FATCA - 5 jurisdictions agree new bilateral approach

A couple of weeks ago the US Treasury Department said that it was to take a series of measures designed to ease the burden which will be imposed on many financial institutions under the Foreign Account Tax Compliance Act (FATCA), after having faced a barrage of criticism. Yesterday, we saw the first moves towards this, with the announcement of bilateral arrangements with five EU nations (France, Germany, Italy, Spain and the United Kingdom) under which there would be a "new government-to-government framework for implementing FATCA".  The 5 nations will work together with the US to create a means to collect the information from their banks and send it at a governmental level to the United States, rather than each financial institution doing it separately.  Although it is good that the US is apparently trying to respond to the almost overwhelmingly negative feedback from financial institutions affected by FATCA, it remains to be seen how much this new initiative really relieves the burden on banks and trust companies.  The fact remains that the organisations will still have to have mechanisms to track and report on US persons, albeit that the reporting will be to their national government, rather than direct to the US Treasury.

Under the new bilateral arrangements, the US Treasury said the United States would reciprocate by collecting and sharing information with the five participating EU countries about accounts held by their citizens in U.S. financial institutions.  This is doubtless something which will cause consternation amongst US institutions, who may have a taste of the difficulties of complying with such onerous reporting burdens.

Noticeably absent from the initial group of 5 nations who have apparently signed up to the bilateral arrangements were many international banking nations such as Canada, Switzerland, the Netherlands, or any of the offshore financial centres such as Ireland, the Cayman Islands and the Channel Islands.  It remains to be seen whether the US will make efforts to include such territories in similar arrangements in the future, or if in fact this is an attempt further to isolate them.  The jury is still out.