The Foreign Account Tax Compliance Act (FATCA) mandates that required U.S. taxpayers, including those living outside of the United States report their financial accounts held outside of the United States. It also requires foreign financial institutions report information to the IRS about their U.S. clients. The U.S. is also in pursuit of Intergovernmental Agreements with other countries to make sure that the requirements of FATCA are carried out by foreign financial institutions. FATCA was passed on March 18, 2010 as an amendment to an appropriations bill known as the HIRE Act.
FATCA has three main provisions:
Armed with new weapons to make foreign governments and financial institutions comply, the Departments of Treasury and Justice wasted no time in testing out their new powers. The first target was the most obvious – Switzerland. UBS was the target of an aggressive enforcement action. In the end, UBS was forced to turn over the names and information of 4,000 U.S. taxpayers. In order to settle a corporate criminal action for failure to comply, UBS paid a $780 million dollar fine. Switzerland’s oldest bank, Wegelin & Co. faired far worse. It paid only $74 million in fines, restitution and forfeitures, but it was dealt the death penalty when its board agreed to cease to do business to avoid criminal liability. In August of 2013, to avoid further prosecutions the United States and Switzerland signed an agreement that provides for fines in exchange for non-prosecution agreements for banks that have facilitated American tax evasion. Given the success in shutting down the Switzerland offshore banking industry for U.S. taxpayers, it is believed that Treasury and Justice will be launching its next assault on Israel and the Caribbean.
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