World Council of Credit Unions on FATCA

I have noticed that the World Council of Credit Unions is getting close(as in the next 24 hours) for submitting their comments on FATCA. I linked below to their own RFQ that they sent to their member Federations(such as Credit Union Central of Canada)around the worldwide that was updated as recently as yesterday. A couple of notable issues. They STILL seem to be very concerned about the remittance issue with non compliant institutions. I thought Western Union and others lobbied to get this taken out of the regs.


16 thoughts on “World Council of Credit Unions on FATCA

  1. @Tim, thank you for posting this. I read through it, and still can’t believe that this is possible. I was heartened by the fact that Canada, Japan, China and Switzerland were named as holdouts still.

    How can any sovereign government let the IRS reach into their country and compel non-US entities to be subject to the US. The US can (and would) change the terms at any time. There is no mechanism for getting back any withholding if the IRS deems it forfeit. So no mechanism for settling disputes, and the IRS does not seem to have to prove that the withholding was accurate or justified.

    All onus is on the institution – and the individuals. You can bet too, that banks which already act in a high-handed manner towards depositors, will be even more imperious whenever any FATCA issue is to be decided – it will be the individual account holder who will lose any benefit of any doubt and be left to deal with the IRS however they may.

    And the idea that a person can be coerced into signing a waiver of their financial privacy as enacted by local law. Does a legal right cease to exist if the waiver is coerced? I would think that if someone makes you sign away your money by pointing a gun to your head, a crime is still committed, even if the paper has your signature on it.

    Canada would be insane to let this happen – regardless of any banks that are for it because they want access to the US markets. It may turn out that the only remedy is to isolate the US in turn, and to develop an alternative center of banking – like Canada. I don’t directly hold any American investments, and now I never will. Unfortunately, the big pension plans do – so they need to be

  2. I wish this site could accommodate graphics – I think we need some good political cartoons:
    The FATCA shark swallowing a big bankfish – which is swallowing the smaller minnow depositors, or the masked robber of the US/IRS mugging credit unions and depositors at gunpoint.

  3. As I pointed out earlier FATCA was really designed to be implemented in Europe not Canada. I am in the camp of those believing it won’t be repealed but it still an open question how it will implemented on Canadian resident accounts. I think unlike in Europe it is very telling that there has been no apparent change day to day in the Canadian banking system as of yet.

  4. To give TD Bank credit they did propose a solution in the letter below to the US that would allow the US the saving grace of not having to repeal FATCA but at the same time essentially keeping existing Canadian banking practice intact. The also make it clear that if the US intends to implement FATCA as written recipricocity requires US Banks to ask all of there US resident customers whether or not the are Canadian citizens, born in Canada etc and report that all to the CRA(even though Canada doesn’t tax based on citizenship). Now I would have liked TD to say you do what request in our letter or we will simply pull out of the US completely and not comply.

  5. @Tim, I see what you mean about giving TD credit, after reading the letter. I saw possibly a tiny hint of resistance – but through logic – ex. pointing out all the features of Canadian banking that were the antithesis of tax havens, and also putting in there several times, the reminder that US citizen/persons in Canada would generally end up owing little or no tax in most cases (and in the section re the only other alternatives open, about not investing in US markets?).

    Glad to have a major bank corroborating what we all have been saying so steadfastly all along re tax rates, lack of evidence of money laundering, and the issue about not reporting ALL transactions in and out of each account – how could the IRS even meaningfully process all that? I guess the TD approach would let the US save face, while mostly preserving the system as is. Still think though that the US IRS is prone to grabbing another yard if given an inch, and encroaching even further if they can. Once expensive and complex systems are in place, they don’t usually wither away. Congress – Levin et. al., are continually prone to try and make things more punitive, so Canada and Canadian banks would probably have to continue to assert and hold the line that TD is taking.

    One issue that no-one really talks about is that under FBAR and FATCA, the information is not even as secure as tax return info (which as we see in the US news, is not very secure). It is shared outside the IRS, with other federal agencies and bodies, and under the Patriot Act, the account holder does not need to be notified. The IRS has been chided several times about their lack of security around tax account holder information – and the resultant identity thefts that have occurred – on a fairly grand scale. I don’t want my account numbers and balances, plus other personal id shared out amongst several US agencies, or breached by scammers. There is no guarantee that the IRS won’t have a security leak, and we probably couldn’t sue them if we were compromised.

  6. Speaking of the IRS and it’s inability to secure taxpayer’s information:
    ……”the IRS needs to put more resources into assisting taxpayers experiencing significant tax problems caused by identity theft; and at the same time, the IRS needs to continue improving its fraud detection filters for identity theft, to avoid harming innocent taxpayers.”This is a tall order for an agency experiencing staffing cutbacks,” she added.”……..

  7. @Badger

    There are couple interesting things. One is TD has found a fairly novel and possibly unintended section of the law saying FFI’s can either report under the new “FATCA” standard with all the account deposits and withdrawals or they can report “old school” 1099 as a domestic US bank would due with its domestic US customers. The IRS I believe really wants everyone to do new school FATCA not old school 1099 however at some level they couldn’t be seen as burdening foreign institutions with greater burdens than domestic US instititions thus they had to give the option of old school domestic style 1099. Another section of the law allows exemptions where equivalent information is already available to the IRS as what would be provided under FATCA. Thus TD is arguing Canada has very similar reporting system i.e. CRA NR4 is pretty close to 1099 thus the US already gets equivalent information from Canada as required by the actual FATCA legislation.

    The other issue is under the proposed regs credit unions and other single country domestic only institutions(such as Canada Western Bank and Laurentian Bank) could opt into a FATCA “lite” regime where they only have to certify they don’t have any or very few non residents of Canada as customers and thus would not have to report any information on their Canadian resident US person customers. So there are some indications the US has given up in trying to get information on US Person Canadian residents in terms of Canadian credit unions. The World Council of Credit Unions talks a lot in their submission about how the FATCA “lite” status would work. The link below from Deloitte gives more information.

    I think the real issue is many Canadian credit unions and their Canadian lawyers that have no US source income aren’t going to want to sign any legal document or certification with the US(as described in the Deloitte document above) if they have no need to which is going to create a messy situation for the larger banks like TD that have to do business both with Canadian credit unions and the US. As Steven Mopsick put it signing anything with the IRS when you don’t have to is making their day.

  8. Another reason for Canada and Canadian institutions and the Privacy Commissioner to resist turning over our personal identification and account information to the IRS:
    …….”Around tax time in 2007, 2008, 2009, 2010, 2011 and now this year, the Government Accountability Office has identified similar, recurring weaknesses that could expose sensitive taxpayer information and agency financial data, according to archived GAO reports.

    “IRS had never installed numerous patch releases for the Unix operating system” that had been in operation since March 2009, stated the most recent report, released Friday. By not patching security holes on a timely basis, the “IRS increases the risk that known vulnerabilities in its systems may be exploited.”

    The key reason IRS computers are susceptible to tampering is the tax agency has yet to institute a mandatory information security program, GAO officials have said for five years. Under federal cybersecurity law, agencies must deploy a departmentwide initiative that, among other things, trains personnel to comply with security policies and tests technical protections.”..

    “Passwords for some IRS computer programs were weak enough to expose intelligence that hackers could use to crack open other agency accounts, the auditors found. This was because computer settings did not require complex passwords or limit password reuse appropriately.

    “As a result of these weaknesses, increased risk exists that an individual with malicious intentions could gain inappropriate access to sensitive IRS applications and data on these systems, and potentially use the access to attempt compromises of other IRS systems,” the report stated.”
    “Among the troubles remaining unresolved since the 2011 report is a server that transfers tax and financial data between internal systems and “allowed unencrypted transmission of sensitive data.” Other outstanding issues include network devices stored in unlocked cabinets and digital credentials that let inappropriate personnel enter computer rooms.”………..

  9. @Tim
    I would appreciate your thoughts on the following.

    I noticed in the TD letter that they want to leverage their AML procedures and infrastructure. Makes sense.

    I took some AML training many years ago. I am very rusty but I recall that on Account Open for amounts over $10K, the bank’s service rep can flag the customer as a potential money-lanuderer if they *suspect* the depositor might be guilty. It’s imperative that the service rep give the depositor no physical or verbal feedback. A conversation between the bank’s service rep and the Branch Manager is then required to either escalate the case or set it aside.

    So my paranoid side suggests that CDN banks may only have to *suspect* that you are a US person to flag your account(s). For example, you go into a branch and ask “hey – have you got me down as US or CDN?”. I would think that would be enough to at least flag the account for internal bank discussions. Maybe not today, but say in a year from now.

  10. @Canadian Pat

    But under Canadian law they still can’t refuse to open an account based on US Citizenship or force to fill out a W-9.

  11. This really in question of political will. Is the government next year going to want to have people calling their MP’s(often NDP opposition) next year asking them why they are being asked about US citizenship then being denied accounts and after that the NDP making a big stink about it in question period and all over the evening news.

  12. @Tim and @CanadianPat;
    re ‘political will’ and the future ‘big stink’;

    Hammering home to politicians (and bankers) hat this affects Canadian-born persons, and snowbirds (or others that might meet the ‘substantial presence test’) would make this into a big black eye for whoever lets it happen. They may count on people thinking that it is ‘only’ US born resident of Canada, and not ‘Canadians’ – until it is too late.

    Just successfully publicizing that the IRS wants regular reporting of ALL account activities (not just interest earned like Canada) of anyone they deem to be a ‘taxpayer’ is intrusive enough – and beyond belief – and would make a good scary sound bite. The current situation with FBARs already presents a significant threat to the successful promotion of that new Pooled retirement pension plan idea as the solution to the shortfall in OAS and CPP – which is currently much in the news.
    ( )

    Since the US and IRS doesn’t even recognize similar vehicles as legitimate tax deferred or tax exempt (ex. TFSAs, RESPs, and RDSPs) and penalizes them in reporting (as trusts) and in taxable status – creating a nightmare for those who hold them. RRSPs are already an embarrassing black eye in my opinion, for the Canadian government/s who let the IRS get away with making them so hard to report on.

    As we know, those affected (ex. snowbirds, green card holders, duals, ) go way beyond the usual misconception of who US taxable ‘citizens’ in Canada are – so any way to publicize what estimated proportion of the Canadian resident and citizen population would be well advised to refrain from buying TFSAs, RESPs, PRPPs, RDSPs, from banks, would also influence them where they are vulnerable. They want to sell them, and the federal government wants us to buy them. And the investment community is pressing the federal government to implement the PRPPs soon ( ).

    MP Mai of the NDP was on the right track when he asked for details about all of this, in Parliament. And I note that there were still answers outstanding from that Question period (as to the treatment of TFSAs, etc. ?). See other IBS threads.

    People pay attention, and might call and write to their MPs, if they understand that the US IRS threatens their savings (and pensions) – through the costly reporting, the draconian penalties and through not being able to benefit from the investments that the Canadian government offers everyone else.

    A headline like: “IRS threatens Canadian family’s savings; reserves right to monitor Canadian retirement, education, and TFSAs in Canada” or something in that vein – would probably require somebody to do some ‘splainin.

  13. @Tim and @badger

    I can’t see CDN banks denying CDN or US folks on Account Open. I am suggesting there is a possibility that on Account Open, one’s account could be flagged as a “US Account” based only upon the suspicion of a bank rep or by accident *without* the customers knowledge.

    In this light, if customer account details were passed to the US IRS by improperly identifying customers or by accident, I suggest this could make headlines. Perhaps similar to when CIBC Faxed Canadian customer details to a junkyard in New Jersey on a regular basis. Unfortunately under my scenario Canadians would blame the Canadian Banks, not the US.

    I worry that the situation with US citizenship, FATCA, FBAR et al is so unbelievable that it might be hard to capture share of mind across Canada. I spent an hour with two different small town lawyers (one specializing in Privacy) explaining this stuff. Neither one had ever heard any of this. I am sure they thought that I was off my rocker. I think that the CDN Press might have a similar communication challenge.

    The Canadian political angle is the only card that I can play. It seems to me that the NDP are leading on our issue. Having lived in Canada my whole life I know nothing of the US political process, and I don’t want to know. Obviously the US system is badly broken. I can only hope folks like the ACA can make a dent south of my border.

  14. I had a very interesting conversation with a bank officer at BNS quite a while back, early December I think. My husband was opening a large savings account and we explained that I was not signing as I was USC and didn’t want to have to report it etc. I began to ask him a few questions – all of the answers were a bit rattling but the worst ones were that they would ask people to fill out either W8Ben and/or W9; and when I said, certainly the bank wouldn’t pay for the changes required to comply with FATCA, you will up the service charges of the customers and he smiled and said “yes.”

    I have a girlfriend here who recently received a registered letter from her bank, indicating her account had been closed and they required her to come in and clear out her safety deposit box and so on. No explanation was given. She is not a USC. When she went to the bank, they would not even discuss it with her. She pressed for an answer and was told the head office had made the decision and they could tell her nothing. She said she was totally humiliated by it. When the teller took her to the safety deposit boxes, she said “It’s never a good idea to hold a joint account with anybody (outside spouse, etc). She implied just enough to make it clear that the other owner, who was a close friend previously, had been tagged as likely evading taxes (very large, sudden deposits, way off the pattern, etc). It made me aware that at some level, banks are keeping tabs on what we do and also, how awful it must feel to those who are having their accounts closed simply because they are American.

  15. @nobledreamer and @CanadianPat. It is too bad that we have to be concerned with those aspects of banking and bank practice – which as law abiding people, we would probably never have had cause to consider before.

    I too have had to explain the situation to people – none of whom had any idea about FBARs and FATCA, and who cannot comprehend it – and thus can’t give good advice. I did confer with a specialist – but I cannot not afford to hire them.

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