U.S. Persons abroad who sneakily disguised themselves as ordinary, law-abiding immigrants interested only in paying water bills and buying groceries. How well are these so-called “solutions” likely to perform? Well, attention to detail is crucial in both software development and tax compliance, so let’s take a closer look at the level of attention to detail that one of these compliance firms demonstrates in other areas …
More than a year ago on Twitter, I noted this hilariously awful map of Intergovernmental Agreements posted by Thomson Reuters — apparently they thought that Tasmania declared independence from Australia, Siberia broke away from western Russia, and then Sakhalin & the Kuriles counter-seceded from Siberia, all because of FATCA. From the Internet Archive, if you don’t believe that’s a genuine screenshot:
“Information is accurate as of 24/04/14”, claims that page? About the only thing this map does right is that Tasmania has finally been reunified with Australia. Otherwise, it doesn’t even agree with the map’s own sidebar, let alone Treasury’s list of IGA jurisdictions. Brazil and Peru are the same “model 2 in substance” colour, even though both have actually signed (but not ratified) model 1 agreements, and Peru is absent entirely from the sidebar. Latvia, Lithuania, and Poland are (correctly) mentioned in the sidebar under the “model 1 in substance” category, but in the map they remain grey. Japan is (again correctly) mentioned in the sidebar under the “model 2” category, but is coloured in as a “model 1” country. Thailand and Malaysia are coloured in as well, for no discernible reason. And North Korea — probably the least likely country on Earth either to be interested in signing a FATCA IGA, or to be allowed to do so by Treasury — is coloured in as if it were covered by the South Korean Model 1 agreement.
You might want to dismiss these as simple oversights or slips of the mouse, but there’s more two giant errors which demonstrate pretty conclusively that “the lights are on, but no one’s home”. First, someone decided to pay enough attention to Russia to ensure that cis-Ural Russia could rejoin trans-Ural Russia, but Sakhalin, the Kuriles, Kaliningrad, and various other Russian territories are still greyed out — and of course, the actual future of FATCA in Russia is in serious doubt, with IGA negotiations stalled and McCain and Levin proposing to use the 30% withholding as another economic weapon in response to the Ukraine crisis. And then, the whole of China (except for Hainan) is for some reason coloured in as “model 2 agreed in substance”, when in reality only Hong Kong finished negotiating a model 2 agreement (after the date of that map, not before) and Beijing has finished negotiating nothing at all.
And of course, simultaneously running a news wing and a “compliance solutions” wing has had No Effect Whatsoever on Reuters’ ability to report the latest FATCA happenings in a neutral and balanced fashion, as can be seen from Patrick Temple-West quotes like “FATCA has come under fire from Americans with foreign financial accounts because they are accustomed to secrecy”, or referring to the Credit Union National Association as “[a]nti-tax advocates” for “applaud[ing] an effort by Senator Rand Paul to roll back important sections of a U.S. law designed to fight tax evasion”.
So, banks: these are the people you trust to offer you a “full service solution for FATCA compliance that can be tailored to fit any size of organization, wherever it is located and whatever the compliance challenges are” and save you from 30% U.S. sanctions? Better pray to Mammon or whichever other god you believe in that there’s no such thing as “karma”, cuz otherwise it’s gonna come back and bite you in some sensitive parts!