Findog

FATCA claims its first scalp

In Polytricks on January 8, 2013 at 2:04 pm

FATCA the Foreign Account Tax Compliance Act claimed its first scalp in the form of  Switzerland’s oldest bank, Wegelin.  Wegelin announced that it will pay the US $57.8m fine and shut its doors for good after being open for business hiding peoples money from the tax man for longer than the USA has even existed as a country.  FACTA is a ferocious bit of legislation.  It mandates all banks throughout the world to send information on US citizens bank accounts overseas to the IRS.  In one fell swoop its shuts down tax haven banking around the world.

So how does this work?  How does the USG bully foreign banks into giving up their clients?  Quite simple really, foreign banks that fail to comply with  FATCA will be fined, blacklisted, and banned from trading in the US, the world’s largest market.  Ironic really, a government that can’t contain it bloated military spending or reform its corrupt tax code is now shaking the foreign financial banks down to see what hapless tax cheats fall out.

Wegelin was not offered a deferred prosecution agreement unlike its global banking neighbor UBS.  UBS provided Swiss bank accounts to 20,000 U.S. taxpayers with assets of about $20 billion, paid $780 million as part of its agreement, promised to abide by U.S. federal laws and also agreed to hand over the names of tax-evading U.S. clients. Charges were dropped 18 months later.  Wegelin helped U.S. taxpayers avoid taxes on at least $1.2 billion, but was criminally charged, fined $57.8m and forced to close.  This shows that there is still an unwritten rule that big banks are not to be seriously prosecuted.

I would imagine it would simple enough to create a holding company offshore not connected to anyone’s citizenship.  That way the FACTA rules would only target the unwary.. ;o)

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