Global Banking In Our Post-FATCA World
Oct. 31, 2014, Belize City, Belize: FATCA regulations are playing out, and banks around the world are scrambling to become compliant.Dear Live and Invest Overseas Reader,
"'Knock three times and ask for Roscoe.'
"That's what offshore banking used to be," Peter Zipper, an offshore banker with more than three decades of experience, explained to the crowd in attendance at last week's Global Asset Protection and Wealth Summit in Belize.
"But those days are over," Peter continued.
"In 1999, there was a global banking conference, which I attended, during which the world of offshore banking was changed dramatically. One specific outcome of that convention, for example, was the end of the numbered account. Ever since, if you want to bank with Roscoe, you've got to reference your account name," Peter assured the group.
The offshore banking industry is right now experiencing another dramatic upending, this time not in the interest of cleaning up banking dumps but with the clear and straightforward agenda to track the movement of money around the world more tightly and to tax every possible dollar along the way.
July of this year was the deadline for banks around the world to begin complying with IRS FATCA regulations or risk U.S. dollar transfers to their bank having 30% withheld by the sending bank. Come July, however, neither the IRS nor the global banking industry was in a position to meet FATCA administration requirements, so the compliance regulations have been loosened to allow everybody more time to continue working through the associated red tape. Banks have been signing up for their Global Intermediary Identification Numbers (GIIN); many have received them but not all. During this time of transition, compliant banks are to maintain the IRS-required information to do with money transfers and account holders, but they don't have to begin sending this information to the IRS until next year.
"Which banks won't comply?" Lief Simon asked the audience at the conference.
"That is," Lief continued, "maybe you're thinking that you'd like to identify those banks that don't intend to comply with IRS regs and do business with them alone?
"That's not a practical strategy," Lief explained. "A noncompliant bank will have that 30% withholding yoke on it, meaning it's going to be really expensive to do business with a noncompliant bank. In other words, any bank that wants to deal in U.S. dollars will be compliant. I'm not sure which banks that fact leaves out, but I'm guessing you aren't going to be able to conduct whatever business you want to conduct through them.
"One way for a bank to comply with FATCA rules," Lief said, "is to have no U.S. account-holders. A number of banks around the world are going this route, but not all, of course, and the American looking to diversify his banking offshore still has good options."