Your Canadian FI MUST Contact You Before Forwarding Account Info to CRA Under FATCA

We are indebted to Just a Canadian over at Isaac Brock Society for picking up on this important point.  For the full context of the discussion in which this came up, see this link: Was TD overzealous here?
Under the Bill C-31 as approved by Parliament, a Canadian Financial Institution (FI) MUST attempt to contact you about any US indicia they think they have about you, BEFORE reporting your account information to CRA (which then will forward it to IRS).  That is the law in Canada, and if any FI ignores it, you’d have IMO excellent grounds for suing their bloody socks off.
 This is particularly important to those Canadians who have a CLN or other reasons why they should not be considered “US persons,” not to mention those Canadians for whom their FI might have on file some note or other concerning something they said in a conversation with a bank employee which may have been taken out of context or misinterpreted by whoever recorded the note, as constituting indicia of US personhood.  It’s all about “due process”.
What follows below is a cut-and-paste of what Just a Canadian said in response to an observation I had posted in the Brock thread linked above (based on my reading and copy of a version of the IGA that predates Bill C-31 as it was finally approved.
Schubert1975 said: My reading of the IGA is that (horribly and outrageously though this is), that agreement merely says a Canadian FI MAY notify the account holder and seek clarification of the indicia. It doesn’t say the FI MUST do this (I think the agreement damn well should have said that, but as far as I can see it doesn’t).
(Just a Canadian said and quoted as below:)
The IGA contained the “MAY” language, but bill C-31, the enabling legislation, makes one change to the agreement. Annex I 2.B.3 is the paragraph that requires banks to report accounts with indicia and states that they MAY apply one of the exceptions. Bill C-31 replaces that paragraph with:
 
(quote from C-31 as approved:) 3 If any of the U S indicia listed in subparagraph B(I) of this section are discovered in the electronic search, or if there is a change in circumstances that results in one or more U S indicia being associated with the account, then the Reporting Canadian Financial Institution MUST SEEK TO OBTAIN OR REVIEW THE INFORMATION DESCRIBED IN THE PORTION OF SUBPARAGRAPH B(4) of this section that is relevant in the circumstances and must treat the account as a US Reportable Account unless one of the exceptions in subparagraph B(4) applies to that account.
(Just a Canadian continues:) Paragraph B(4) is where they ask for a self-certification, a CLN or a reasonable explanation.
In other words the BANKS MUST CONTACT YOU before turning your financial information over.
It seems that most of the copies of the IGA that are floating around do not contain this revised paragraph but instead contain the original text, but that is not the version that is the law in Canada.

7 thoughts on “Your Canadian FI MUST Contact You Before Forwarding Account Info to CRA Under FATCA

  1. @Hazy.
    Ouch. Thanks for that link. Guess what, I replied to that link back in May. (It’s right there on that thread …) I’d forgotten that.
    Scary what this says about my relatively-short-term memory … Little grey cells not what they used to be I guess.
    Anyway, this is a very important point and needs to be stressed. Sorry for the duplication.

  2. At the end of this July, CRA posted an update to their FAQ on FATCA. The link is here
    http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/fq-eng.html#q2-15
    This FAQ page is a lot more detailed than my recollection of the previous one I’d checked (but be aware of my short-term memory issues, sigh). I urge everyone visiting this thread to check this latest version.
    Pay particular attention to what it says about financial institutions that are no part of a multinational financial group and for which at least 98% of the account holders are Canadian residents. AFAIK that description applies to all Canadian credit unions, certainly those in BC and Ontario from what I’ve heard, and wouldn’t apply to any of the chartered banks, all of which I believe have branches in the US now. Financial institutions meeting the Canadian-only, 98% resident criteria do not have to report account information if the account is held by a Canadian resident. Regardless of citizenship status of that resident, as far as I can see.

  3. @ Schubert
    The matter of notification should probably be reposted every several months to refresh everyone’s memory and let new visitors know of this requirement,
    Interesting, in the link to the CRA page on FATCA, item 15 says in part
    “Although there will be no obligation for financial institutions to automatically notify their account holders about reporting to the CRA under the Agreement…”
    It appears to me that CRA still hasn’t gotten the word that there is an obligation for notification.

  4. Hopefully at least the banks get it since CRA doesn’t seem to be anything other than a post office box for reporting, unless someone complains.
    Other wording isn’t quite as clear or could be interpreted rather differently than probably intended, notably (as George notes over on Brock) this sentence at the very end: “It is the responsibility of the account holder to determine whether he or she is a U.S. citizen.” One reading of that sentence is that the account holder gets to decide whether he or she is a US citizen. I think we’d all welcome that, though I don’t think the IRS would ;-))
    What matters is what’s in the law, and that is pretty clear IMO – they HAVE to attempt to contact you for clarification of any US indicia before reporting you to CRA. What some bureaucrat mis-read or some editor missed before posting, isn’t the law.

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