FATCA Makes Banks Shut Out Americans

I would draw your attention to the recent post by Robert Wood at Forbes.  It caught my attention this morning, and so I decided to post a comment back to him.  Frankly, Robert is one of the regular and consistent writers on FATCA, FBAR and Citizenship taxation issues.  He often quotes and references American Citizens Abroad.  I sometimes joke that they must have him on their payroll.  That is NOT true!  LOL

Here is the link to the most recent posting…

FATCA Makes Banks Shut Out Americans

I could not pass up the opportunity to post a comment back to him, and the text is produced below:

Excellent summary and compilation of previous posts. The US is the primary force in creating a world wide Tax Data exchange regime, and it may be like a force of nature, unstoppable. What is stunning to me is how little discussion there is on this subject in the MSM.

This statement of yours certainly is true… “the IRS began a compliance push like no other.”

Unfortunately, they started with a penalty hammer, and did nothing to lay the ground work with an educational outreach to Expats or new immigrants to America. In that they may have done some serious irreparable harm.

Ever since the 5 EU nation FATCA agreement, which would replace direct FFI reporting to the IRS with a Tax authority exchange program, there seems to be other countries now going along.

I point your attention to the Governor of the Bank of Mauritius, at the Seminar on Foreign Account Tax Compliance Act, as an example of that position.

Google: Rundheersing Bheenick: Responding to the US FATCA – complain but comply

In spite of being hailed internationally as:

“A US-centric law”;

“An attempt to convert foreigners into unpaid IRS agents”;

“A kind of US backward imperialism”;

“…a murder weapon and the US government the assailant”;

“An atomic bomb used to kill a fly”; and

“One of the worst pieces of legislations to be revealed in recent times

…the advice of this Banking Governor, is to modify their countries laws, join in a similar EU pact, and “Complain but Comply.”

Also, I am not sure that you are aware of the IRS US bank non resident interest reporting regime that is being opposed by some in Congress. This is the tool the IRS has created to make the 5 nation EU tax data exchange reciprocity work. It is the domestic equivalent of FATCA… for short, I like to call it DATCA.

There is a recent editorial in the Miami Herald by Senator Rubio and Congressman Posey Titled: A Destructive IRS mandate.

This was answered in a dueling editorial by Emily McMahon, acting assistant secretary for tax policy, Treasury Department

It was titled: Offshore depositors won’t be hurt.

(Note:  these editorials have been previously posted at Isaac Brock here)

I believe the former, not the later, but neither of the editorials drew the link from this domestic IRS reporting regime to the FATCA reporting that Congress created. FATCA begat DATCA. It is that simple.

Even if you did not have an axe to grind in this debate, it certainly is an interesting one to watch, and more amazingly so, because it is totally off the radar for American’s generally, and totally ignored in the GOP debates.

Someday, we will look back at this, and there will be retrospective books written, and as sources of what was happening, folks will have to come to your blog to get the history which is well documented.

Thanks for continuing to shine the light on the subject.

Best regards

PS: I would only take exception to one comment, and that is the so called “success” of the voluntary Disclosures programs. The IRS has only produced 2 numbers to make that claim, and any CPA knows, numbers without context have no meaning. There are some real disasters happening to Minnows inside those programs, and as a compliance tool it may not have been that successful. However, that discussion is for another time, and doesn’t otherwise distract of your fine work.


29 thoughts on “FATCA Makes Banks Shut Out Americans

  1. Because of FATCA one of my bank accounts was closed and I am now restricted to simple current and savings accounts. All other bank account types are barred to me currently (this is in Germany).

    If there were no FATCA I wouldn’t life a finger to renounce or file anything with the US: I am an accidental American and EU citizen and can safety avoid travelling to the US ever again. But having my bank accounts restricted and feeling discriminated against in my own country due to a US birth place is where I draw the line. I am patiently waiting to receive my renunciation appointment, fill out the 8854 and whatever else needs to be done and then wash my hands of the US and their crazy extra territorial laws. Good riddance.

  2. ALL,
    I also posted an on-line comment on this article. Click on the link provided by Just Me to read the article and the comments, and add your own as well. Forbes is read by people who can be heard “on high.” Some real life stories will contribute significantly to spreading the word on the brutatity of US citizenship-based taxation, FATCA, FBAR and how these are not only destroying the human rights of US citizens residing abroad, but the very image of the US as well. @Dom Pedro: Your words posted here are right on target.

  3. Well written @just me. Kudos also to Robert Wood for the article – now if we can only get some “solid numbers” (see Shulman remarks below) to challenge the repeated claim that OVDI=*success – perhaps if the IRS coughs up some actual *stats (not likely!).

    *see ‘Lies, damn lies, and statistics’…http://en.wikipedia.org/wiki/Lies,_damned_lies,_and_statistics http://www.ted.com/talks/lies_damned_lies_and_statistics_about_tedtalks.html

    As Shulman said himself, about the: ”….international tax gap. So how big is it? $10 billion? $100 billion? It’s hard to say as I haven’t seen any solid research to arrive at conclusive numbers….But in some ways, whatever the size of the international tax gap, our commitment to this issue would be unchanged. That is because our international compliance efforts are much more about protecting the $2.7 trillion base of revenue that we collect today rather than just the incremental enforcement revenue that we collect from these efforts. Nevertheless, we are committed to aggressively pursuing the international tax gap – whatever amount it may ultimately be”….from: Remarks of Commissioner Douglas Shulman before the 21st Annual George Washington University International Tax Conference IR-2008-137, Dec. 8, 2008http://www.irs.gov/newsroom/article/0,,id=201003,00.html

  4. further to my reference to the paucity of any “solid research” to base the OVDI=success claims on, I refer you to the very strong letter that the ACA sent to Commissioner Shulman on March 5, 2012;

    An excerpt;
    “We also ask that you answer the questions raised in letters sent to the IRS under the Freedom of Information
    Act, letters that were replied to by refusal to answer.

    1) How many of the 33, 000 taxpayers that the IRS News Release of January 9, 2012 says came forward
    in the offshore voluntary disclosure programs actually live abroad? From our close contacts with various tax
    preparers, we know that the OVDP program gathered up many more Americans overseas than the IRS

    2) How much of the $4.4 billion amount that the IRS claims has been paid under the OVDP is in fact FBAR
    fines, not back taxes?”

    and, from; http://www.prweb.com/releases/2012/3/prweb9264773.htm Geneva, Switzerland (PRWEB) March 09, 2012
    “Hornung-Soukup added, “We also asked Commissioner Shulman, again, two questions which have already been raised in Freedom of Information Act letters sent to the IRS, but which have not been answered. These questions are, how many of the 33,000 taxpayers who came forward in the OVDP live outside of the United States, and how much of the USD$ 4.4 billion that was collected under this program comes from fines, and not back taxes?””

    If we get any numbers, it will be thanks to the TAS and the ACA – so THANKYOU ACA and Nina Olson!!!

  5. @Everyone

    US Congresswoman Carolyn Maloney was on twitter again today talking about FATCA. Supposedly she is going to. the next ranking member or chair of the House Financial Services Committee

  6. @bubblebustin. Forbes doesn’t have like buttons, I guess. Thanks for the thought. Consider posting a comment there too. You have to scroll all the way now, and hit a button called “expand comments” A few more there beside just “Roger and Me” would help encourage Robert Wood to keep at it. And no, the movie wasn’t about us… LOL

    @Tim… I just looked on both of her accounts. I only see the one from the 21st. Is this the one you are talking about…

    btw, I replied and thanked her…

  7. This has turned into a very long string of posts – for that I apologize, but…..

    Regarding the lack of analysis and definition of ‘*success’, and the lack of robust statistics and research on the much touted ‘international tax gap’. See this interesting document. The reference for one very large estimated figure in the table, is a piece of correspondence, not a piece of research (see footnote 38) ;


    Office of Inspections and Evaluations

    A Combination of Legislative Actions and Increased IRS Capability and Capacity Are Required to Reduce the Multi-Billion Dollar U.S. International Tax Gap

    January 27, 2009
    Reference Number: 2009-IE-R001

    “This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.”

    “The international tax gap is defined as taxes owed—but not collected on time—from a United States (U.S.) person[1] or foreign person[2] whose cross-border transactions are subject to U.S. taxation. The IRS has not developed an accurate and reliable estimate of the international tax gap and has no plans to comprehensively measure it, but it is making the reduction of the international tax gap a top priority. Some non-IRS estimates place the international tax gap at $100 billion or more annually.[3] The result is that compliant taxpayers have additional tax burden when noncompliant taxpayers do not pay their legal obligations.”

    see also: Appendix VI where the estimate for “Offshore Noncompliance of U.S. Taxpayers”
    “Low estimate $40.0 billion[38] “reference: “[38] Rossotti, Charles O. 2004. Letter to Senators Charles Grassley and Max Baucus. March 22.).”
    “High estimate: $70.0 billion[39]”[39] “Sullivan, Martin A. 2004. U.S. citizens hide hundreds of billions in Cayman accounts. Tax Notes. Vol. 103, p.956″

    (1) Interestingly, re the US justifications for implementing FATCA: Canada does not meet the OECD criteria (*see below) being used in this US Treasury Inspector General for Tax Administration (TIGTA) report to define a ‘tax haven’).

    (2) The table cited in Appendix VI as the basis of the ‘international tax gap’ does not attempt to distinguish between individual and corporate or business taxpayers. There is no attempt to quantify specific classes of taxpayers.

    This report defines *’tax haven’ as below:
    * ” 9 The Organization for Economic Cooperation and Development (OECD) utilizes four criteria to identify a jurisdiction as a tax haven:

    “1) no or only nominal taxes (generally or in special circumstances); ”
    2) a lack of transparency;
    3) laws or administrative practices that prevent the effective exchange of information for tax purposes; and
    4 ) no requirement that foreign activity be substantial.

    Although the first criterion is a necessary condition, it is insufficient by itself to identify a jurisdiction as a tax haven. The other criteria reflect conditions that, in conjunction with no or nominal tax, enable a jurisdiction to pursue harmful tax competition and effectively obstruct authorities in other countries from accessing information for tax purposes.”

    So, does that sound like Canada or any of your permanent countries of residence? Not likely.

    Perhaps the cited ‘international’ tax gap should be adjusted by looking at an estimate of the numbers of US citizens residing ONLY in countries identified by the OECD as ‘tax havens’, rather than just declaring that any country who does not sign on to FATCA is automatically a tax haven. Furthermore, that estimate would need to EXCLUDE all the ordinary US citizens living in those countries (which is not a crime) who are very unlikely to have amassed enough money to make it worth ‘hiding’. The document does not distinguish individuals from entities.

    See the gross estimates and large UNKNOWNS in the whole table in appendix VI – Source: TIGTA Analysis of Likely Components of the International Tax Gap with Available Estimates.

    – If you were officially justifying some serious policy moves and expenditures – and the policies imposed significant hardship on a particular class of US citizens ie. ordinary individual citizens ‘abroad’, shouldn’t you be required to provide a bit more robust proof to support your decisions and conclusions?

    – How do you prove that draconian actions are justified, or effective in closing a ‘gap’ that has not been robustly quantified and described in any useful detail?

    – The introduction describes ‘cross-border’ transactions, but if you live in the country where you work, earn and bank, where is the ‘cross-border’ aspect of transactions?

    – Where is any attempt to distinguish between the actions of US residents vs. US non-residents? Or immigrants to the US with pre-existing accounts?

    Maybe as someone with no background at all in taxation, business, economics or public policy, and no specialized research skills I give too much weight to this one document, but I think that if we are to suffer the consequences, the burden of the proof for justification should rest with the government in a true democracy. Since no evidence is forthcoming (ex. the FOI sought by the ACA) then we are left to our own devices in trying to make sense of the seemingly senseless.

    In closing, re the repetition of the “OVDI=success” equation, and the other favourite – ‘taxpayers abroad who don’t pay, burden those at home” messages – if it occurs to us to ask for proof of this – then can’t the media in general do the same? What else would help to shine light through the holes in these claims – and highlight the ‘gaps’ in reports like this one?

  8. @badger

    No apologies necessary. Good work digging that one out. I am going to have to read it slowly and digest it, but it does show how little they know about what it is they are doing, and certainly explain why there is no Cost vs Benefit analysis!!!! But this is how our government operates…

  9. @Tim
    Thanks for that link. Interesting listening. Let’s hope Mr. Geithner is actually listening to people concerned about those living abroad.

  10. Tim,

    Thanks for that…

    Well, well… let me quote exactly what I heard Timothy say with emphasis…..

    “We are working very closely to try to meet the Congressional intent in making it harder for American Citizens overseas to avoid US taxes without putting undo burden on their ability to have a bank account for example…”

    So, the intent of Congress he is saying, was to make it harder for American Citizens overseas to avoid US taxes, and no mention of the real reason which I thought was to stop Homeland cheats from moving money offshore.

    So, he is saying that this was intentional, and not an unintentional consequence. He is putting this back on Congress, as that was your intention, and so that is what we are doing!! Disappointed the the Congresswomen didn’t challenge the intention.

    If I hear comments like that too often, I will have to modify what I think Carl Levin was trying to do with FATCA. Maybe he was just going after Expats, if you are to believe Geithner’s statement.

    Hummm… So, that should give the Canadians here much comfort, NOT!

  11. One ray of hope in all this: any American that can claim to be covered under Sections 5.1 and 5.2 of General Comment No. 23/50 of the United Nations International Covenant for Civil and Political Rights (UN-ICCPR), as a member of an indigenous ethnic minority foreign to the U.S., could claim to have an ”underlying natural nationality” and/or a ”dominant effective nationality” that would differ from their American nationality – upon which the IRS appears to base their right to tax expats with. In which case, expats living outside the U.S. could claim at least a double-nationality (i.e., maybe not a double citizenship though), even if the host country hadn’t agreed to the status.

    After that claim is made, it’s only a short jump to declaring one’s U.S. Citizenship to be ”irrelevant and subordinate”, and suing a foreign government for discrimination against you for not recognizing the ”effective dominance” of your true ethnicity if you are denied full banking services, etc. Remember this: to be ”American” does not denote an ethnicity unless you are a Native American. U.S. Citizenship is nothing more than an (American) legal construct.

  12. Pingback: Video: Robert Wood speaks with Scott Drake on loss of U.S. citizenship | The Isaac Brock Society

  13. @Just Me, in many ways it doesn’t surprise me if they’re in fact focussing on us abroad because many could face extra US taxation on capital gains, especially when selling their primal residences. Also double taxation possible with pension lump sums and anomalous taxation of foreign-based mutual funds (“PFIC”) taxes. Fatca will make it easier to catch people not declaring this stuff correctly…It’s why I realised I was going to have to amend my earlier returns and become compliant.

    And if they do away with the FEIE, I believe many could face further double taxation even in higher tax countries like the UK due to more generous personal exemption thresholds which are increasing more quickly than their US equivalent. Yikes.

  14. I’m NOT getting into conspiracies here, just trying highlight what US politicians and commissioners like to say. Maybe this will help to understand their motives. Some people attribute this to the Big Lie Theory and somehow related to Hitler, but I find that quite impossible that this technique started in the 1930-1940s (so recently..) My guess is that this practice has been going on since we first walked out of caves and some people wanted to control us:
    If you repeat a lie often enough, it becomes the truth;
    If you tell a lie big enough and keep repeating it, people will eventually come to believe it;
    If you repeat a lie often enough, people will believe it;
    If you repeat a lie long enough, it becomes truth;
    If you repeat a lie many times, people are bound to start believing it;
    I’m not out to attack them, or degrade their methods. I just like to know why people do what they do, even if they have no real proof to back up their claims. And I’m not criticising only the US for doing this! I know this is technique is very commonly used around the world.

    So there you go, for people to believe it, they have to repeat it– over and over and over again. The sad part is that this technique works all too well!

  15. @bubblebustin – I guess so, but usually those 1 million people are saying the stupid thing as a result of a few at the top who have the most to benefit.

    In our specific cases, I can’t understand what — aside from scaring a few expats in developed countries into handing over percentages of their accounts balances — what they stand to gain from the FATCA itself. I’ve been saying it since the beginning, but I think it’s more about “control” than anything else.

    The point to my posts is to highlight the fact that the US politicians and tax commissioner NEVER change their message, no matter how many people like me or people on this site write to them to explain their REAL day-to-day circumstances. They never will.

  16. I am reminded today that the FATCA type issues are not affecting Americans alone. I just read this, or more appropriately stated, the google translate edition.


    Here is the translated version…

    ATS, Morning Sunday, March 25, 2012.

    RESOLUTION: The Swiss abroad seeking to uphold their banking relationships in Switzerland.

    The Council for the Swiss abroad ^ denounces discrimination which are covered expatriates wishing to open an account at a bank Helvetic, including the United States, met yesterday in Bern, its 132 members have unanimously adopted a resolution calling on banks and the authorities to act.

    “The Swiss abroad live in the United States were shocked by how the banks have informed, sometimes overnight, closing their accounts,” reported the president of theOrganisation of the Swiss abroad (OSA), former National Councillor Jacques-SimonEggly (PLR / GE).

    The Helvetians domiciled in other countries are not spared, he said. In Germany, for example, they must have a minimum of 50,000 francs to open an account.

    The resolution calls for banks and authorities to propose solutions to enable the Swiss abroad who are in good standing with the tax authorities to maintain banking relationships in Switzerland on reasonable terms. Arrested last year, the Federal Council considered that it had no jurisdiction to intervene in trade policy banks, was surprised Jacques-Simon Eggly.

    At their spring meeting, members of the Council of the Swiss abroad have requested the creation of a law for this community. A parliamentary initiative in this direction was accepted earlier this year by the appropriate committees of both Houses of Parliament.The head of the Federal Department of Foreign Affairs Burkhalter there expressed support, underlines the OSE.

    This follows the story last month


    I will reproduce in case you didn’t read it last time it was reference here on Brock, I think…

    By Isabelle Eichenberger, swissinfo.ch, February 20, 2012

    Helvetic banks no longer want to risk taking U.S. customers, or when under very restrictive. Put in one basket, the Swiss settled in the United States do not hide their frustration.

    “I live for four years in the U.S. and Zurich Cantonal Bank has signified to me in late 2011 that all my accounts were canceled. And now what? How will my customers be able to pay me? ”

    “I can no longer make my payments online. And whether from a Swiss bank or American, open an account is almost impossible. You must fill dozens of pages of paperwork and too expensive because you have to pay each transaction. ”

    Remarks in a discussion of swisscommunity.org, the platform of the Swiss Abroad.Where an expatriate in Argentina complains of discrimination. “The U.S. pressure leads to increased restrictions for all customers of Swiss banks domiciled abroad, for political and economic reasons.”


    The options are closing one after the other and expatriates are “frustrated”. “It is outrageous and I understand that this causes so much emotion,” said Martin Naville, director of the Chamber of Commerce Switzerland-United States.

    He recalled that one must distinguish between accounts and asset accounts Current account used by people who have such family in Switzerland, an apartment, a mortgage, a club, etc..

    “A transaction account offers no opportunity for tax evasion, says Martin Naville. By closing such accounts, banks penalize customers completely innocent and exhibit exaggerated caution. ”

    For the Organisation of Swiss Abroad (OSA), the cost of banking more and higher are a “real problem”. “We get complaints from people who do not know where to put their money on reasonable terms. Moreover, it discriminates against the Swiss in Switzerland, “says Sarah Mastantuoni, head of legal department of the OSE.

    Things started to go wrong when UBS was forced to close its offshore activities in the United States. Tension has been mounting, with the charge-surprise by the American justice of the private bank Wegelin, who had no overseas subsidiary.

    And now even Raiffeisen retail banking mainly active in Switzerland, announced the closure of all customer deposits of the United States. Alain Girardin, Director for Western Switzerland, said that “3.5 million cooperators, 0.01% are based in the U.S. and it’s clients with close personal relations with Switzerland.”

    Americans considered

    The Swiss Bankers Association (SBA) confirms that administrative burdens have increased substantially. Since the 2001 attacks, regulations and forms have multiplied against terrorism, foreign potentates, bleaching, etc..

    The process accelerated with the war tax. “Administrative requirements have increased in all countries that have declared war on tax evasion and trying to get money wherever it is hidden. The public mindset has changed, the fraudster is no longer a hero but a criminal like another, “said Rebecca Garcia, spokesman for the SBA.

    “It’s a real problem for Swiss residing in the United States, but there is nothing to do, she adds. After four months’ stay, they are considered full-fledged American citizens. ”

    No easy solution

    The Confederation has beautiful “attentive to the U.S. authorities,” it is powerless. “The decision to keep customers or not is up to banks. Administrative requirements necessary to remove all suspicion of the IRS are so expensive that many give to open a deposit, “says Roland Meier, spokesman for the Federal Department of Finance (FDF).

    And mention the alternative offered by PostFinance payment transactions. But who has the same security requirements (and costs) that any bank.

    “Customers should be able to certify that they have paid taxes on funds to be transferred,” said Alex Josty. The head of press service PostFinance refuses to give figures, but has “not seen any significant increase in the number of accounts opened by Swiss nationals in the United States.”

    For Martin Naville, there is no easy solution. “Some banks offer a limited service and specific, eg for young students or workers who spend only two or three years in the United States.”

    D and the system remains, for example, establish a home in the near Switzerland and the task of managing its bank account, but with the risk of being illegally and, especially, become very complicated life, finds M . Naville.

  17. The Internal Revenue Service is pleased to announce that its highly successful campaign to bring non-resident United States persons into tax compliance has led to an unprecedented number of tax returns entering our processing center. However, due to recent budget cuts to our country’s tax collection service, and our inability to have predicted the current volume of returns, the IRS no longer has the available manpower needed to process US taxpayer’s returns in a timely fashion.

    In our effort to maintain a consistent level of service for our customers, the IRS will now charge a processing fee to taxpayers whose tax returns originate in a foreign country. This fee will help defray the cost of the additional manpower needed in processing these returns.

    Due to existing law, non-resident US tax persons currently yield little, if any, revenue for the US government. This fee shall remain in place until such time that Congress makes changes to our tax laws that currently allow non-residents to avoid paying into the US tax system.
    – Tax Czar

    Okay, not true, but doesn’t it seem like a natural progression in the current climate? It wouldn’t be much different from the US government’s decision to charge US citizens a $450 fee to cover the costs of their own renunciations. I am slowly starting to digest the reality of the situation: that if are not of benefit or value to the US, we are a liability by default.

  18. As the saying goes you can always count on Americans to do the right thing after they’ve exhausted all other possibilities. Why do they always have to do it that way? It’s exhausting.

    They’ll probably decide to strip people of US citizenship in the end … which is what we wanted all along.

    If they want to keep the citizenship taxation scam going, they’ll have to find a way to let ordinary dual citizens off the hook by letting them get rid of US citizenship.

  19. @bubblebustin,

    Go to: http://isaacbrocksociety.com/2011/12/12/how-to-join/

    If you want to be able to create new threads (posts) on subjects related to US persons living abroad, please just make a comment on above thread and you will be invited to become an “author” by an administrator. You will need to create a WordPress ID (at wordpress.com ). Aliases are also welcome by WordPress. (Please note: If you wish to cross post from your own blog to Isaac Brock, please cross post it: “Reblogging” will not be permitted, and the editor will immediately take reblogs off the site).

    I think I see my screen a little differently, but look for “New Post”. Click on that if you see it, and you will be able to post. If not, wait for someone more knowledgeable than I am to help you.

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