Major FATCA and Banking Privacy News From Europe

image_pdfPDFimage_printRead mode

The following is extracted from Q Bytes dated 11th Fenruary, 2012. We thought it was important to republish it here on the blog. To be sure you don’t miss out on matters like this (including the full text of the newsletter, that has been redacted here to remove some references to individuals) then please sign up for Q Bytes – it’s free!

In the article below:
… WEGELIN: THE IRS CONTINUE TO ATTACK SWISS BANKS

… COURT VICTORY FOR BANKING SECRECY IN FRANCE

… MAJOR DEVELOPMENT ON FATCA IN EUROPE
“What’s new? Quite a lot this week!” says Peter Macfarlane

I am just back from my trip to the BFI conference in the Bahamas, followed by a whirlwind visit to several Caribbean countries working on the ground on hot topics affecting readers: in particular, economic citizenship (that’s second passports to those unfamiliar with the euphemism), and the use of offshore LLCs in IRAs for Americans and in SIPPs for Brits.

In fact, we are currently putting together a deal on the latter that will be very useful to our many readers who have onshore retirement accounts. Retirement nest-eggs are easy, low-hanging fruit for governments to seize (err, I’m sorry, to safeguard) – we’ve already seen this happen in France, Hungary and Argentina and I believe it is only a matter of time before it happens in the USA. More on this in the next month or two. Meanwhile, any feedback and ideas would be appreciated while we are putting this together. Contact us here.
WEGELIN IN THE SPOTLIGHT: THE IRS CONTINUE TO ATTACK SWISS BANKS

The US Justice Department created quite a stir last week by filing charges against Wegelin, Switzerland’s oldest private bank. The DoJ alleges that, from 2008, Wegelin followed a deliberate policy of attracting former American clients of UBS who were alarmed by the US action against UBS and were looking to move their funds elsewhere. Wegelin has no branches outside Switzerland, making it difficult for the US authorities to seize its assets. (They seized $16 million from a US correspondent account, but that’s pocket change for a bank that had about $25 billion under management)

The technique used, says the DoJ, involved creating nominee accounts for clients in other jurisdictions such as Liechtenstein, Panama and Hong Kong, held in the names of offshore companies and private interest foundations. Thereby, although the accounts were managed from Switzerland, they were not actually Swiss accounts. None of the charges, of course, have been proven as yet.

Our take on this is not one of surprise. Nobody thought the Americans would stop at UBS. And Wegelin’s bosses had been quite outspoken in criticizing US actions, so it’s hardly surprising that they would be targeted first. Anyone who, incredibly, still has an undeclared Swiss bank account needs to take appropriate professional advice urgently, that is right now! We can make necessary referrals for Q Wealth members. There are still things that can be done, but time is running out.

COURT VICTORY FOR BANKING SECRECY IN FRANCE

In a less reported court action, however, came some good news for those of us who still support due process and the rule of law: France’s Supreme Court has ruled that information stolen from HSBC Private Bank’s Geneva branch cannot be used in the prosecution of alleged tax evaders.

The facts of the matter are that in 2007 an HSBC employee, Herve Falciani, illicitly copied the details of thousands of client accounts and took the stolen to France, where he tried unsuccessfully to sell it. The Swiss government issued a warrant for his arrest for theft of the data. In a convoluted action, the French authorities then used this warrant as an excuse to raid Falciani’s home and seize the data in question. Falciani is now hiding out under a witness protection programme.

France subsequently made the confidential information available to tax enforcement agencies of many other countries, as well as using it to investigate its own tax residents, including searching their homes.

However, it now turns out that these searches were all illegal. One of the targetted individuals complained to France’s lower appeal court and in February last year succeeded in having the tax authorities’ actions ruled unlawful. The French Budget Ministry appealed that ruling but has now lost in the country’s highest court.

A spokesman for HSBC Private Bank Geneva is reported as saying: “We are pleased with the judgment which confirms that the data was illegally acquired, as we have always maintained.”

The Budget Ministry issued a statement to the effect that the Supreme Court decision would only have a limited effect by restricting its search powers. It is likely that the French authorities always knew the information could not be used in evidence, but have used it to pressure suspects into making admissions.

MAJOR DEVELOPMENT ON FATCA IN EUROPE

This week the governments of Germany, France, Spain, Italy and the UK agreed to collect information from banks within their borders and pass it on to the US tax authorities on the banks’ behalf, as from January 2013. Banks in these countries will apparently no longer have the option of ‘opting out’ of FATCA, and neither will they need to sign individual agreements with the IRS.

This will require a change to the 1998 EU Data Protection Directive, which includes a blanket prohibition on the passing of any kind of private information to the USA.

In return the USA has agreed to collect information on US bank accounts operated by European residents and automatically pass it to the relevant national tax authority.

The European Commission claims a huge benefit, in that if European banks had been forced to comply individually with FATCA it would have cost them around $100 million.

The US Treasury, meanwhile, stressed that it is not contemplating an exemption from FATCA “for any jurisdiction”. This may not please the Canadian government, which has been lobbying for exactly that. The implication is that Canada will be offered the same kind of agreement as the five European governments have accepted. We would also expect to see similar developments soon in Asian banking centres like Singapore and Hong Kong, as well as major Latin American countries like Brazil, Argentina and Mexico.

That’s all we have for you this weekend, but we’ll be back soon with more important freedom, wealth and privacy information! If you would like to be kept up to date, don’t miss out on our free Q Bytes weekly newsletter.

Related Articles

1 thought on “Major FATCA and Banking Privacy News From Europe”

  1. Hi all,

    I am a EU citizen and resident.

    I've just set up an offshore company and opened a broking acct with hsbc hongkong.

    Hsbc wants me to fill and sign the W8-BEN account to deal in US securiities. How will fatca affect privacy: will the irs pass my info to my fiscal administration?

    Many thanks and congrat for the good job.

Leave a Comment