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.

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About schubert

I've had a CLN (Certificate of Loss of Nationality of the United States) since 1976, quite by accident (DOS mailed me one after I wrote a long anti-US letter to Henry Kissinger on July 4, 1976, telling him I'd become a Canadian citizen several months earlier and why, then confirming on a form I got in the mail that I had done so willingly - duh! - and with the intent of relinquishing my US citizenship). I filed the CLN away and forgot about it until August 2011 when I first heard about FATCA and FBAR and realized I needed to find the proof I am not an American in spite of my birthplace. My wife, who came to Canada with her ex before I did and also became a Canadian citizen, believed she'd thereby lost her US citizenship but didn't write Kissinger, didn't know anything about CLNs or the need to get one (nor did I at the time), and applied for a relinquishment CLN a few months ago. Until August 29, 2012, we were waiting to get her CLN, and it has been in her interests that I'm monitoring and occasionally participating in this and the IBS website. However, joy of joys, wonder of wonders, my wife's CLN arrived in the mail on that date, so now we both have CLNs. I will continue to monitor and contribute to this website as I have time and when I think I have something constructive to add, but after 12 months of Hell we're going to get our sanity and lives back, and that means a prolonged vacation from anything related to CLNs, IRS, FATCA, or any other such crap, unless it rears its head and threatens Canada and Canadians to the point where I have to come out of my corner fighting again ...

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

  1. 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.

  2. @ 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.

  3. 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.

  4. @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.

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