Tag Archives: compliance

Dealing with Mr. FATCA

This is a non technical description on how I have dealt with FATCA and some general suggestions for others. It is based primarily on FATCA as it stood in July, 2011. I realize that there have been significant developments (such as IGAs) and new draft regulations in the meantime, but the basics remain the same.

As this is a Sandbox and there may be children playing nearby, I won’t use many of the words, most not polite, to describe the abomination that is FATCA. I’ll leave that to others in other places.

By way of preface, I am a prime candidate for relinquishment, but have not yet chosen to go through the process. Instead, I have chosen to protect myself from FATCA and other intrusions of the U. S. government into my financial affairs.

After first learning about FATCA, I wasn’t sure if Credit Unions were somehow outside of FATCA’s scope. So, I first approached the experienced and well respected CEO of my local Credit Union with some questions about FATCA. Specifically, would Credit Unions be affected?  His response was that he never even heard of FATCA (An aside-in June, 2011 a major international accounting firm released a worldwide survey of top level financial executives. The survey indicated that less than 1/3rd had heard of FATCA or had done much about it, if they had heard).  The Credit Union CEO referred me to the head of the regional Credit Union Central. This person is one of the senior Credit Union executives in Canada. I was told that FATCA was something that had to be dealt with at the national level and he had no answers for me at present.

Subsequently, I learned that Credit Unions did come under FATCA and that strong representations were being made to the IRS.

I then moved on to the branch manager of a major Canadian Chartered Bank where I had some accounts. My questions were not about FATCA as such, but about their AML/KYC policies (anti-money laundering/ know your client). I was told what IDs I had provided the bank and what their procedures were for new accounts. The procedures were to obtain 2 pieces of ID, one of which was a photo ID. They would make copies of the IDs and then enter the kind of ID (driver’s license, etc) into their system as well as an identifying number on the ID, such as a driver’s license number. Most interesting was that after a few days, they would shed the ID photocopies. Just an electronic record would remain.

FATCA has several thresholds. Aggregate accounts under $ 50,000 are exempt from review. Accounts between $ 50,000 and $ 1,000,000 are subject to an electronic search. Accounts over $1,000,000 are subject to both an electronic search and a manual search. There are different rules for insurance policies, for example, but I won’t get into that.

It is important to note that the word Aggregate is important. So, if you have $35,000 in bank savings and chequing accounts and $40,000 in an account at their discount brokerage arm, you’ll be over the $50,000 threshold. I’m not sure how this would work with Credit Unions where a person has a Credit Union account and a brokerage account at Credential Securities. Credential is owned by provincial Credit Unions. Somehow, I don’t think the two would be aggregated, but I’m not sure.

Here are a few suggestions, most of which are quite obvious.

If you can’t remember what ID you used to open an account, you can probably still ask without arousing suspicions. FATCA information has likely not filtered down to most bank branch employees at this point.

Open accounts at other financial institutions to get yourself under the thresholds. Make sure any IDs presented have no indication of U.S. personhood, such as a passport with place of birth. Then transfer money to those new accounts.

I recently opened an account at an additional  bank and there were absolutely no questions about place of birth.  I believe a question about citizenship may have been asked.

If you have a brokerage account, sell any U.S. based investments. Having U.S. investments will likely lead to a request to complete either a W8-BEN or a W-9.

Consider buying physical precious metals and storing them in a safe place. It may not be the best investment partially because of the cost of both purchasing and selling the metals, but precious metals are a form of money completely outside of the banking system.

These are a few suggestions. I’m sure others can add more.

One special note. If you have an investment adviser, they may very well know where you were born. My experience is advisers usually try to learn something about their client’s background. It may just be idle chit-chat, but place of birth may come out. For persons inheriting money from US relatives, your origins might be self evident. FATCA refers to advisers as “relationship managers”. Under FATCA, It is the duty of the relationship manager to determine if they are dealing with a U. S. Person.

Any comments or corrections are welcome.