Thursday, June 5, 2014

DOJ Tax Issues Comments on the DOJ Swiss Bank Initiative (6/5/14)

The Tax Division’s further comments about the Program for Non-Prosecution Agreements or 
Non-Target Letters for Swiss Banks (6/5/14), here. Here are some of the excerpts that I found most interesting:
Maximum aggregate dollar value and penalty mitigation (Program II.H.) Part II.H.1 of the program provides that the Swiss bank will pay as a penalty “for U.S. Related Accounts that existed on Aug. 1, 2008, an amount equal to 20% of the maximum aggregate dollar value of all such accounts during the Applicable Period.” (Emphasis added.) Similar language is found in II.H.2 and II.H.3. For each of these three categories of accounts, the “maximum aggregate dollar value” is calculated at a single date (typically using end-of-month information) when the bank’s book of those U.S. Related Accounts is at its highest point. Additionally, that same date is used for all penalty mitigation calculations, and a reduction in maximum aggregate dollar value will only be permitted for accounts in existence on that date and in the amount that was included in the maximum aggregate dollar value. Although the Program does not require the maximum aggregate dollar value to be verified by an independent examiner, the Tax Division may accept such verification. In the alternative, the Tax Division may request, pursuant to Part II.D of the Program, further explanation or materials relating to the calculation of this figure to ensure that the Swiss bank demonstrates to the satisfaction of the Tax Division that the determination of the maximum aggregate dollar value is correct.   
Alternatively, Category 2 Swiss banks may elect to use a maximum aggregate dollar value definition equal to the aggregate of the maximum dollar value of each U.S. related account at its highest point during the relevant period. In other words, this figure would not be computed at a single date during the relevant period, but the dates at which each U.S. related account was at its maximum value. In these circumstances, penalty mitigation calculations would similarly be based on the highest point of that U.S. related account.   
Identities of third parties involved in structuring, operating, and supervising cross-border business (Program II.D.1). The Program requires a Category 2 Swiss bank to provide, prior to the execution of the non-prosecution agreement, information as to how its cross-border business for U.S. Related Accounts was structured, operated, and supervised, including the names and functions of individuals involved in that activity. Such disclosures are not limited to individuals who are employees or former employees of the Swiss bank. Rather, to the extent that the Swiss bank attracted U.S. Related Accounts through third parties, such as external asset managers, the Program requires that such third parties be identified, and that documents and explanatory material relating to that cross-border business be provided to the Tax Division pursuant to Part II.D.1 of the Program. The Swiss Federal Department of Finance published a Model Order in July 2013 noting that Swiss banks are permitted to disclose the “personal data of (former and current) employees who structured, operated or supervised business relationships within the bank … as well as the personal data of third parties who performed similar functions in connection with such business relationships.” (Emphasis added.)
Identities of relationship manager, client advisor, asset manager, etc. (Program II.D.2.v). The program requires a Category 2 Swiss bank to provide “the name and function of any relationship manager, client advisor, asset manager, financial advisor, trustee, fiduciary, nominee, attorney, accountant, or other individual or entity functioning in a similar capacity known by the Bank to be affiliated” with the U.S. Related Account during the Applicable Period.   The Program contains no de minimis number of accounts with which that person must be affiliated before that person is identified. Moreover, the Program requires the identities of such persons or entities located not only in Switzerland, but in any country outside of Switzerland, including the United States.   
Information concerning transfers of funds into and out of the account (Program The Program requires a Category 2 Swiss bank to provide the identities of intermediaries and financial institutions related to the transfers of funds into and out of the U.S. Related Accounts, including the transfer of securities, precious metals, or other account assets. The Swiss bank must also provide the identities of such intermediaries and financial institutions located not only in Switzerland, but in any country outside of Switzerland, including the United States.   
* * * * 
Assistance with treaty requests (Program II.D.4). As soon as is practicable, the Tax Division intends to submit to the Swiss authorities, through the Competent Authority, requests for assistance under Article 26 (Exchange of Information) of the Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income signed at Washington, October 2, 1996, together with a Protocol to the Convention. A Category 2 Swiss bank that wishes to extend the time in which it may demonstrate that an account was disclosed to the IRS through an announced Offshore Voluntary Disclosure Program, as described in the following paragraph, must provide information by June 30, 2014, to the satisfaction of the Tax Division, relating to its accounts for which there is a   reasonable suspicion that the U.S. account-holder has engaged in conduct such that Swiss authorities may provide assistance under the 1996 Convention and Protocol. Notwithstanding this June 30, 2014, deadline, the Swiss bank’s obligation to cooperate with the preparation of requests for assistance under the 1996 Convention and Protocol, or such later Convention or Protocol that may enter into force, is a continuing one as described in Part II.D.4 of the Program.  
Extension of deadlines relating to mitigation of penalty amounts (Program II.H). The Program currently requires, in Part II.B.1, Category 2 Swiss banks to be in a position to produce all II.D information and all II.H information no later than June 30, 2014 (assuming that an extension has been given). To the extent that Swiss banks have been advised that the deadline applies only to information referred to in Part II.D.1 of the Program, that advice is incorrect.   
The Tax Division recognizes the difficulty that some Swiss banks have encountered in obtaining proof that an account was not an undeclared account or was timely disclosed by the Swiss bank to the IRS. Therefore, the time in which a Swiss bank may demonstrate to the satisfaction of the Tax Division that an account was not an undeclared account or was disclosed by the Swiss bank to the IRS in the manner required by the Program is extended to July 31, 2014.  
In addition, Swiss banks have requested additional time to demonstrate to the satisfaction of the Tax Division that an account was disclosed to the IRS through an announced Offshore Voluntary Disclosure Program following notification by the Swiss bank of such a program. The Tax Division will extend the time in which a Swiss bank may make this showing from June 30, 2014, to Sept. 15, 2014, on the condition that the bank demonstrates, no later than June 30, 2014, to the satisfaction of the Tax Division, that it has provided assistance with respect to treaty requests as described in the previous section of these comments. 


  1. Australian banks have prospered because of the stability of Australia's economy and the proximity to the fast growing markets of Asia ranking them among the world's best.

    If you want to know how PrepareForAustralia can help you with your Australian online banking needs click here

  2. GlobalCapitalismJune 6, 2014 at 3:30 AM

    Paul Continues to Block Move to Ratify U.S.-Swiss Tax Treaty

  3. GlobalCapitalismJune 6, 2014 at 11:10 AM

    Anti-American sentiment growing in Russia...Putin signed a controversial law this week making it a criminal offense
    to fail to report dual citizenship. It's a bid to keep track of
    potential foreign agents. Russian citizens who also hold a U.S. passport
    or one from another country have 60 days to notify the Federal
    Migration Service of their status or face a fine of nearly $6,000.

  4. National origin discrimination is a US federal crime and yet the US government is causing Americans around the world to be denied banking services due to their national origin.

    If I was US citizen, then I would renounce US citizenship to protest this. This is unacceptable!

  5. GlobalCapitalismJune 9, 2014 at 11:20 AM

    Banamex USA, a subsidary of Citibank with its headquarters in Los Angeles, has sent letters to many US customers informing them that their accounts will be closed June 30. 3 weeks from tomorrow, FATCA begins. Apparently our compatriots in Mexico are about to be hit in a very big way. None has been so far reaching as this notice sent to US citizens who have accounts at Banamex USA in Mexico this week, however. Banamex USA's parent, Banamex, is the second largest bank in Mexico and there are over 1 million US citizens living in Mexico, by far the largest
    amount of any country, and so this news will be felt over a very widespread area.
    Notices have begun to be sent by Banamex USA, a bank operating in Mexico and used by many American expats in Mexico, to all US citizens notifying them that their accounts will be closed within 30 days.

  6. How is FATCA going to hurt Americans living overseas? All that will be happening is that the banks will provide the same information to the IRS that is supposed to be reported on the FBAR. It's like an employer sending the IRS your W-2. It just has information that you are legally required to report yourself.

  7. "How is FATCA going to hurt Americans living overseas?" ..... I guess you need to start reading and educating yourself a bit ... but we have here on this blog > 50 posts,comments and factual explanations to guide you .

  8. It is definitely NOT like an employer sending the IRS your W-2. It is a data dragnet put into the hands of global 3rd parties that also sucks in data of NON U.S. Persons united in unholy matrimony. It is more than just employer income, it is assets. And it is way more than just banks. It is ALL Financial institutions in the WORLD, loosely defined to be whatever the IRS wants it to be.

    I guess you would be amendable to filling out a Domestic Bank Account Report every year? a DBAR? plus filling out a DATCA duplicative form 8934 too in addition to your W-2 on income as a new legal requirement to be sure the IRS knows everything about your financial life?

    I agree with GlobalCapitalism. You need to start reading. If you are not familiar with the 1000 pages of FATCA regulations and convoluted language, it might be hard for you to understand why FATCA, as good intentioned as it might seem on the surface, has many negative consequences and collateral damage not imagined by the mental midgets who came up with this monster.

    If FATCA was such a good idea and no big deal, why did the authors feel the need to pass it by stealth inside an unrelated piece of legislation without any debate or public airing? :)

  9. Just_Me_Also,

    I always appreciate and respect your comments. Thanks.

    But, on the particular issue of the consequences to the innocent or at least relatively innocent group of expats who now have difficulty getting banking services in their countries of residence, why has not the problem been addressed by ACA. ACA as I understand its role is to deal precisely with this type of issue and present a widely supported and credible source of complaint to the IRS and to Congress for glitches that need to be fixed.

    One could infer that, from ACA's staying on the sidelines on this issue, it may not be quite the systemic problem claimed by some commenters on this blog. But that is only an inference. Maybe it is a real systemic problem and ACA either does not know about it or has it in line to deploy resources toward.

    So, even broader than ACA, is there any organized action being taken or contemplated to apprise the IRS and Congress of the problems?

    Thanks again for your comments.

    Jack Townsend

  10. Not entirely sure that the claim that the ACA is "staying on the sidelines" on FATCA is correct. On their website, they have an immediate revolving banner entitled "Banking: US Legislation resulting in denial of financial services to Americans residing overseas". Clicking on more shows how they are "working with Congress, the Treasury Department and the IRS to do away with a number of unintended consequences of the recently enacted FATCA legislation." The also include a link to allow submission of personal experiences with banking problems, which were to be presented to the two co-chairs of the American Abroad Caucus." They also include a link to a rebuttal to a NY Times article, in which the ACA lays out some of the denial of services being suffered by US citizens abroad. Furthermore, clicking on the FATCA section of their website brings up similar info. Their official position is that FATCA results in denial of services to US citizens and affects their privacy rights. They responded directly to Robert Stack (who wrote the FATCA v. Myths Treasury document) in which they detail their concerns. Their oft used quote reads as follows: "Americans abroad have been seriously disadvantaged by the implementation of the new FATCA tax rules, even before they go into effect, because banks all over the world now perceive American clients as too risky," said MaryLouise Serrato, Executive Director of ACA. "Foreign banks have been closing Americans' accounts and turning away Americans wanting to open a new account. We want to do everything possible to avoid this happening, and these new provisions are a step in the right direction,” she continued. Other organisations that represent Americans Abroad are making similar points. AARO is conducting a survey on denial of services:
    Democrats Abroad have an FATCA task force which makes many of the same points (although they are somewhat limited in their ability to criticise Democratic policy too openly) and of course, Republican Overseas are leading an effort to repeal FATCA (somewhat in vain, in my opinion). The problem is not the lobbying - it is whether or not anyone in Washington is listening. Thanks again for the forum to discuss.

  11. Excellent reply, John Audit.
    Similar situation for a close family member: dual US/EU citizen but resident in the US. Account over $1 million, contacted many banks in two EU countries. Found ONE bank in each of the two countries. Bank X wanted a ton of proof (more than was submitted to OVDI !) and would then "consider" whether it might open the account. Bank Y opened the account however although the bank is FATCA compliant (and will file the required reports on the account) they will have NO communication with the client to/from the US.

    Why not? Not because they're not profit-seeking. Not because of an emotional decision against the USA or FATCA. Because of the fear of being considered to be doing business in the US if they send or receive even one phone call, email or letter to the US, and if they make one small misstep they risk having to pay huge penalties.

    And I'm not mentioning the names of the countries or the banks because the more US accounts a bank has, the greater the risk and if too many people open accounts the bank may decide to close all such accounts.

    So ... I cannot speak about whether someone with 10M can open a foreign account; I do know that with $1M it's near impossible. For those residing in the EU it may not be as difficult.

  12. There have been a lot of complaints about expats inability to obtain banking services from non-U.S. banks. That appears to be a problem. I have invited some of the more articulate commenters on the problem to write a guest blog laying out in some length the precise nature and scope of the problem.

    In the meantime, for some balance, readers might check this out.

    See Your Money: U.S. Expats Find Their Money is No Longer Welcome at the Bank (Wealth Management 6/11/14), here:


    If you're an American expat and you have a bank account or have recently moved and need to get one, Michele Moore Duhen advises patience. Duhen relocated from Boston to London in April. She was able to open a bank account at Barclays, but it took some effort.

    "My passport wasn't enough. They wanted bills proving I lived where my flat contract stated I lived. But you can't set up for bills until you have a bank card," Duhen says.

    It took her about 10 days and several back and forth trips to the bank with various pieces of paperwork before she and her husband, a French citizen, could get accounts.

    Don't assume that if a bank shuts your account you do not have other options in the same country. Darryl Daugherty, a due diligence specialist from Baltimore, says fellow Americans are having trouble opening accounts in Bangkok, where he has lived for 13 years.

    "It's not yet insurmountable," Daugherty says - you just have to keep checking around for friendlier banks, he adds.


    This snippet is just one reporters and his source's view. I await someone making a presentation with sufficient data from which to draw real conclusions.

    I hope someone will take me up on the offer to do a guest blog.

    Jack Townsend

  13. GlobalCapitalismJune 12, 2014 at 5:02 AM

    Contrary to what Robert Stack, deputy assistant treasury secretary for international tax
    affairs crowed, ”The strong international support for FATCA is clear, here is a good summary to show how small actually so far the worlwide support for FATCA really is :

  14. GlobalCapitalismJune 13, 2014 at 5:01 AM

    A legal challenge to FATCA
    The comments from Nigel Green of deVere Group, which has 80,000 clients and $10bn under advice, are in response to attorney Jim Bopp Jr’s decision to mount a legal challenge to the new law – due for implementation on July 1.
    The high profile,no-nonsense lawyer is preparing a legal challenge to FATCA, which its
    opponents insist has a host of serious unintended adverse consequences.
    Mr Green says: “The decision taken by Mr Bopp, who has previously successfully challenged other questionable finance laws in the Supreme Court, to take on the fatally-flawed FATCA could, I suspect, be the tipping point in the campaign to ultimately have it repealed.
    “He is on a legal mission to definitively prove that FATCA, which has far-reaching negative consequences for the 7.6 million U.S. citizens abroad, the 13 million green-card holders and American businesses that operate globally, is unconstitutional on at least three counts.

    “I believe that common sense and justice is on his side on this issue of national and international importance. I am confident that his legal opinion will prove to be sound and robust.”

  15. Global Capitalism,

    Thanks for the link.

    This quixotic adventure reminds me of the Republican attempts to repeal Obamacare. They kept charging at that windmill and failed each time (I think well over 40 times in the House of Representatives). As I read the tea leaves, there doesn't seem to be much likelihood of successful litigation (what is the constitutional issue?) or in congressional repeal unless the libertarians and the tea party seize all of the reins of power (which is not likely).

    Now, I do not doubt that good amendments could be passed, keeping the goals of FATCA in place and tweaking the legislation to mitigate the unintended consequences.. But that requires parties cooperating. We do not have that.

    The result is the mitigating the damage to expats is very difficult.

    Jack Townsend

  16. On the constitutional issue, the only one that I think has any chance being taken seriously is the question as to whether the IGA's (especially to the extent they impose obligations on the US government) require the advice and consent of the Senate (ie., full ratification) or whether they lie within the acceptable discretion of the Treasury in terms of executing the general terms of FATCA. (As much as I would love to see FATCA fall on some type of 4th amendment or other privacy claim, just don't see that happening). Could be an interesting discussion on what actually constitutes a treaty, at what point does an agreement with a foreign government rise to the level of a treaty requiring Senate ratification and do the IGA's so reach that point. Presumably, then, if the IGAs fall, then enforcement of FATCA falls and the whole thing magically disintegrates. The separate of powers and treaty rights is an interesting area of constitutional law (for a recent case of federal government overreaching, see the following - in particular, Scalia's dissent:

  17. Btw, for a brief analysis on the IGA point, see: One question (among many others) is who exactly would have standing to sue? A US senator?

  18. CHRISTY CATARINA PALMERJune 27, 2014 at 3:58 PM

    Hello everyone my name is Catarina from Esch-sur-Alzette, Luxembourg. i never ever believed in spell until i meet a man called Dr.Kazakh, who helped me cast a spell that brought back my ex-lover to me within 48 hours. Dr.Kazakh spells works beyond my imaginations and today i am happily married with my lover. What more can i say rather than to say thank you to Dr. Kazakh for been there for me.Contact Dr.Kazakh today and your life will never ever remain the same.YOU CAN CONTACT Dr.Kazakh VIA EMAIL: OR CALL HIM ON +2347035112568


Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.