Idea that SCE would encourage FFIs currently not doing business with US citizens 2 change their stance is laughable. https://t.co/2SGecl0d7F
— 🇨🇦Patricia Moon⚾ (@nobledreamer16) May 6, 2017
To me, the idea that the SCE would encourage FFIs currently not doing business with US citizens to change their stance is laughable. In the UK, about 40-50% of online brokers have blanket bans on US citizens. If the real issue was the reportability of the account, you would see at least some online brokers refusing to offer reportable accounts but offering non-reportable accounts (eg ISAs). I didn’t find any online brokers that offered non-reportable accounts when they didn’t offer reportable accounts. To me this suggests that the issue driving whether or not they service US citizen customers is not the reportability per se, but rather the risk that a single incorrectly reported account can put them on the non-compliant list.
That risk is not insignificant and for most FFIs would be devastating. Through FATCA, the US has given itself enormous power over the global financial system and the US has the “right” and the ability to inflict, at a minimum, grave financial harm if not bankruptcy if they so desire on any FFI in the world if they serve US citizen customers. FFIs are generally investing customer assets not their own and “withholding” 30% of the interest income, dividend income, proceeds of sale or redemption of principal on their customer assets will create an enormous liability vis a vis their customers that the FFI’s equity will be unable to cover or only temporarily. Furthermore, FATCA is designed to isolate any FFI deemed non-compliant by forcing all compliant FFIs to report every transaction with a non-compliant FFI. A non-compliant FFI is likely to see a) no compliant FFI willing to do business with them b) all customers with US invested assets leave them for a compliant FFI and c) an enormous liability to replace “withheld” customer income and assets. I’m also not aware of any mechanism whereby the FFI can reclaim the “withholding”. If true, then it’s a system to steal the underlying customer assets of non-compliant FFIs.
Now, which FFI having previously decided the systemic risk of having US citizen customers was too great and having seen the US treat FFIs like piggy banks to break in case of emergency, would like to place their neck in the guillotine and offer same country exception accounts by introducing new procedures to verify customer residency? Anyone? Bueller? Yeah, I didn’t think so.