Global Financial Surveillance Matrix Set to Expand

Privacy Alert

In March 2014, the Treasury Department announced onerous new Foreign Account Tax Compliance Act (FATCA) regulations to start taking effect in July. Even though it is expected to cost way more to implement than it will ever recover, the rules will put all overseas accounts containing more than $50,000 under closer scrutiny by the IRS. New reporting mandates placed on financial institutions will probably force many banks that cannot or will not comply to close accounts held by U.S. citizens.

As the International Business Times reported,

“…the ambitious tax evasion crackdown is a key step toward global information-sharing by governments on citizen finances, as money flows internationalize. The OECD earlier in February released a global framework for sharing financial data, though actual data exchange may only start in 2017.”

The legislation enables U.S. authorities to impose regulatory costs, and potentially penalties, on foreign financial institutions who otherwise have few if any dealings with the United States. The U.S. has sought to ameliorate that criticism by offering reciprocity to potential countries who sign intergovernmental agreements, but the idea of the U.S. Government providing information on its citizens to foreign governments has also proved controversial. The law’s interference in the relationship between individual Americans or dual nationals and non-American banks led Georges Ugeux to term it “bullying and selfish.” The Economist has called FATCA’s “extraterritoriality stunning even by Washington’s standards.”

Treasury officials have signed information-sharing agreements with over 50 countries already. (Check out the current list here.) Dozens more such pacts are in progress. Under these agreements, foreign banks are obliged to report detailed information about U.S. account holders to the government entity that regulates the banks in that country. That government entity then shares the information with the U.S. government.

Beware of foreign banks that claim they don’t share customer data with the IRS. If that foreign bank is in a country that has an informationsharing agreement with the U.S., then your records will almost certainly be shared with the U.S. government.