Congressman Bill Posey asks Treasury Secretary Mnuchin to deal with #FATCA

 

Persistence pays off!
Suzanne Herman, a long-time Brocker, never gives up & look at the result!
We need more of this kind of thing!
BRAVO!!!

See the original here

letterhead image of Posey letter to Mnuchin
 
 

September 29, 2017
The Honorable Steven Mnuchin
Secretary of the U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW Washington, DC 20220

Dear Secretary Mnuchin,

I am writing to you regarding the Foreign Account Tax Compliance Act (FATCA) [26. U.S.C. § 1471-1474; 26 U.S.C. § 6038D]. As discussed below, FATCA is an invasive, costly failure that I strongly suggest must be repealed at the soonest possible opportunity, hopefully in the context of tax reform enacted this year. In addition, the means adopted during the tenures of your predecessors Jack Lew and Timothy Geithner to implement FATCA via a series of legally dubious and constitutionally infirm non-treaty agreements with other countries must not be allowed to stand. I ask your assistance in assuring that FATCA repeal is part of any relevant legislation, and that the Treasury Department takes prompt action to cease the implementation of FATCA via Intergovernmental Agreements (IGAs).
FATCA’s proponents claim that it is simply a “transparency” measure – similar to a domestic 1099 – to ensure greater tax compliance for assets held offshore. This characterization is misplaced. Domestic tax law requires reporting of taxable events, such as income (a W-2 Wage and Tax Statement) or bank interest (a 1 099-INT). U.S. law, based on a presumption of innocence, does not generally require inquiry into asset principle unless there is reason to suspect wrong-doing. By contrast, FATCA requires wholesale reporting of Americans’ assets and transaction history absent any such suspicion, solely because the asset is held outside the United States. This is despite the fact that the IRS’s own Taxpayer Advocate Service reports that “the vast majority” of Americans residing abroad “actually appear to be substantially more compliant than a comparable portion of the overall U.S. taxpayer population.”

Despite such an invasion of privacy, FATCA has failed in its stated purpose of recovering revenue lost to offshore tax evasion. Last year the Internal Revenue Service (IRS) credited FATCA for “collecting” $10 billion from “taxpayers coming back into compliance, ,2 but that figure conflates genuine tax revenues with penalties for filing deficiencies and recoveries from all offshore enforcement programs, not just FATCA. In the estimate of Professor William H. Byrnes of Texas A&M University School of Law, the real net tax recovery of FATCA alone is about $200 million annually and may be only half of that. Professor Byrnes projects that FATCA may “soon cost more money than it brings in.”‘ Indeed, his view may actually be overly optimistic in light of the IRS’s commendable enforcement standard of recovering seven dollars for every dollar spent.4

By contrast, because of the IRS’s need to try to discern indicators of evasion within a sea of indiscriminate personal information belonging to non-evaders, W. Gavin Ekins of the nonpartisan Tax Foundation suggests that, under FATCA, finding “a dollar of tax evasion may cost us $5 of actually sifting through the data and compliance costs.”5 FATCA’s unsatisfactory ratio of return must also be weighed against the impact on taxpayers saddled with burdensome reporting paperwork. The Tax Foundation estimated in 2016 that these requirements cost individuals nearly four and half million hours and more than $165 million,6 an amount comparable to FATCA’s likely proceeds. This does not even take into count the massive compliance costs imposed 011 financial institutions.
The above summarizes the good and sufficient reasons why FATCA must be repealed and enforcement dollars spent on more effective programs to detect and punish actual tax evasion. While your support for that effort will be appreciated, it is a task primarily of Congress. But I now turn to a matter almost entirely within your purview, on which I ask your prompt and decisive action. This relates to IGAs invented by the Department in consultation with five European governments for the purpose of enforcing FATCA.

While the IGAs read like treaties and have the effect of treaties in purporting to create mutual obligations between sovereign states they are not submitted to the United States Senate for that body’s advice and consent to their ratification, though the non-U.S. “partner” country is required to do so under its necessary internal procedures for entry into force. In July 2013, I wrote7 to Secretary Lew with a specific request for the statutory authority for the IGAs. The Department responded, after a delay of nearly a year, with the following statutory justification: 8
 

“The United States relies, among other things, on the following authorities to enter into and implement the IGAs: 22 USC Section 2656; Internal Revenue Code Sections 1471, 1474(f), 6011, and 6103(k)(4) and Subtitle F, Chapter 61, Subchapter A, Part III, Subpart B (Information Concerning Transactions with Other Persons).”

 

None of the sections cited above confers on the Treasury Department any authority for making agreements with foreign governments for the furnishing of private financial information. In particular, there is nothing in the cited sections that allows the Department to promise (under the so-called “Model 1” IGA) on behalf of the United States FATCA-“equivalent” reporting to foreign tax services of private information obtained from domestic American financial institutions. Following through with this unauthorized promise would impose on American banks, credit unions, insurance companies, and other institutions crushing compliance costs of the magnitude already suffered by foreign institutions – costs that would inevitably be passed on to American consumers.

The IGAs represent a prime example of the kind of executive overreach that unfortunately typified the previous administration. I ask you to rein in this abuse by ceasing the negotiation of new IGAs and freezing the implementation of existing ones. This action should include a freeze on enforcement of FATCA regulations on taxpayers and financial institutions. Further, I ask that you notify IGA jurisdictions that these dubious pseudo-treaties are under legal review and that their nullification or abrogation from the U.S. side can be expected pending FATCA’s anticipated repeal.

Nothing in the foregoing should be construed in any way as being “soft” on tax evasion. Quite to the contrary, in addition to its other flaws FATCA is a distraction and a diversion of resources from effective tax enforcement based on standard investigatory techniques. As a member of the Financial Services Committee I look forward to working with the Department on measures to ensure effective tax enforcement that targets the guilty, without penalizing the innocent or
compromising our cherished American constitutional and legal norms. In the meantime, FATCA and the IGAs must go.

Thank you for your assistance on this critical matter.

posey signature

___________________________________

1 Taxpayer Advocate Service, 2016 Annual Report to Congress, Vol. 1; “FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA): The IRS’s Approach to International Tax Administration Unnecessarily Burdens Impacted Parties, Wastes Resources, and Fails to Protect Taxpayer Rights,” page 221; See:https://taxpayeradvocate.irs.gov/Media/Default/Documents/2016-ARC/ARC16 Volumel MSP 16 FATCA.pdf

2 IRS press release, “Offshore Voluntary Compliance Efforts Top $10 Billion; More Than 100,000 Taxpayers Come Back into Compliance,” Oct. 21, 2016; See: https://www.irs.gov/newsroom/offshore-voluntarv-comphance-efforts-top-10-billion-more-than-100000-taxpayers-come-back-into-compliance

3 “Background and Current Status of FATCA” Texas A&M University School of Law Legal Studies Research Paper No. 17-31, pages 1-34, 35; See: https://paers.ssrn.com/soI3/papers.cfm?abstract id=2926 119

4 IRS press release, “National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Tax Reform, IRS Funding and Identity Theft,” Jan. 9, 2013; See: https://www.irs.gov/newsroom/national-taxpayer-aclvocate-delivers-2012-annual-report-to-congress

5 “Why Americans are giving up citizenship in record numbers,” Washington Post, June 1; 2016: See:

6 Tax Foundation, “The Compliance Costs of IRS Regulations,” June 15, 2016; See: https://taxfoundation.org/compliance-costs-irs-regulations/

7 See: http://www.repealfatca.com/downloads/Posev letter to Sec. Lew July 1, 2013.pdf

8 See: http://federaltaxcrimes.blogspot.com/2014/07/irs-letter-to-congressman-defending-its.html
For a definitive section-by-section demolition of the Department’s response, see Professor Allison Christians, McGill University Faculty of Law, “IRS claims statutory authority for FATCA agreements where no such authority exists,” http://taxpol.blogspot.com.au/2014/07/irs-claims-statutory-authority-for.html

#FATCA and the Canadian Charter of Rights and Freedoms

 

The initial reaction of the Canadian government to FATCA can best be described by a letter then-Finance Minister, the late Jim Flaherty wrote, intended to be placed in major American newspapers.Virtually no one believed there would be any reason for the U.S. to impose this given Canada is a higher tax jurisdiction and owing annual income tax was rather unlikely. Back in 2012, in spite of all the scaremongering created by the IRS and foreign tax compliance practitioners, the underlying hope/belief of “US Persons” in Canada was that it would be impossible to get around the Canadian Charter of Rights and Freedoms. In spite of the fact that the first Model 1 IGA was released on 26 July 2012 by the US Treasury. The IGA was developed cooperatively with France, Germany, Italy, Spain and the United Kingdom.

The post below was written over a year before the Canadians signed the IGA agreement on Feb 5 2014. Interestingly enough, it was written on the same day as a letter written by Peter Hogg, perhaps THE most important constitutional lawyer in Canada. This letter was sent to the Department of Finance and was welcome news.

Note that the prohibited grounds of discrimination
include ‘national or ethnic origin’, and the Supreme Court has held that
citizenship is an ‘analogous ground’ also prohibited by s. 15(1).”
(Andrews v. Law Society of BC (1989) 1 S.C.R. 143)
“The point of this letter is to urge the
Government not to agree to an IGA which would call for foreign
legislation which would offend s. 15
of the Charter.”

Perhaps I just have a bad memory but it is curious to me now, that there is such a difference in the time some of our main allies signed and when we signed. I only recently (and surprisingly) learned that the U.K. and Germany do not have anything comparable to our Charter. Could that be a reason they were more willing to sign earlier on in the process? Does it mean the Canadian government at first considered the possibility that any action they took would not be able to withstand a Charter Challenge? And if so, what was it that made them change their minds? How did they come to believe they could get away with changing a law to break the law? Bill C-31 is the only of the clearly unconstitutional laws that the Trudeau government refuses to budge on (the others being C-23 C-24 & C-51).

While Canada clearly failed when it had the chance to stand up to the U.S. government, perhaps we can count on the Supreme Court of Canada, in the end, to demonstrate leadership by living up to the ideals enshrined in the Charter.

*******

Reposted from renounceuscitizenship blog on December 21, 2012.

 
Love him or hate him (and there was very little in between) former Canadian Prime Minister Pierre Trudeau left his mark on Canada. The Trudeau Liberals brought Canadians a set of entrenched constitutional rights. From April 1, 1982 the history of Canada was forever changed.

 
1982: The Charter was intended to give individual Canadians rights …

The Canadian Charter of Rights was intended to give individual Canadians (including permanent residents who were non-citizens) an important set of rights that governments could not (as a general principle) override. These rights included rights in a number of categories including: legal rights, rights to freedom of expression, mobility rights, equality rights and more. Although originally touted as the “biggest make work project ever for lawyers”, Canadians in general have benefited from these rights. The focus of the Charter was on “individual rights”.

2012: The Charter may be used to shield the country of Canada from the U.S. FATCA attack …

The Honourable Sinclair Stevens of the Progressive Canadian Party has argued that the Charter of Rights can be used to protect Canada from FATCA. According to an attendee at the recent FATCA Forum in Toronto Mr. Stevens emphasized that:

… the rights and protections of the Canadian Charter applied to permanent residents of Canada and that individuals in Canada are all equal and under the protection and benefits of that Charter regardless of race, nationality, ethnic origin, etc. He state unequivocably that Canada MUST obey the Charter (which would never allow for FATCA’s discriminatory parameters). He is a very well-spoken and articulate man and I was very impressed with his strong words and message about the importance of the Charter.

Prime Minister Trudeau would not have imagined that the Charter might be used to shield Canada from the U.S. FATCA attack. Talk about the law of unintended consequences … ! S. 15 of the Charter may be used to prevent the Government of Canada from entering into a FATCA IGA.

In other words, instead of the Government of Canada saying NO to FATCA, Canada will not enter into a FATCA IGA (which is what it should say):

S. 15 of the Charter may possibly be used for the Government of Canada to say:

No Canada will NOT enter into an IGA, because S. 15 of the Canadian Charter of Rights prohibits us from entering into an agreement with you that discriminates on the basis of citizenship and/or national origin.

Here is the text of Charter S. 15 (1):

Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

Although S. 15 does not specify citizenship has a ground of discrimination the Supreme Court of Canada has included citizenship has a prohibited ground of discrimination. For the Government to help the IRS seek out U.S. citizens is to deny Canadians who are U.S. persons the equal benefit of privacy laws. (Now for the lawyers reading this, I realize that Charter S. 1 and the override are possible issues.) That said, the starting point in the analysis is the likely violation of S. 15.

Of course, S. 15 applies only to governments. Therefore, it may prohibit the Government of Canada from entering into a FATCA IGA. The Charter of Rights applies to government activity and would not affect the conduct of the banks and other FFIs. The prudent course would be to NOT sign the FATCA IGA and let Canadians see how their financial institutions are willing to betray them to the IRS.In other words:

For the government to sign an IGA is to give the Canadian banks the license to betray Canadians! This is another reason why there can be no IGA. Let the banks betray Canadians at their peril. Let the banks deal with the lawsuits. Let the banks absorb the costs! Let some banks advertise that they are a “FATCA Free Bank”.

The Financial Institutions are subject to provincial human rights codes that prohibit discrimination based on citizenship. It is up to Canadians to hold the Sun Life and Bank of Nova Scotia s of the country accountable.

There are many reasons why Canada must say NO TO FATCA.

Imagine the Charter of Rights being used to protect Canada as a country from the U.S. led FATCA attack! Great example of unintended consequences …

Anti #FATCA BRIC nations building political clout and alliance

 

We all spend tons of time wondering what individual effort might bring down FATCA. Will the Congress come to its senses and pass the Meadows/Rand bills to repeal FATCA? Will Nigel Green & Jim Jatras achieve a lobbying miracle? Could it be possible that the Appellate Court will come up with a different finding than Judge Rose in the “Bopp” case? Or will the Canadians be successful in striking down their IGA with other countries deciding they will do the same? Will the Treasury Secretary indicate that #AmericansAbroad are exempt from FATCA? Or somehow Treasury changes its mind and allows for Same Country Exception?

To the best of my recollection, when the post below was published NONE of the actions mentioned above had started. If somebody had predicted any of them (never mind all of them), I expect we would have thought they were nuts. It has seemed so overwhelming and so hopeless from the start. Yet we fought back from the very beginning, starting simply at first; researching information and making decisions on our own terms, being unwilling to just follow blindly what we were told by the IRS, the compliance community and so on. Little by little groups began planning how to approach their ideas of taking the battle to the next level. Everyone should be proud that so much has been done under such dire circumstances, the expat grassroots movement is alive & well!

Of course, there are always other currents flowing alongside all that is happening and usually the best results are the ones that are not planned per sé but come about as the interplay of all the factors as they work themselves out. Clearly, one of the most powerful would be the demise of the U.S. as the world’s biggest bully, police officer and holder of the most powerful reserve currency. Of course many Western business/financial leaders dismiss this idea as pure folly. Impossible they say. However, look at the bank collapses of 2008. Would financial officers not have reacted the same, “Impossible” ?

Did we not react the same when we first started out? Impossible ?

There is reason to believe the BRICS nations might well succeed at creating a system that can bypass what the U.S. currently “owns”; the USD as the world standard reserve currency.

This will be the first of a few posts regarding BRICS. We truly may be witnessing the fall of the American Empire and the rise of a new ruling entity.

*******

Originally posted on the RenounceUSCitizenship blog March 24, 2013

 

Earlier this year I wrote that “Peaceful resistance to FATCA will result in a new financial order“. An article by Geoffrey York of the Globe and Mail suggests this may be starting to happen.

The article is well worth reading.  Note the following commentary and excerpts:

Continue reading “Anti #FATCA BRIC nations building political clout and alliance”

Hands Down this is the Worst Academic Piece About FATCA ever Written

 

 

Profesor Paul Caron, on his TaxProfBlog posted the following article:
CONSIDERING “CITIZENSHIP TAXATION”:
IN DEFENSE OF FATCA
20 Fla. Tax Rev. 335 (2017):
by Young Ran (Christine) Kim

 

If any description could possibly be demonstrated over & over in this piece it would be the term “offensive.”  I confess to a hard-edged bias against academia, likely for the same reasons as most people; i.e., the rather noticeable and consistent lack of everyday common sense. Even in my own field (piano performance, where a doctorate is called a DMA not a Phd) there is a prevalence of people who may be perfectly schooled in the accuracy of Baroque ornaments, precise methods of articulation in Classic-period pieces or any number of other tedious accomplishments yet their actual playing (which is the whole point of a performance degree vs an academic one) is so devoid of vitality and inspiration it is enough to make one weep. I don’t know if the same exists in all disciplines but one thing that does apply here is a complete (and I mean complete) lack of awareness on the part of the author, of the harshness of how these theories play out on the lives of REAL people. What would make much more sense would be to address these problems head-on rather than justify “concepts” through a lot of theoretical jargon.

 

The following comment says it well:

 

The people affected by “citizenship-based taxation” are U.S. citizens and Green Card holders who live outside the USA and are “tax residents” (and often citizens) of other nations. The paper discusses (sort of) “citizenship-based taxation” as an abstract concept without considering the brutal effects that it has on the people subjected to it. The acknowledgement of the difficulties with pensions, retirement planning, foreign spouses, mutual funds, CFC rules, etc. (the reality of citizenship taxation) is most notable in its absence. And no, FBAR and Form 8938 (as obnoxious as they may be) are reporting requirements and not the specific tax rules (PFIC, etc.) that affect Americans abroad. I suspect that this paper will be subjected to the criticism that it so richly deserves.

Posted by: John Richardson | May 26, 2017 1:14:02 PM

While this criticism can be equally leveled at the members of Congress who passed FATCA, the Treasury Department personnel who wrote the regulations and last but not least, the heartlessness of many tax compliance practitioners, there is something especially repugnant about those pontificating from their ivory towers, proclaiming that FATCA, citizenship-based taxation, global transparency and all the rest of it, are worth the grief being caused.

Ms Kim indicates her paper finds its origins in Ruth Mason’s recent article, Citizenship Taxation, [89 S. Cal. L. Rev. 169 (2016),

A major difference between the two is that Ms Mason basically sees citizenship taxation in a negative light while Ms. Kim attempts to find it as a natural basis to support FATCA.

She addresses three main arguments; the fairness argument, the efficiency argument and the administrative argument.
 

I.) THE FAIRNESS ARGUMENT

 

Individual taxpayers’ obligations to file Foreign Bank Account Reports (FBAR) or report under the Foreign Account Tax Compliance Act (FATCA) are not seriously onerous. The fact that citizenship taxation along with FBAR and FATCA enhances global transparency further supports the case for citizenship taxation……..because the rules have been improved through various exceptions and substantially high reporting threshold amounts.

Ms. Kim asserts that the obligation to file FBARS is not “seriously onerous.” The very real threat of a non-willful penalty of $10,000 per account per year (or worse for “willful) is certainly enough to strike the fear of God in even the most reticent individual. The idea that this reality is not considered when evaluating FBAR is beyond reasonable. Articles about FATCA often cover only the reporting done by the FFI’s. However, the other component is the requirement to file 8938’s which duplicate information from the FBAR and can incur serious penalties. The average person is not able to complete an 8938 and will have to pay to have a professional do it. Nowhere in this article does the author address the issue of compliance costs for individuals which can easily be $2500 a year for someone owing no tax and involve 50 or more pages of returns. Not onerous? Furthermore, there are simply NO FIGURES yet, to make any claim that FATCA “enhances global transparency.” Professor William Byrnes describes
the oft-quoted figure of $10 billion. This amount has absolutely NOTHING to do with FATCA; it is largely comprised of penalties and interest collected through the OVDI programs (and does not even represent actual tax recovered). While the FATCA thresholds are higher, please, the threshold for FBAR remains at $10,000, the same figure when the Act was created in 1970 – 47 YEARS AGO!
 

FOCUSING ON THE ABILITY TO PAY PRINCIPLE

First, consent theory argues that taxing nonresident citizens is justified because retaining citizenship represents consent to such taxation.

 
One cannot consent to something one doesn’t even know about. Is the author completely unaware of the history underlying the persecution of expats once Treasury/Justice went after the Swiss banks in 2008? There are still likely more Americans abroad who remain unaware of the obligation to file taxes and worse yet, the oppressive information returns with penalties simply for not filing a piece of paper (i.e. no tax due). For those who do know and who retain citizenship, keeping it is much a matter of confusion and fear and could hardly be described as “consenting to taxation.”

 

Second, benefit theory attempts to justify citizenship taxation as an obligation of nonresident citizens in return for the benefits they receive from the government.

This argument is so ridiculous at this point it is hard to believe it remains part of the discussion. Cook v Tait is nearly 100 years old and does not address the large changes globalization has produced. There is the endless  nonsense of hearing how “The Marines will come to rescue you,” after which you receive a full bill. How many living in first-world countries have any need for “rescue?” And last but not least we “owe” the U.S. for consular services (for which we pay, dearly in the case of renouncing – $2350 or $50 USD to notarize a single page). All tiresome and nowhere near justifiable for being taxed “the same” as Homelanders.

 

Third, social obligation theory

the underlying assumption of this theory is that people have an obligation to pay taxes to support the members of the society to which they belong in accordance with their ability to pay taxes, which should be measured by their worldwide income.

I remember my reaction to Prof Michael Kirsch’s comments (at the ACA Program in Toronto, May 2014, “CBT vs RBT”)regarding polity and such. It seemed ridiculous to me to consider those of us living outside the United States as being a member of that society in any meaningful way. In my own life, now 35 years outside the U.S.(over half my life), the only times I identified as a “member ” of U.S. society was when defending against strong anti-American sentiment (the first few years away) and national tragedies such as 911. I cannot see any way that those infrequent occurrences defined me as being an American more than being a Canadian.  I would say a more meaningful and valid way to apply the social obligation theory is whether or not I support policies that promote the social welfare of those around me, whether or not I give the homeless guy I see everytime I go to the bank, a bit of money so he can buy some lunch. IOW, except in an idealistic or nostalgic way, one can really only measure his/her “social obligation” based upon what they come face-to-face with, i.e., where they live.

 

Due to the different factors affecting the ability to pay, such as difference in the standard of living or amenities between places, “it would be fairer to calculate a person’s ability to pay by reference to the place where she lives rather than to the place where she holds her citizenship.”

“actually tax them alike,” which would require the repeal of the foreign-earned income exclusion and the allowance of unlimited foreign tax credits, including foreign consumption taxes, as well as the implicit taxes and subsidies to compensate the differences.

 

While all expats readily understand the reality that they are NOT “taxed the same” as Homelanders, the idea of being able to adjust all these factors to the number of foreign countries with all the differences in structure etc., absolutely discourages any realistic notion that this could ever be accomplished. Current retirement-oriented plans such as the Australian Super; the lack of recognition of tax-deferred vehicles registered by governments being treated the same as their US equivalents; requiring capital gains tax on the sale of principle residences which are tax-free in the countries where they are located ; and above all else, the obscene “savings clause,” all speak to the built-in bias the US has for anything “foreign” and its pronounced tendency to punish people for making use of non-US instruments. Add the effect of the Patriot Act, which makes it impossible to even open a US account with a foreign address and a non-resident American understandably lacks the will to try and weave one’s way through all these complicated, impossible-to-delineate requirements and procedures. The fact that the IRS does not clarify ambivalent sections such as §877A as well as the fact that no two compliance professionals can be counted on to give the same opinion is proof positive that disparate tax systems simply cannot be adjusted “fairly.”
 

when its critics condemned the new obligations to file FBARs and FATCA as an excessive compliance burden for nonresident citizens created by the Bank Secrecy Act.

There are no “new” obligations to file FBARs; they have been required (and unenforced) since 1970 and are part of Title 31. FATCA was NOT created by the Bank Secrecy Act. It comprises part of the H.I.R.E. Act (2010) and is part of 26 U.S.C. § 1471–1474, § 6038D.

II.) THE EFFICIENCY ARGUMENT

citizenship taxation may distort both Americans’ and non-Americans’ citizenship decisions, is not convincing

American citizenship renunciation rate is not particularly serious compared to other countries

residence-based taxation confronts an additional hurdle on top of enforcement difficulties: determining the residence of the individuals. Determining residence by considering all facts and circumstances creates problems beyond enforcement difficulties. The facts-and-circumstances test itself contains inherent problems when compared to a bright-line test

….and to what extent renunciation is treated as immoral and/or illegal, and so on.

The idea that citizenship taxation does not affect the decisions of Americans abroad concerning their citizenship is patently absurd. Without question, citizenship taxation IS THE MAIN REASON anyone renounces. Not because of tax per sé (don’t even think of trying to scare with the Reed Amendment) but rather, due to all the complications of trying to match two different tax systems. Add the non-financial issues such as the stress on marriages (to “aliens”), passing U.S. citizenship on one’s children, etc. etc. It has become a nightmare not worth living and something to escape if one can.

Ms. Kim devotes a long section to establishing the idea that the renunciation rate of U.S. citizens is “not particularly serious.” Again, we have someone indicating that unless the numbers are large, whether compared to that of other countries, the proportion of renunciations to the numbers of those abroad or to the number of entering immigrants, there is nothing being lost here. If that is the case, then the U.S. has virtually nothing to lose by simply letting these people go without all the forms, swearing under penalty of perjury and so on. One might occasionally consider that Americans abroad were once the best ambassadors the country could have. Now those tables are turned and some are more anti-American than any “alien” could ever be. Nothing like betrayal to warm the heart.

Regarding determination of residency, it is interesting that all 191 other countries of the world are able to surmount this difficult obstacle, which will be even more pronounced once CRS is operative. The “bright line test” which I presume means using citizenship rather than residency to base reporting on, is not truly useful given the fact that only the U.S. (Eritrea does not count) does this. When a U.S. citizen is living abroad with dual citizenship, with no determinant indicia, ask any bank how easy it is to establish whether or not one is a U.S. citizen. If it were clear, one would not see so many institutions refusing to serve Americans.

The Expatriation Act of 1868 gives all Americans the right to give up their citizenship if they so desire. It is not an issue of illegality. When a country treats its own citizens in the manner we have experienced from 2009 onwards (particularly the Accidental Americans who are not American in any normal understanding of the term), who is there to even suggest renunciation is immoral?

III.) THE ADMINISTRATIVE ARGUMENT

ENFORCEMENT DIFFICULTIES

Citizenship taxation has been criticized as difficult to enforce on nonresident citizens abroad….Determining residence by considering all facts and circumstances creates problems beyond enforcement difficulties

Next to failing to point out the outrageous 30% withholding “sanction” inflicted on every other country of the world, this has to be the weakest argument in this paper. The fact that the U.S. cannot effectively collect anything outside of the country is the number one reason people feel safe in remaining “under the radar.” After the initial scare of 2009/2011 seeing that the people hurt the worst were those who tried to do the right thing, people started considering the reality that being identified (“caught”) may amount to virtually nothing for a number of reasons. First of all, the majority of expats who are not compliant are NOT wealthy tax cheats with foreign accounts in order to deprive the U.S. of tax revenue. They are first of all, compliant where they live, which speaks volumes. Secondly, they have these “foreign” accounts in order to live their lives. This is in no way comparable to Homelanders who are guilty of tax evasion when they stash money in tax havens (and let’s not forget Delaware, Nevada, South Dakota and Wyoming, shall we?). The Revenue Rule still stands; even the 5 countries with Mutual Collection Agreements (Canada, Denmark, Sweden, France and the Netherlands)WILL NOT collect on those who were citizens of their countries at the time the tax was incurred. Canada WILL NOT collect FBAR penalties. With regard to fear about crossing the border, if one is not in the U.S. system, there is nothing for the IRS to report to DHS or CBP etc. All these things may change over time but as it stands now, the most IRS can do to most people, is send them a letter asking them to pay. EXACTLY WHAT IS THE POINT OF HOLDING ON TO CBT IF THERE IS NO WAY TO COLLECT?

Is the Compliance Burden Actually Onerous?

the IRS has provided the OVDI that a U.S. taxpayer can utilize to avoid criminal sanctions for the failure to report the existence of, and income earned on, a foreign account on tax returns as well as for the non-filing of the FBAR. In exchange for avoiding criminal sanctions, taxpayers will generally be subject to a 27.5% penalty on the highest aggregate value of their undisclosed offshore assets.86 In addition, for non-willful violators, IRS provides Streamlined Filing Compliance Procedures (SFCP), a program that was expanded in 2014 to cover a broader spectrum of U.S. taxpayers residing abroad and to provide penalty relief. Therefore, nonresident citizens who no longer have a strong economic and social connection with the United States or happenstance Americans are no longer likely to be subject to the severe FBAR penalties.

To suggest that OVDI and Streamlined “make everything alright” is to avoid the real issue altogether which is that citizenship taxation is simply wrong. No other country on earth “claims” its citizens for life. (Eritrea does not count). No other country on earth taxes its citizens after they abandon residence. No other country on earth applies an Exit Tax on assets that were acquired prior to obtaining residence in that country. There are reasons why no other countries do any of the things associated with citizenship taxation. It’s high time the United States stop this appalling abuse of human rights.

THIS ARTICLE FURTHER AIMS TO DEFEND the administrability of citizenship taxation in conjunction with the Foreign Bank Account Reports (FBARs) and the Foreign Account Tax Compliance Act (FATCA).

FBAR-absolutely not the way it is being conceived of now. FBAR, created in 1970 was aimed at uncovering money being laundered in smuggling, the drug trade and terrorism. It also was not originally conceived of being applied to those outside the U.S. Once the DOJ/Treasury departments went after the Swiss banks, they realized they could stretch the intent of FBAR to apply to non-resident Americans and the penalty regime thickened.

The criticism… has continued even after the U.S. government committed to enter into Intergovernmental Agreements (IGAs) in an attempt to address those concerns

A huge oversight on the part of the author. FATCA was without question an extraterritorial imposition on other countries. Only the United States would be as uncivil as to suggest imposing a 30% withholding charge on their allies and trading partners. The U.S. appeared not to understand that other countries could not comply even if they wanted to as privacy laws prevented the level of reporting required by FATCA. Banks would be sued were they to comply. To suggest that the US committing to the IGAs was a gracious act is revolting. Under the guise of being rooted in tax treaties, the IGAs simply bypassed what should have been required; that Congress ratify such agreements and implement legislation to do so. There is nothing in FATCA that warrants the creation of the IGAs. The U.S. downloaded ALL of the costs of compliance to the other countries. There is no mention of any penalties for the U.S. failing to comply. The U.S. made only the vaguest promises of reciprocity. It is simply unbelievable that the immorality of taking capital out of other nations is considered acceptable by the United States.

IV>) FATCA:MERITS AND CONCERNS

The OECD’s AEOI and the U.S. FATCA are two important developments, but FATCA plays a more important role.
First, FATCA provided critical momentum
Second, FATCA facilitates multilateral implementation of AEOI by creating an extensive network with more than 100 countries in the world, at the center of which is the United States.

This is unsubstantiated nonsense. First of all, it is bizarre to say FATCA “plays a more important role” Who gains from FATCA other than the United States? So far, nobody. The United States is at the Center of AEOI/CRS? The US has not even signed on to CRS. There are huge differences that matter greatly. The OECD AEOI/CRS agreements are determined by the countries involved; the terms of residency are established by those exchanging the information. FATCA is vastly different in that the United States alone determines who is/is not a “US Person” “US Citizen” irrespective of the status of such a person to the other country. And so far, the U.S. is not “paying its fair share” by requiring its banks to implement the same systems and legislation required (imposed) by FATCA. The IGAs do not constitute “acceptance” by other countries. To think otherwise is ridiculous. One could not possibly view such stipulations as reasonable.

criticism that…. FATCA exposes taxpayers’ private information to potential abusive use by foreign tax authorities.

This is a matter of real concern to Americans abroad living in some of the more troubled areas of the world-or those living Colombia in South America and particularly in some of the Middle East countries. Ironically enough, the U.S. has had some of the worst breaches of security and leakage of private information; certainly this is disturbing and worrisome.

Ms. Kim’s discussion of the Bopp FATCA lawsuit I will leave to someone else.

Second, opponents of FATCA and EOI argue that an EOI system removes a country’s unilateral control over its own tax policy, resulting in the forfeiture of sovereign autonomy. Although such argument has withered since the U.S. government entered into IGAs with other countries, it was strongly asserted by Canadian opponents of FATCA when the IGA Implementation Act included in Bill-31 was debated in Canadian Parliament.

How outrageous to suggest a foreign country does not have the right to have unilateral control over its own tax policy. The proof is in the pudding. The U.S. would never allow the equivalent. The IGA’s are the proof.
I have watched the video of the Canadian FINA hearings on FATCA many, many times. It is not possible to convey the absolute disgust we have for the majority Conservative government which minimized completely, the capitulation that occurred with the implementation of the IGA. It was nothing more than protecting the banks, without any regard to the effect it would have on Canadian citizens resident in Canada.

However, a government’s control over its tax policy is more severely harmed when a country segregates itself from the global community and loses the ability to enforce effectively its own tax laws against its taxpayers with interests in foreign jurisdictions

More unsubstantiated nonsense. This is an opinion completely unsupported up by any facts.

A Case for American Exceptionalism

conclusion, if FATCA makes the world better off by enhancing global transparency on tax information, then this may serve as another support for citizenship taxation, as well as an example of constructive exceptionalism.

While all of us raised in America understand unconsciously what exceptionalism is, it truly takes living outside the country to appreciate how incredibly arrogant and offensive it is. It is questionable whether FATCA “makes the world better off….” that a questionable tenet should “serve as a support for the imposition of citizenship taxation.” It is nothing short of reprehensible that the author should suggest what the U.S. has done is “constructive” or in any way justifies the gross aberration of power demonstrated by the creation of FATCA.

IRS Claims Statutory Authority for FATCA Agreements Where no Such Authority Exists


 

A lot of discussion has taken place recently as to what (if anything) might happen with FATCA & the IGAs given the election of Donald Trump and the positions regarding RBT etc, in the platform of the Republican Party. The nagging question seems to be that if FATCA were rescinded, the IGAs would remain, with FFI’s still on the hook. A rather bizarre situation where countries agree to something not actually rooted in law? Simply absurd and presumably, Congress would take steps (or be reminded to do so) to put the whole business to rest.

Then there is general discussion that includes the reversal of President Obama’s executive agreements. With this we would still have FATCA but no implementing IGAs. Should FFI’s pass private banking information directly to the IRS sans the IGAs, they would be in violation of the privacy laws of many countries. With (more) lawsuits certain to follow.

All of this brings to mind another nagging question, and that is, just exactly what are the IGA’s? The Canadian government claimed ithe IGA was a Treaty, and accepted it as such. The U.S. did not have it ratified by 2/3 of the Senate which is normal procedure there. Professor Allison Christians has long indicated they are actually sole executive agreements with “dubious legal status.” Other interesting perspectives are offered here.

Of course, the original overall objection to the IGA’s is that they are hardly agreements; they are documents where the U.S. inflicts its will on all 192 countries of the world; incurs no cost for doing so and while mitigated, the 30% withholding remains.

It may be very useful to review all that is involved in Professor Christians’ viewpoint so that any future action ensures complete finality to these abominable and odious “agreements.”

*******

This appeared at the Isaac Brock Society on July 4, 2014 and was cross-posted with permission from Prof. Christians’ blog

I saw the letter referenced below on Jack Townsend’s site and included Professor Christians in a tweet questioning the validity of the IRS’arguments regarding IGA’s. I am delighted to see she has taken this further and posted the following today on her blog.

 
allison_christians_2012_150x225

Over at federal tax crimes blog Jack Townsend has posted a letter from the IRS to Congressman Bill Posey, in response to an inquiry the Congressman apparently made about the intergovernmental agreements (“IGAs”) to implement FATCA by other governments (instead of directly by foreign financial institutions, per the law Congress enacted in 2010). Treasury says:

“Your letter also asks about statutory authority to enter into and implement the IGAs. The United States relies, among other things, on the following authorities to enter into and implement the IGAs: 22 USC Section 2656; Internal Revenue Code Sections 1471, 1474(f), 6011, and 6103(k)(4) and Subtitle F, Chapter 61, Subchapter A, Part III, Subpart B (Information Concerning Transactions with Other Persons).”

None of these sources of law contain any authorization to enter into or implement the IGAs. It is patently clear that no such authorization has been made by Congress, and that the IGAs are sole executive agreements entered into by the executive branch on its own under its “plenary executive authority”. As such the agreements are constitutionally suspect because they do not accord with the delineated treaty power set forth in Article II. As Michael Ramsey wrote in a 1998 article, the danger is that if the president seeks to reach agreements outside of his plenary constitutional powers, the agreement lacks domestic legal effect.

Just to be clear, the fact that a document signed by an individual might or might not bind the United States as a matter of constitutional law does not mean that the United States will not honor whatever commitments the individual makes under such an agreement. The contrary is likely the case especially given the predicament Treasury found itself in, coupled with the pitiable small promises undertaken by the US in these “agreements.”

But we should be clear that the analytical terrain we should be traversing is whether the scope of the plenary executive authority can suffice to support as a matter of law the promises made in some 80 or so IGAs (many of which are currently agreements in principle only). We should not be wasting anyone’s time pretending that Congress has authorized Treasury or the Secretary of State to enter into the IGAs. It has not.

So let’s take a look at what these sources actually say.

22 USC 2656 is about the power of the secretary of state. It says:

The Secretary of State shall perform such duties as shall from time to time be enjoined on or intrusted to him by the President relative to correspondences, commissions, or instructions to or with public ministers or consuls from the United States, or to negotiations with public ministers from foreign states or princes, or to memorials or other applications from foreign public ministers or other foreigners, or to such other matters respecting foreign affairs as the President of the United States shall assign to the Department, and he shall conduct the business of the Department in such manner as the President shall direct.
If that is an authorization for the IGAs, it is a vague one at best. Does an IGA constitute “correspondences, commissions, or instructions,” “negotiations”, “memorials or other applications,” or “such other matters respecting foreign affairs”? Under what interpretation of such relevant provisions? Also there is nothing here about the content or scope of the treaty power hereby implicitly authorized. Is IRS saying that with this power the Secretary of State can bind the nation at will on any matter, without the need for the President to seek advice and consent from the Senate prior to ratification? If so this is an extraordinary claim that does not scan with either historical practice or constitutional theory.

26 U.S. Code § 1471 is, of course, part of FATCA. It is entitled “Withholdable payments to foreign financial institutions”. It sets out the reporting obligations imposed on foreign financial institutions and states that the Secretary is authorized to treat a foreign financial institution as “meeting the requirements” of 1471 if the institutions complies with procedures or requirements set forth by the Secretary or is “a member of a class of institutions” identified by the Secretary.

There is explicit authorization in 1471 for the Secretary to engage in agreements with FFIs to implement FATCA. However where is the authorization in 1471 for the Secretary to engage in agreements with other countries to implement FATCA? It is not in the text, certainly.

Therefore to what specific provision of 1471 could IRS possibly refer when it suggests this statute authorizes individuals to sign agreements altering the reach of FATCA on behalf of the United States? There is clearly no explicit authority. Is it implied? If so, by what?

Moreover, many or most of the IGAs have been signed by officers of the Secretary of State, ambassadors, consulates general and others, and not by Treasury. Does s1471 also impliedly delegate its implied treaty power authority to those outside of Treasury who have signed on behalf of the United States? Certainly there is no explicit delegation here.

26 U.S. Code §1474(f), also part of FATCA, is the statutory authorization for the Secretary of the Treasury to
“prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of, and prevent the avoidance of, this chapter.”
There is no authority expressed in this provision for the Secretary to enter into agreements with other governments. Does IRS suggest that an IGA constitutes “regulations” or “other guidance”? Under what interpretation of that characterization does the Treasury interpret the promulgation of either regulations or other guidance as an authorization to negotiate an agreement with a foreign government?

26 U.S. Code § 6011 is entitled “General requirement of return, statement, or list,” and it states the parameters under which a person must make a return “[w]hen required by regulations prescribed by the Secretary.” There is authorization in 6011 for the Secretary to require taxpayers to fulfill various reporting requirements, including electronic reporting. There is no authorization in 6011 for the Secretary to engage in agreements with other countries to implement 6011.

What provision of 6011 is IRS suggesting confers the authority to negotiate agreements with other governments without Senate advice and consent? Does IRS mean to imply that each and every authorization that Congress gives Treasury for the prescription of regulations is an implicit authorization for Treasury (or its implied designees in other departments) to conclude agreements with other governments? If so, this is a surprising claim of executive power that is inconsistent with the treaty power described in Article II of the constitution. I would think Congress would like to know under what interpretation of Congressional direction to the Secretary to issue guidance, IRS or Treasury would conclude that it now holds the power to make treaties on behalf of the United States.

In other words, if IRS stands by this authorization it is suggesting that any tax code section that authorizes Treasury to regulate implicitly contains both a treaty making power as well as the power to delegate authority to departments other than that specifically charged with implementing the statute. That is not a plausible claim.

26 U.S. Code § 6103 is entitled “Confidentiality and disclosure of returns and return information” and it provides that “returns and return information shall be confidential,” with exceptions provided by statute. There is authorization in 6103 for the Secretary to engage in agreements with taxpayers to implement 6103 (for example in the case of advance pricing agreements). There is no authorization in 6103 for the Secretary to engage in agreements with other countries to implement 6103. Therefore, as with 1471 and 6011, to what specific provision of 6103 does IRS refer, and under what interpretation of the authority given by Congress in 6103 to enter into agreements with taxpayers does IRS find the authority for anyone to enter into agreements with other countries?

26 U.S. Code Part III, Subpart B is entitled “Information Concerning Transactions With Other Persons” and it contains 26 US Code §§ 6041 through 6050W—a very broad set of statutes involving information reporting, none of which explicitly grant anyone the power to bind the nation to anything. Certainly nowhere in the subpart appears any express authorization for Treasury to enter into agreements with other governments in respect of s1471 or otherwise. Therefore the same questions I have raised with respect to 1471, 1474, 6011, and 6103 would seem to arise here.

In short I see no express authorization anywhere in any of these authorities for the Treasury to enter into the intergovernmental agreements. Moreover there is no precedent for such agreements, and they are being signed by US officials who are not members of the Treasury. Does it not seem at least noteworthy that an enormous network of bilateral tax agreements has been established, a network that dwarfs the existing tax treaty network in size and scope, all without any explicit Congressional authorization, and without any regard to the Treaty power clearly laid out in Article II of the Constitution?

And why not cite the TIEA power?

I would add that is not at all clear why any list of authorizations for an individual to enter into agreements with other governments on behalf of the United States would not include 26 US Code § 274(h)(6)(C)(f), which has long been relied upon to by Treasury to find the authority to enter into tax information exchange agreements (“TIEAs”) that were not expressly authorized by the statute (because they are not listed in Section 274 as beneficiary Caribbean Basin countries). This statute has clearly been abused by Treasury in extending it way beyond what Congress intended. However, the fact that Congress has not complained suggests that it has acquiesced to the overreach.

That makes the TIEAs good precedent for those who want to defend the IGAs as a matter of law. In omitting this, the only plausible source of support for the authority to bind the nation without the advice and consent of Senate, does IRS suggest that Treasury now backs away from this authority? If so, why would they do that? The answer is of course that IRS believes that if necessary the TIEAs can also be considered sole executive agreements, and as such a TIEA “does not need Senate or other congressional approval.” This is an official claim that the IRS doesn’t think Treasury or anyone needs even s.274 as a cover: the executive can simply act alone to achieve its tax goals through international agreements.

At the end of the day, it is clear that Treasury saw a real and serious need to work with other governments to make FATCA work. There is no disputing that fact, and indeed it is a step toward multilateral cooperation which should be celebrated if only it weren’t so lopsided, and if only it weren’t being accomplished via the threat of economic sanctions for all the world’s tax havens except the United States itself. But no amount of need or want can sidestep the constitutional delegation of powers among the branches, and the treaty power is no exception: nor should it be. At least one Treasury official has already conceded that the explanation for the IGAs is that they are “executive agreements”, not Article II treaties.

IRS and Treasury should therefore just admit that the IGAs are simply “sole” executive agreements—not authorized by Congress but entered into by the executive branch under its sole discretion.

This is a tenuous position and it ought to fail constitutional scrutiny but for the fact that in the past, Congress has acquiesced to this exercise of power by the executive and it is likely to do so again, especially given how little has been undertaken by the United States in these IGAs. As Lee Sheppard pointed out in a Tax Notes article two years ago, “An executive agreement depends on the good will of the parties to enforce it.” And as Susie Morse also pointed out in Tax Notes last year, Treasury is very likely to try to enforce their part of the IGAs.

Since the US side of the IGAs is to deliver very modest undertakings that Treasury also believes can be done without congressional approval (namely, extending the longstanding s. 6049-based information exchange with Canada to other countries), this is probably true; all IGA promises to alter the law in the future should be seen as what they are, unenforceable promises that are beyond Treasury’s control and so won’t be delivered.

Therefore honesty is still the best policy for Treasury. Instead of citing non-existent statutory authority that is easily refuted by simple reading, Treasury should own what it is doing outright. These are sole executive agreements, they lack statutory approval, they undertake very little on the part of the United States, but they are an effective way of pretending to be cooperative so that other countries can save face as they submit to the threat of economic sanctions that is FATCA. There isn’t really any reason why Treasury shouldn’t acknowledge this reality, since it is, strictly speaking, of Congress’ own making.
Posted by Allison Christians at 8:34 PM

How the “assistance in collection” provisions in the Canada US Tax Treaty facilitates “US citizenship based taxation”

cross-posted from Citizenshipsolutions

The above tweet references the comment I left on an article titled: ”

Why is the IRS Collecting Taxes for Denmark?

which appeared at the “Procedurally Speaking” blog.

The article is about the “assistance in collection” provision which is found in 5 U.S. Tax Treaties (which include: Canada, Denmark, Sweden, France and the Netherlands). I am particularly interested in this because of a recent post at the Isaac Brock Society.

This post discusses the “assistance in collection” provision found in Article XXVI A of the Canada U.S. Tax Treaty. The full test of this article is:

Continue reading “How the “assistance in collection” provisions in the Canada US Tax Treaty facilitates “US citizenship based taxation””

Principles of Treasury’s (reserve currency) War used by private plaintiffs – U.S. law determines who non-U.S. banks can do business with

 
I was reading an article this evening which reminded me I had never taken the time to really learn what was involved after World War II and the Bretton Woods. I need to trace back to a point before the IMF and the OECD were involved in developing globalization policy, especially when countries sign onto these rather than being the originators of the policies. At any rate, talk about procrastination, the post I had intended to read was put up 2 years ago! However, the more one delves into all the accompanying issues of complying with US tax and reporting requirements, etc, the more one comes into awareness of why the US (thinks) has the power to do what it does.

reposted from the renounceuscitizenship blog
 
Prologue a comment to a blog post from 2014 …
 

Mr Jatras:

Thanks for a great article. You have used FATCA as a particularly egregious example of the propensity of the President to either ignore law or make law himself. The Obama presidency is one characterized by a rogue President who does what he wants, when he wants and to whom he wants.

One interesting example is the recent 10 billion dollar fine which he personally levied against the French Bank BNP. This is described in “The Economist” as follows:

“WHAT is the appropriate penalty for a firm that abets genocide? Roughly a year’s profit and the sacking of a dozen employees, the American authorities concluded this week. At any rate, that is the punishment meted out to BNP Paribas, a French bank that pleaded guilty to helping the Sudanese government sell oil, clearing proceeds through New York in violation of American sanctions. At the time government-backed militias in the region of Darfur were massacring civilians by the tens of thousands.”

What’s interesting that the bank was fined NOT as a result of a direct act of Congress, but as a fine levied as Executive Order 13622, by President Obama himself, found here:

Interestingly, the U.S. is claiming jurisdiction over the French Bank on the basis that the bank was using U.S. dollars.

To put it simply we have a situation where:

1. President Obama decides to impose a 10 billion fine on a French Bank; and

2. He claims jurisdiction over the bank on the basis that the bank was using U.S. dollars.

Leaving aside the troubling issue of Obama acting as though he is a “law unto himself”, it is obvious that the U.S. can no longer be trusted enough for the USD to be the main reserve currency. The erosion of the status of the USD is well under way.

The threat of FATCA sanctions levied at non-U.S. banks will exacerbate that trend.

Thanks again for a great article!
 
How the U.S. uses the dollar as to regulate foreign banks by “its very nature benefit U.S. citizens

The above tweet references an article that is of interest because it demonstrates the extension of Treasury’s War to a private plaintiff. It demonstrates how (as per Cook v. Tait) the U.S. government “by its very nature benefits its citizens“.

In other words if:

1. U.S. law prohibits a non-U.S. bank from performing certain acts or dealing with certain people.

2. That bank performs an act that U.S. law prohibits

Then,

That bank is liable to a private “U.S. citizen” plaintiff for damages.

The article includes the following:

In a unanimous verdict late Monday, a federal jury agreed that Jordan-based Arab Bank violated U.S. anti-terrorism laws in conducting business with Hamas-linked “charities.”
 
Some Israelis refer to Arab Bank as the “Grand Central Station of terrorist financing.”

It is the first case that successfully employed the strategy of going after terrorists by suing a major bank that allegedly did business with them. More than 300 U.S. nationals were part of the landmark terrorism trial that began last month in New York.

Some Israelis refer to Arab Bank as the “Grand Central Station of terrorist financing.” The plaintiffs or their family members were injured or killed in terrorist attacks while visiting Israel between 2000 and 2005 during the second intifada or Palestinian uprising.

Arab Bank Accused of Helping Reward Hamas Suicide Bombers in Terrorism Case

 
In finding the bank guilty of violating anti-terrorism laws by providing material support to Hamas, jurors rejected Arab Bank’s key defense that it had no way to know some of its clients were using its accounts to provide payoffs for terrorist acts.
 
Nobody likes violence, but …

I suggest that there is a broader principle at play here. Can the U.S. government be permitted to regulate the conduct of foreign banks? In his book, “Treasury’s War“, Juan Zarate details how the U.S. government, rather than going after the “bad guys”, goes after those who do business with the “bad guys”.

The jurisdictional basis for the U.S. Government asserting jurisdiction over non-U.S. banks
 
Now, any “right thinking” person would wonder:

How can the U.S. government regulate foreign banks?

How can the U.S. government imagine that it can impose FATCA on the world and use FATCA Sanctions as an instrument of foreign policy?
 
The answer is … It’s about the “reserve currency stupid!”
 


 
Once upon a time, Circa 1944, when the U.S. government had a reasonable “moral status, before law had become a substitute for morality, the Bretton Woods Conference made the U.S. dollar the world’s primary reserve currency.
 
A bit of history – once upon a time in “reserve currency land …
 
On of the 70th anniversary of the July 1, 1944 Bretton Woods conference – the landmark gathering that created the International Monetary Fund (IMF), the World Bank and later the World Trade Organization (WTO) – it’s hard to know whether it’s the best or worst of times for multilateralism.

Bottom line – On July 1, 1944 the U.S. dollar became the world’s primary reserve currency. Until it is replaced (which is coming) the U.S. dollar is and will be the oxygen of the financial system.

Countries need access to the U.S. dollar which allows the U.S. government to abuse that need. If you want to use our dollar, then you must do what we want! If you use our dollar and violate our laws, we will punish you.


 
@MiaChupacabra @USCitizenAbroad Here is a little exec order for the new President of France http://t.co/t9bp9q7zow
 
BancdelAsteroideB612 (@BancB612) July 1, 2014
One of the most egregious examples of the U.S. abusing the status of the dollar as the primary reserve currency is the case of the French Bank PNB Paribas. This bank was subjected to a 9.9 billion dollar fine, by a U.S. law that allowed President Obama to be a “law unto himself”. In others words, the fine was effectively levied by Obama.
 

If you have this far in the post, you really need to read the “Economist article” which is referenced in the above tweet.

Of note is the following comment to the article:

America is playing a very dangerous game indeed.It currently has the “exorbitant privilege” of having the worlds reserve currency. The economic dominance that made this so is already declining. By running this sort of extortion racket it is making is more and more likely that the world will move to a different reserve currency – very likely an internationally agreed artificial currency. Then the USA will find that international trading carefully avoids any contamination with the USA. New big international banks will rise which deliberately decide not to have a US banking license.

America will rue the way it threw away its advantage.

A law made by Congress is bad enough, but an order made by President is unjustifiable. It’s not about the law, it’s about Executive Order 13622

On July 31, 2012, President Obama issued Executive Order (E.O.) 13622, “Authorizing Additional Sanctions with Respect to Iran.” The E.O. authorizes Treasury to impose new financial sanctions on foreign financial institutions found to have knowingly conducted or facilitated certain significant financial transactions with the National Iranian Oil Company (NIOC) or Naftiran Intertrade Company (NICO), or any entities owned, controlled by, or acting on behalf of NIOC or NICO, for the purchase or acquisition of petroleum, petroleum products, or petrochemical products from Iran. These entities would be prohibited from opening or maintaining correspondent or payable-through accounts in the U.S. In addition, the E.O. authorizes Treasury to block the property and interests in property of any person determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, NIOC, NICO, or the Central Bank of Iran, or the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran.

Because OFAC has not issued corresponding regulations including general licenses, a number of typically generally licensed activities if conducted with NIOC, NICO and the Central Bank of Iran can now result in sanctionable activity. For example, specific authorization is now needed from OFAC before any person provides mail or telecommunications services to NIOC, NICO, or the Central Bank of Iran. Additionally, any intellectual property claims involving these entities also must be specifically licensed by OFAC – as must the provision of legal services. While these changes again reshape the sanctions landscape with respect to Iran, companies cannot expect a lengthy compliance grace period. Companies must therefore act quickly to assess their current operations, including those of their foreign subsidiaries and affiliates, and develop immediate plans to bring themselves into compliance. Given the lack of corresponding regulations, when in doubt, it may be appropriate to file requests for guidance and specific authorizations.

Are You at Risk Under Dramatic Expansion of US Sanctions Against Iran and Syria?”

For the complete text of Executive Order 13622:

Executive Order 13622

And finally …

We now have proof that the “U.S. government by its very nature benefits its citizens.

Why?

Because if a foreign bank, does something the U.S. government doesn’t like, and a U.S. citizen believes he has been damaged by that act:

The U.S. citizen can sue the foreign bank!