FATCA makes moving funds overseas and offshore a precarious decision.
Jeffrey S. Freeman, J.D., LL.M
FATCA has introduced challenges for banks and financial institutions, but they are not the only ones impacted by this new regulation. U.S. bank account holders have found themselves kicked out of banks and unable to open bank accounts. Where should they take their bank accounts?
Additional regulations may make it harder to find a location for your foreign offshore funds. The final and temporary FATCA regulations prohibit limited Foreign Financial Institutions (FFIs) and limited branches from opening new U.S accounts or transferring from other members of an expanded affiliate group (EAG). A limited FFI or branch cannot fully comply with FATCA in their local jurisdiction and are part of an EAG with FFIs that can otherwise comply with FATCA. In a notice issued by the IRS on May 4, 2014 these restrictions were modified to allow local residents to be able to open U.S bank accounts at the limited FFIs or limited branch as long as the account is not used at another FFI in the EAG. These complex regulations all have one underlying purpose, to try to ensure that individuals are not able to circumvent FATCA by transferring funds from one institution to another regardless of location.
As you are determining where to move your funds, you should also be aware of the tax implications. Do you have any undisclosed foreign offshore bank accounts including any foreign bank accounts, retirement accounts, un-segregated gold or precious metal accounts, or insurance products? Now would is the perfect opportunity to take advantage of the Offshore Voluntary Disclosure Program (OVDP) to come into compliance.
With FATCA the IRS is able to track the opening of your new bank account and you better believe they are going to be looking into where those funds were located before. Consider talking with a legal professional with tax compliance experience before making any changes to your accounts or to discuss your past tax compliance.
About Freeman Tax Law
Freeman Tax Law is a boutique tax law firm with national exposure with the expertise and professional staff equipped to handle all domestic and international tax law matters. Freeman Tax Law regularly represents clients in disclosures to the IRS. Our firm also routinely advises banks and financial institutions on how to comply with FATCA and works with consulting/technology firms to implement systems for FFIs. In addition to handling complex tax controversies, the Freeman Tax Law team has extensive expertise in assisting clients with wealth management and estate planning.
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