Governments around the world will continue to put significant pressure on financial institutions around the globe to reveal details about their wealthy clients, leaving no stone unturned in the hunt for tax revenue.
“The notion that you can rely on bank secrecy is gone,” Joseph Field, a senior international counsel with Withers Bergman LLP in New York, said in an interview. Field, who advises wealthy families on structuring their financial affairs and estate planning, spoke at the annual national conference of the Society of Trust and Estate Practitioners Canada in Toronto on Monday.
“You can provide for a degree of confidentiality, but clearly people that break the law do so at their own peril, and they’re very likely going to get caught at greater numbers than they use to.”
The combined efforts of inter-governmental bodies such as the Organization for Economic Co-operation and Development and the Financial Action Task Force, as well as the governments of the European Union and the United States, are making sure that transparency will be the key watchword for all future international financial transactions.
The U.S.’s Foreign Accounts Tax Compliance Act, which effectively compels financial institutions around the globe to report on their U.S. account holders, is a fait accompli, Field suggested. FATCA kicks in Jan. 2014.
“People are being bludgeoned into conformity,” he said during his presentation on global wealth and wealth planning at the STEP Canada conference. “There is no choice; it’s simply going to happen.”
Over a dozen countries have already signed inter-governmental agreements with the U.S. to apply FATCA, with another 70 countries, including Canada, working on their own IGAs with the U.S. The intergovernmental agreements do “take some of the sting out of the tail of FATCA” as foreign financial institutions will now be required to report only to their domestic tax agency and not directly to the U.S. Internal Revenue Service.
Field suggested that governments are becoming aggressive in terms of seeking out and punishing those they believe are trying to hide money offshore, and may be in jeopardy of overreaching. He cited a case earlier this year where prosecutors were seeking jail time for a 79-year-old Florida widow who held roughly $40 million in a Swiss bank account. The judge sentenced the woman to a year’s probation, but had harsh words for the government, saying that it was clearly trying to make an example of the wrong person. By the end of reading his decision, the judge had reversed even the one-year probation.
However, there is little hope that U.S. or other global governments will flag in their attempts to shine a strong light in all financial corners, Field suggested.
“If you want to start a private bank today and hide money,” he said, “you better go to Pyongyang [North Korea], cause it’s going to be the only place in the world that will be safe from the prying eyes [of foreign governments].”