Four Ways to Get FATCAed

Back at the family farm in my home country, the Pacific Northwest of the United States of America, my parents have a very helpful neighbor.  Let's call him Bob.

How helpful is Bob?  Well, when my parents have gopher problems  Bob drives over in his Cushman with his lawn chair, a couple of beers, and his .22 rifle.  And he sits out there in the sun until the little beasts pop their heads out to see what's up and then Bob blows them to pieces.  Pest control American-style.

Very entertaining for humans beings.  Not so much fun for the gophers.

If you are an American or a Green Card holder living outside the United States or an immigrant living in the US you might just feel that you have a lot in common right now with the gophers:  not only are you being treated as a particularly nasty little pest but  you've looked around and seen that some of your furry friends have already met the equivalent of Bob  through one of the American IRS "amnesty" programs.

Oh, but it gets better.  With FATCA (the Foreign Account Tax Compliance Act) those tax farmers in the U.S. have decided to start fires in the tunnels and smoke everyone out.  Makes for a terrible dilemma - you can hole up and die of asphyxiation or you can come out and risk getting your head blown off.

Some of you have already been FATCAed but for those of you who smell the faint odor of smoke but have yet to become intimately acquainted with the wrong end of a rifle, here are some indications that the air is about to become unbreathable.  This is what people are reporting to date and it's the local banks blowing the smoke on behalf of the United States:

1.  Bank Personnel Asking Questions:  You've been banking with the same local bank for years in France or Germany or Argentina.  You come in to do some business - cash a check, check your balance, pick up a debit card - or maybe they call you in to touch base about your accounts and suddenly you find yourself being asked some curious questions in a roundabout way:  We see that your mother is a US citizen - by any chance are you an American citizen too?  We see that you send money to the US - do you have a connection to that country?

2.  Questionnaires/Privacy Waivers:  You have just moved from the US to a new country where you have found your dream job and you try to open a local checking/savings account.  In response to your request, the bank hands you a questionnaire that asks things like:

Are you a US citizen? (answer "yes" even if you have other nationalities)
Have you ever had a Green Card?
Are you considered a tax resident of the United States (according to US law)?
Independent of the Substantial Physical Presence Test are you still living in the US?  (If you have left the US and do not intend to return you can reply "no" but this must be documented with proof of your current domicile).

You may also be handed a document that waives your local privacy rights.  In jurisdictions with strong personal privacy laws, banks cannot turn over your personal information unless you first sign away those rights.  You will be told that failure to sign will result in your accounts being closed.

3.  A W-9 Request:  You live outside the United States and the local bank sends you and your spouse (not a US citizen or Green Card holder) an IRS form called a W-9, Request for a Taxpayer Identification Number and Certification.

4.  Account Restrictions:  You are an American abroad with an account in the US and the American bank contacts you and says, "Sorry, but from now on the only thing we'll allow you to do with your retirement fund is sell."    No more buying or adding to that account.  If you live outside the US, we don't want your money.

So you go to the local bank in the country where you live (and where you deposit your paychecks) and discover that they too don't want your money.  "You're an American?"  Nope, not opening savings and retirement accounts for Americans anymore.  You do a web search and find that this is not all unusual.  Here are General Conditions for an account with Ing Direct here in France.  They will no longer open things like an "assurance vie" or other savings and investment accounts for "US Persons" (people who, it must be pointed out, may perfectly well be French citizens).

As for a French (or any other nationality) who becomes a "US Person," his accounts will be closed.  Ing says, "Par ailleurs, elle sera dans l’obligation de mettre un terme au mandat de courtage d’un Client devenu "US Person".

As for immigrants and foreign investors in the US, some of the reciprocity agreements (called "IGA's) the US has signed with other countries means that account information will be flowing out of the US as well.  This means that US banks have to do the same due diligence only they will be looking for those "German Persons" or "UK Persons."

A special warning here for immigrants living in the US and foreign investors:  This exchange of data means that your home country will know about your accounts in the US and the US will know about your accounts back home.  If you have not declared the accounts in your home country to the US government (and you probably were not aware that you were supposed to), the time to fix this was yesterday.  For those of you from countries where perhaps your parents or grandparents have added your names to their accounts, you might want to talk to them about that and make sure they understand that this could be a problem for you.  If you are caught, the fine for not declaring those accounts is 10,000 USD per year and you might just find yourself in a heap of trouble (the kind that gets you deported) if the US authorities consider your failure to file as "willful."

Where is this going?  Depends on the bank and the country but there's a very good chance that once you and your fellow "US Persons" been FATCAed that the bank will close some or all of those accounts.  For a lot of local banks inside and outside the United States "US Persons" or "German Persons" are not a large percentage of their client base and so it becomes a business decision:  Is the revenue the bank derives from those accounts worth the cost of compliance?  Clearly, time spent tracking actual and potential "US Persons" is time better spent doing other, more lucrative, things.

Welcome to the brave new world of FATCA where banking discrimination on the basis of national origin or a connection, however small, to another country, becomes simply another "good" business practice.

Banks in many different countries around the world have already made the calculations and decided to become "US Person-free" entities.  ACA and AARO have documented these cases. (Note to Treasury - contact these organizations ASAP before you come out in public again saying all this is a "myth."  It doesn't make you look good at all.)  I think it's safe to assume that this will continue as the deadline for FATCA comes closer.

Can anything be done about this?  Well, some folks have been working on it for a couple of years now and just lately the story is starting to get some traction in both the American and the local media.  That's progress.

You should be aware that you are not alone - FATCA is impacting millions of people around the world.   Every day more and more people are becoming aware of this via one or more of the rather unpleasant ways I've described above.  Some of them went into shock when they got FATCAed.  Case in point was a progressive college professor in Israel who thought FATCA was about catching "evil rich American tax evaders" and then learned that the US meant him when he got a note from his local bank.  Ditto for immigrants in the US who were never told they had a home country account reporting obligation to the US once they accepted that Green Card or H1-B Visa.  Welcome to the world of the gophers, mes amis.

So if I were asked, "What can I do?" I really only have one sure answer at this point:

Bark as loudly as you can.

Evangelize.  Witness.  Reframe.  Tell people what's going on and make it personal - this is what's happening to me and my family. FATCA is a very complex piece of legislation and people won't remember your explanation about the nuts and bolts of the law.  What they will remember is your tale of discrimination and despair and how it made them feel.

Barking serves two other important purposes:  1.  You are taking an active part in your own defense, and 2.  You are warning others which is a real service to them.

And if it all fails in the end?  Well, just keep in mind that even lowly unloved gophers can always take off and find another field.