FATCA And Dodd-Frank Compliance

“Kathleen, I thought you’d be interested in the letter I got from Citibank yesterday, on Dodd-Frank 1073 compliance. We’ve been speculating for a long time…now I’ve got something in-hand.

“A couple of things jumped out at me.

“First, Citi says they’re imposing these restrictions in order to provide me, the client, with ‘fee and tax information’ from the beneficiary bank. Info that will ‘enhance my banking experience.’ I thought this was an odd approach to what’s going on.

“The Citibank Global Transfers are blocked for Colombia and the Philippines, effective Dec. 7, 2012. These are Citi-to-Citi transfers only.

“There are also restrictions on what currencies I can send. It must be the local currency, or perhaps U.S. dollars. No problem in countries like Uruguay–where you can swap currencies on the receiving end at the bank rate–but it could be restrictive elsewhere.

“The bottom line is this: Citi seems to be ducking the whole issue of the 30% withholding. If the beneficiary bank won’t supply the requested ‘tax information,’ then they won’t send the wire.

“And people have just over two weeks to act.”

–Lee Harrison, Latin America Correspondent

Joel Nagel, one of the best-schooled attorneys in the world on these issues and one of the key speakers at last week’s Offshore Summit, replies:

Dodd-Frank 1073 deals with what are called “remittance transfers.” Dodd-Frank is the little brother of FATCA with some overlapping provisions. I think Citi is being overly dramatic, but who am I to tell them how to run their bank?

Their position amounts to what I refer to as a “private sector” approach to capital controls with the belt being squeezed one notch tighter. Of course, if you live in an affected country, such as Colombia or the Philippines, it probably seems like a lot more than one notch. It probably seems that the noose has closed completely. It allows the U.S. government to say, “We don’t have capital controls.” However, the reality is far different.

All I can say, is you probably need to find a different bank in the short run as Citi’s internal rules and regulations are just that, their rules, not government mandates. Good luck and keep me posted in what solution you come up with, as I am sure your note will not be the last on this.

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