Bank FATCA regulations are really tight now, aren't they?

[dor]

I am small timer in online affiliate marketing, selling digital software and web hostings


I received this email from my agency it says:


Thank you for your email.


I am afraid we have only just been informed that due to the new FATCA regulations, ABC Banking will not be accepting any client where the business activities takes place in the USA or the client is a US citizen or a resident in the USA.


Can we offer you a bank account with the Loyal Bank of St. Vincent?


Please advise so that we can send you the relevant documents. Also note that the Loyal Bank opens account using scanned documents but the original application forms will have to follow.


Attached please find the bank’s requirements for your attention.


Best Regards,


Is this that bad now?


Anyone had encountered this before?


What banks are ok with USA these days?

 

[Zqq]

A lot of banks are shutting down or refusing to open US accounts or accounts with payments from the US, due to FATCA.


Since FATCA is so new and banks are still assessing compliance vs. the loss of US clients, it's too early to tell which banks will tolerate US-source funds.

 

[cbenitez]

I really dont understand why banks refuse US Citizens. All they need to do let their clients know about FATCA and if they will be ok for the bank to give information. This is what we doing with our clients at Global Bank of Commerce Ltd. we cant just turn our back to our clients.


Regards


Carlos Benitez

 

[dor]

the thing is that i am not USA citizen i am from europe.

 

[cbenitez]

I guess abc bank does not understand FATCA regulations.


Regards


Carlos Benitez

 

[Zqq]

I guess abc bank does not understand FATCA regulations.

How do you mean?


Under FATCA and depending on the nature and structure of the OP's business, either ABC Bank could qualify as an FFI if it holds money that belongs to US customers or the OP could qualify as an FFE. This requires exchange of information.


If ABC Bank chooses not to bother with FATCA and instead block all US-sourced or US-related funds, that's their choice. USA is probably not an important country to them.

 

[dor]

what is FFI and FFE?

 

[Zqq]

Foreign Financial Institution and Foreign Financial Entity.

 

[dor]

strange, most of the business is happening in USA, this means none of non USA banks will work with affiliate marketing guys... what to do?

 

[Zqq]

If you hold money on behalf of US clients you may be affected by FATCA as an FFI/FFE, or at least ABC Bank may decide that you are in the risk of being classified as an FFI/FFE and therefore refuse you.


You can try to convince ABC Bank of your situation or start looking for other banks.

 

[dor]

what's the point to look for other banks if all banks are obliged to follow FATCA or else

 

[Zqq]

Because some banks accept it whereas others don't. ABC Bank apparently does not want anything to do with FATCA, while other banks may be open to your business.

 

[tarous]

The problem with FATCA for banks is the privacy protection laws of their respective countries. In accordance with FATCA banks have to release information on all accounts held by US citizens or face a withholding tax of 30% on all of their investments in the USA. But by releasing information about any clients a bank has will often go against the privacy protection rights - and that simply means the bank breaks the law in its own country.


That's why banks don't want to deal with this mess and don't accept US citizens as their clients. It's much easier this way than to go through all of the hassle of dealing with IRS and potentially getting sued in their own country.


The funny thing is - Americans are chasing tax evaders, who save about $100bn in taxation, but at the same time risk $14tn of foreign capital invested in the US. Because most investors, faced with a risk of 30% withholding tax, will simply move their investments abroad. I've actually read that the IRS already executes FATCA regulations, even without them coming to full power, and some people were charged withholding tax without any decent explanation. It's not hard to see why banks would prefer to avoid such risks.