Michael

I didn't realize that the Cayman Islands had a big hedge fund industry but I guess it makes sense. I know there were massive SPV's but those are normally just mail boxes.

theOAP

In relation to renunciations, the only response to this statement must be on a personal level from the US expats abroad. As far as any pain suffered in the US, are US citizens in the US having their 'local' banking/investment accounts closed simply because they are US Persons?

theOAP

There is a key phrase which we have talked around, but not specifically named in this discussion: automatic information sharing.

Automatic information sharing already exists in the EU. If a person resident in the UK has a bank account in Spain, the Spanish authorities automatically give that information to HMRC. The UK has recently established an agreement with Switzerland (not in the EU). Any account in Switzerland owned by a UK resident will be reported to the UK. The account does not have to have a 'name' attached to it. If the account holder refuses to be named to HMRC, then the Swiss bank withholds an automatic amount (30% (?) of interest paid, etc.) and gives that to HMRC.

It's the automatic sharing that elements within the US are fighting. The IRS may want it, but right now, they are unable to obtain it. They can only offer a vague assurance to any other country that they will attempt to make 'reciprocity' available.

Any country that signs an IGA with the US can VOID that IGA if it feels is it not recieving like information from the US. It's in all the IGA's. In turn, this means every FFI in the US must search for any resident of that country in their records. Question: who controls the banking laws in the US? Is it the US government, or the individual States?

theOAP

That has turned into an interesting situation.

There has been an addition to the final drafting of the agreement. It's unclear if it's a UK demand, or a US demand. It reads that any FFI wanting to be deemed compliant must not discriminate against any US Person. In other words, they can not refuse an account to a US Person.

Problem: the rules determining a deemed compliant FFI (or 'local' FFI) are so strict and convoluted, that it may be impossible for any medium to large sized building society to become deemed compliant.

Robin, a note to you personally. My spelling is autr...atro....atrosh.....really bad! I know you are sensitive to this. I use the spell check, but I still get things like 'succeed' when I meant 'secede'. I give you my apologies.

robin1234

So long as you're not a duel citizen, you're good.

What's the difference between a small building society, and a medium or large one? Is it to do with the range of financial services offered, or the $$ volume of deposits? I'd just like to think I'll have some choices when I return to England to live. I currently have pound sterling accounts at LTSB in IoM. If I live in England, I believe I could keep those, and, with a UK address, they would start withholding UK tax on any interest income and automatically sharing my details with HMRC. Then my US responsibility would be merely reporting, rather than paying any tax..

Michael

Pretty much since the Glass-Steagall Act from the 1930s was gutted during the 1980s, 1990s, and 2000s, the federal government has 100% control over the US banking system. The Glass-Steagall Act basically stated that small was good and speculation was bad and restricted a commercial bank to one state only and did not allow an investment bank to be an arm of a commercial bank.

For about 50 years, the banking system worked pretty well with about 50,000 independent banks scattered throughout the 50 states. As banks became insolvent, the FDIC could easily take over the bank by closing the doors on the weekend and open back up on Monday with no one the wiser and then recapitalize and sell off the bank when buyers were found.

The first cracks appeared in the Glass-Steagall in the 1980s during to the S&L crisis where the federal government stated that banks could cross state lines to purchase troubled banks but that was up to state regulators. Then in the late 1980s, the federal government passed laws that required states to allow banks to cross state lines to purchase troubled banks. Then in the early 1990s, the law was changed to required states to allow banks to cross state lines to purchase any bank and then the mega banks were formed. Then in the late 1990s, commercial banks were allowed to have investment arms and in the mid 2000s, the last vestiges of Glass-Steagall was put to rest.

The FDIC and the Federal Reserve regulate, audit, and monitor banks. I understand why the changes were made since US banks were pretty small (B of A was confined to California and JP Morgan was confined to New York) and investment banking was controlled by European mega banks and if the US wanted a piece of the action, these smaller banks couldn't compete but it turned a very safe banking system into a risky banking system. Even today, US banks are not that large compared to other banks with JP Morgan ranked at 7th and Wells Fargo at 49th and there are still about 7,000 independent banks in the US.

Since currently the FDIC and the Federal Reserve has total access to banking records and the IRS requires all US banks to report profit and loss of all transactions, I troubled about is happening in Delaware, Florida, Texas, and Nevada since it appears unethical and the practices don't seem to have an produce anything that society needs. Obviously in order to keep transactions secret, they can't be banks, can't be FDIC insured, and don't have access to the Federal Reserve discount window.

Although Delaware is a small state and the $24 million in fees they get from setting up those shell corporations is important to the state budget, it would seem that the federal government could eliminate that practice easily by allocating money for a certain period of time to transition away from those practices.

Orangepants

I worked for a NY hedge fund in Cayman from 2000 until it went out to a third party administrator in 2005. I then transferred over to the administrator to service the same client until I left in 2010. I am writing a paper on FATCA from an Asset Manager/Administrator perspective at the moment so your insights/views are very timely.

Yes since the repeal of the 10 commandments, a lot of work that was traditionally offshore, has now moved onshore so the legal firms in CI often just provide the reg address and the actual admin is conducted elsewhere. Some of the older, traditional firms still like the prestige of an offshore admin base.

Michael

According to "The Economist", Other governments have taken an altogether softer tack. Rather than trying to force Switzerland to abandon its policy of keeping client accounts anonymous—and risk getting nothing—Germany and Britain last year both negotiated bilateral “Rubik” deals (named after a cubic puzzle that can be solved only with moves in strict sequence). Offshore-account holders must pay a lump sum to make up for unpaid taxes, plus an annual withholding tax. Switzerland then collects the money and passes it along. But the names stay anonymous. Many see that as a big Swiss win. Critics also say British hopes that the deal could raise up to £7 billion ($11 billion) are hugely optimistic.

http://www.economist.com/node/21547229

That is progress but I don't think it gets to the root of the problem. I suspect the reason that people want to remain anonymous is that deposits made to the Swiss banks may have never had taxes accessed. In other words, the company books probably don't reflect the wealth of that person. Although it states that a lump sum payment is made to make up for unpaid taxes, does that just mean unpaid taxes from that account and not all the years that taxes were evaded when the income was made or held in other accounts. Without disclosure, it's just a guessing game.

Michael

We'll see if the Cayman Islands made the correct decision. Since they already have an establish hedge fund industry, getting out ahead may be the best solution.

Initially I thought that the Cayman Islands financial services were shrouded in secrecy and they wouldn't have to comply with FATCA since if the US government doesn't know who is investing in the Cayman Islands, how could the US possibly access the 30% tax. However now I'm suspecting the secrecy is after the fact since we all know Romney had accounts in the Cayman Islands. So it doesn't appear that the Cayman Islands was setup to have total secrecy like Switzerland.

theOAP

I'll respond to two of your posts at the same time.

First, thanks for clarifying the FED/FDIC have regulatory control. There seems to be a real problem in the organization at the Treasury (understatement, I know). The ability to co-ordinate programs towards a common goal appear to be overly difficult. For example, an IRS agent can only get access to FBARs, or whatever they are now, by issuing an information request to Detroit. The IRS computers, evidently, have no access to any of the information. Hence, the introduction of form 8938. In the end, it all about information gathering of a person's assets, and has little to do with tax reporting, although 8938 goes a long way to correct that (it's under Title 26).

As for Rubik, I think the Chancellor of the Exchequer is no more optimistic about revenues from Switzerland than the IRS is about the projected revenues from the implementation of FBAR/FATCA (also projected to be $8 billion over a ten year period). In my honest opinion, and pardon all my metaphors, it's all pissing in the wind until everyone works together and are singing from the same hymn sheet. That will take time (years) and can not be a unilateral 'join up or else' threat. Everyone must decide how companies, shell companies, offshore trusts, individuals, etc. must be treated, and it may not be ONE solution fits all.

I must respond to Robin, and in that reply I'll give my reasons as to why I think FATCA is a farce. Good intentions, but still a farce.

theOAP

If I knew the precise answer to that, I would be one of a very few in the UK, and I'm guessing none of those work in/for a building society.

You asked about 'deemed compliant' institutions. Which one did you mean?

There are 3 types of deemed compliant institutions (of course there are, this is a US document).
1) Registered Deemed Compliant FI
2) Certified Deemed Compliant FI
3) Owner Documented FI
In terms of Deemed Compliant Financial Institutions, only a Registered Deemed Compliant Financial Institution or in certain circumstances a Local Client Base Financial Institution (See Section 2.13), are required to register with the IRS.
Let's assume building societies will want to be a Certified Deemed Compliant FI with a local client base, with no reporting responsibilities. In order to do this, they must meet ALL 10 of a set of rules. If they don't, they are one of the certain circumstances above.

Under rule d) [the FI] is required to identify whether account holders are resident in the UK as part of the AML/KYC procedures.

I occasionally lurk on a site for UK expats in France. There is often discussion about Halifax, etc. and ATM cards and so on. The posters are resident in France, but they have a 'brother' in the UK where their registered address is for the building society. With regards to FATCA, will Halifax and others do due diligence to determine where their true residence is, or will they only concentrate on the other rules that relate to US Persons? If the US has assurance that all US Persons are identified, will it really care about UK expats in France? If the building society does not meet rule d), who will know? Does HMRC or the societe impots in France want to know (probably yes, but that's another situation)? Of course, the larger the building society, the greater the opportunity to have clients resident abroad.

As long as the IRS gets it's info on US Persons, it will be happy. There is no concern about any other international tax situations. Therefore, FATCA is unilateral and does nothing to abate worldwide tax situations.

Then there's rule e) that deals with the required 98% ownership of all assets, by value, in the FI that must be from residents of the UK or EU. And on.....

My opinion only.

Want a good, solid headache before you go to bed? Here's the document, have a read. It's pages 22 to 36.

http://www.hmrc.gov.uk/fatca/130814-guidance.pdf

theOAP

Since this thread was originally about US Citizens renouncing their citizenship, here's two new articles that have just come out which give a fairly accurate picture of why.

OK, so this one is from Occupy.com. It is one of the best articles I've seen and speaks of FATCA and the excessive information reporting.
http://www.occupy.com/article/expose...itizens-abroad

The other is from a newspaper in Canada. It may take a while to load.
http://globalnews.ca/news/782020/why...-taxing-issue/

Within the last month, FATCA, renunciations, and citizenship based taxation have had much greater, and fairer, exposure than the normal 'repeat government BS' that is usually published.