FATCA UPDATE: EASING THE BURDEN ON FOREIGN BANKS AND THE LIST OF: BAD BANKS

FATCA has been on the books since 2010. While the United States is taking the heat for pushing for an Orwellian, virtual, international banking and taxation data base, recall that the overwhelming majority of developed countries are unabashedly “FATCA Friendly.” Just as the U.S. Treasury Department is eager to scoop up data on Americans who have failed to register their foreign accounts with the government (e.g., file an FBAR information return), foreign governments are chafing at the bit to get their hands on the list of their own citizens who are playing the same game as certain U.S. depositors to avoid paying their due share of their respective country’s taxes.

Despite the howl of outrage heard around the world at Big Brother’s attempt to have a book on every American’s foreign financial arrangements, when foreign governments hear the word “FATCA,” they think “mutual” and “reciprocal exchanges of information.”

“We the people” may file law suits, send angry letters to Congress, and form grass roots organizations, but the world’s major financial institutions are spending billions of dollars to get on the FATCA gravy train as they fall over each other scrambling to comply with some of the most complex rules ever to appear in the Regulations under the Internal Revenue Code.

From the beginning, the idea was to implement FATCA in stages so that new accounts would be scrutinized first for telltale signs of an American lurking in the shadows and then preexisting accounts would be examined.

The U.S. and its FATCA Friendly allies are probably years away from full FATCA implementation, so it was no surprise that yet again, the IRS announced recently in Notice 2016-08 that foreign financial institutions will get plenty of extra time to vet their preexisting accounts.

Some Americans who are still sitting on the fence about “coming clean” about their foreign banking have questioned whether they can escape FATCA’s reach because they recently closed all their foreign accounts. They should know that whatever their tolerance for risk and uncertainty, a qualifying preexisting reportable foreign account will not get a free pass if the government has its way. If there is still time left on the six year FBAR statute of limitations, the depositor is still at risk.

Another often over-looked detail for people who are trying to decide whether to comply or just take their chances is the growing and ever changing IRS list of “bad banks” whose lawyers have already been introduced to a friendly U.S. Department of Justice prosecutor who wants to learn all about their past efforts to sign up eager Americans who knew exactly what they were doing when they put substantial sums offshore.

For those whose tax advisors have already told them that their statement of nonwillfulness might be of interest to the writers at Comedy Central, a full-blown OVDP which would have cost a penalty of 27.5% of the taxpayer’s assets subject to the penalty becomes a whopping 50% penalty if the taxpayer’s bank lands on the list before the taxpayer pre-clears for OVDP.

OVDP FAQ 7.2 reminds us that where applicants who are connected to a bank where a public disclosure reveals an ongoing investigation, even if they are cooperating and have signed a Deferred Prosecution Agreement or Non-Prosecution Agreement, they can no longer get the lower penalty. A current list of the bad banks can be found here.

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Foreign Financial Institutions or Facilitators

  1. UBS AG

  2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.

  3. Wegelin & Co.

  4. Liechtensteinische Landesbank AG

  5. Zurcher Kantonalbank

  6. swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG

  7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates

  8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.

  9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)

  10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates

  11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)

  12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)

  13. BSI SA (effective 3/30/15)

  14. Vadian Bank AG (effective 5/8/15)

  15. Finter Bank Zurich AG (effective 5/15/15)  

  16. Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)

  17. MediBank AG (effective 5/28/15)

  18. LBBW (Schweiz) AG (effective 5/28/15)

  19. Scobag Privatbank AG (effective 5/28/15)  

  20. Rothschild Bank AG (effective 6/3/15)

  21. Banca Credinvest SA (effective 6/3/15)

  22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)

  23. Berner Kantonalbank AG (effective 6/9/15)

  24. Bank Linth LLB AG (effective 6/19/15)

  25. Bank Sparhafen Zurich AG (effective 6/19/15)

  26. Ersparniskasse Schaffhausen AG (effective 6/26/15)

  27. Privatbank Von Graffenried AG (effective 7/2/15)

  28. Banque Pasche SA (effective 7/9/15)

  29. ARVEST Privatbank AG (effective 7/9/15)

  30. Mercantil Bank (Schweiz) AG (effective 7/16/15)

  31. Banque Cantonale Neuchateloise (effective 7/16/15)

  32. Nidwaldner Kantonalbank (effective 7/16/15)

  33. SB Saanen Bank AG (effective 7/23/15)

  34. Privatbank Bellerive AG (effective 7/23/15)

  35. PKB Privatbank AG (effective 7/30/15)

  36. Falcon Private Bank AG (effective 7/30/15)

  37. Credito Privato Commerciale in liquidazione SA (effective 7/30/15)

  38. Bank EKI Genossenschaft (effective 8/3/15)

  39. Privatbank Reichmuth & Co. (effective 8/6/15)

  40. Banque Cantonale du Jura SA (effective 8/6/15)

  41. Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA (effective 8/6/15)  

  42. bank zweiplus ag (effective 8/20/15)

  43. Banca dello Stato del Cantone Ticino (effective 8/20/15)

  44. Hypothekarbank Lenzburg AG (effective 8/27/15)

  45. Schroder & Co. Bank AG (effective 9/3/15)

  46. Valiant Bank AG (effective 9/10/15)

  47. Bank La Roche & Co AG (effective 9/15/15)

  48. Belize Bank International Limited, Belize Bank Limited, Belize Corporate Services Limited, their predecessors, subsidiaries, and affiliates (effective 9/16/15)

  49. St. Galler Kantonalbank AG (effective 9/17/15)

  50. E. Gutzwiller & Cie, Banquiers (effective 9/17/15)

  51. Migros Bank AG (effective 9/25/15)

  52. Graubundner Katonalbank (effective 9/25/15)

  53. BHF-Bank (Schweiz) AG (effective 10/1/15)

  54. Finacor SA (effective 10/6/15)

  55. Schaffhauser Kantonalbank (effective 10/8/15)

  56. BBVA Suiza S.A. (effective 10/16/15)

  57. Piguet Galland & Cie SA (effective 10/23/15)

  58. Luzerner Kantonalbank AG (effective 10/29/15)

  59. Habib Bank AG Zurich (effective 10/29/15)

  60. Banque Heritage SA (effective 10/29/15)

  61. Hyposwiss Private Bank Genève S.A. (effective 10/29/15)

  62. Banque Bonhôte & Cie SA (effective 11/3/15)

  63. Banque Internationale a Luxembourg (Suisse) SA (effective 11/12/15)

  64. Zuger Kantonalbank (effective 11/12/15)

  65. Standard Chartered Bank (Switzerland) SA, en liquidation (effective 11/13/15)

  66. Maerki Baumann & Co. AG (effective 11/17/15)

  67. BNP Paribas (Suisse) SA (effective 11/19/15)

  68. KBL (Switzerland) Ltd. (effective 11/19/15)

  69. Bank CIC (Switzerland) Ltd. (effective 11/19/15)

  70. Privatbank IHAG Zürich AG (effective 11/24/15)

  71. Deutsche Bank (Suisse) SA (effective 11/24/15)

  72. EFG Bank AG (effective 12/3/15)

  73. EFG Bank European Financial Group SA, Geneva (effective 12/3/15)

  74. Aargauische Kantonalbank (effective 12/8/15)

  75. Cornèr Banca SA (effective 12/10/15)

  76. Bank Coop AG (effective 12/10/15)

  77. Crédit Agricole (Suisse) SA (effective 12/15/15)

  78. Dreyfus Sons & Co Ltd, Banquiers (effective 12/15/15)

  79. Baumann & Cie, Banquiers (effective 12/15/15)

  80. Bordier & Cie Switzerland (effective 12/17/15)

  81. PBZ Verwaltungs AG (effective 12/17/15)

  82. PostFinance AG (effective 12/17/15)

  83. Edmond de Rothschild (Suisse) SA (effective 12/18/15)

  84. Edmond de Rothschild (Lugano) SA (effective 12/18/15)

  85. Bank J. Safra Sarasin AG (effective 12/23/15)

  86. Coutts & Co Ltd (effective 12/23/15)

  87. Gonet & Cie (effective 12/23/15)

  88. Banque Cantonal du Valais (effective 12/23/15)

  89. Banque Cantonale Vaudoise (effective 12/23/15)

  90. Bank Lombard Odier & Co Ltd (effective 12/31/15)

  91. DZ Privatbank (Schweiz) AG (effective 12/31/15)

  92. Union Bancaire Privée , USP SA (effective 1/6/16)

  93. PHZ Privat - und Handelsbank Zürich AG reorganized as Leodan Privatbank AG (effective 1/25/16)