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Guess who folded now?

February 27, 2012
Talca, Chile

Banking privacy is dead. Completely, totally dead. Murdered, really. The US government is the assailant, and FATCA is the murder weapon.

We’ve talked about this a few times before– FATCA is the heinously insidiously piece of legislation that the Honorable Barrack Hussein Obama passed into law in 2010 as part of the “Hiring Incentives to Restore Employment Act”.

There were no hiring incentives, and there was no restoration of employment. But any vestiges of banking privacy were destroyed.

In brief, FATCA has two key concepts. First, it requires an additional (and completely unnecessary) layer of reporting from all US taxpayers who have ‘foreign financial accounts’ at ‘foreign financial institutions.’ Though as we have discussed before, both of these critical terms are ridiculously and flagrantly ambiguous, putting the onus entirely on the taxpayer.

Without clarifying what constitutes foreign financial accounts and institutions, Congress has effectively created decades of debate in tax court… a move that will undoubtedly ruin the lives of the unfortunate folks who get dragged into the fight.

The second key issue is that FATCA puts a burden on ALL foreign financial institutions worldwide to enter into an information-sharing agreement with the IRS; this essentially obliges every bank on the planet to submit reports and customers’ private data to the IRS.

Banks who don’t enter into this information sharing agreement will have a 30% tax withheld on funds that originate from, or go through, the US banking system. Further, banks who enter into the information sharing agreement are obliged to withhold the 30% tax on transfers to other banks who do NOT enter into the agreement.

Such provisions are absolutely, 100% impossible. And it’s becoming clear that FATCA was passed with no intention of being enforceable. It’s inconceivable that every institution on the planet could enter into an agreement. And it’s inconceivable that every institution on the planet could possibly know whether every other institution has entered into the agreement.

The only thing FATCA has accomplished is scaring the living daylights out of non-US banks. So much so that foreign banks have approached their governments to ask for help.

As I wrote last week, in order to dull the effect of FATCA in their countries, the governments of Spain, Italy, Germany, France, and the United Kingdom recently announced that they were entering into inter-governmental information sharing agreements.  Individual banks will no longer have to comply with the IRS, but instead share all with their home governments.

In other words, French banks will report to the French government, US banks will report to the US government, and the two governments will swap data.

It’s no small coincidence that the first signatories to such an inter-governmental sharing agreement are five of the largest (albeit most insolvent) countries on the planet, forming the core of the OECD. Now it’s only a matter of time for smaller nations to fall in line.

Last Friday, Isle of Man became the first. Treasury Minister Eddie Teare announced that “the inter-governmental partnership approach announced by the US, France, Germany, Italy, Spain and the UK should be explored by the Isle of Man Government” and that a “high-level FATCA working party has already been formed.”

With Isle of Man laying down, we can expect places like the Channel Islands, BVI, Cayman, Bermuda, Mauritius, and other popular offshore banking jurisdictions to sign up next.

There are two key points I’d like to make here-

1) There is no such thing as banking privacy. Do not trust your banker to keep secrets for you, and definitely do not trust a government-regulated banking system to keep secrets for you. If you have undeclared income that’s been nestled offshore, it should be obvious at this point that such arrangements will soon unravel.

Voluntary disclosure is always better than getting caught by your home government’s tax authorities. And, especially if you’re a US citizen where tax noncompliance is a criminal offense, paying hefty penalties is a much better outcome than going to court and ending up in a day-glow orange jumpsuit.

2) Most people who are interested in financial privacy tend to use cash. But since carrying large amounts of cash is more and more being criminalized (and confiscated), this is no longer a viable option.

The best form of financial privacy at the moment is physical gold, at least until a better option for digital currency hits the market. Gold may not be useful for day-to-day transactions, but as a store of value tucked away in an anonymous offshore facility, there is no better way of maintaining financial privacy.

Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens.

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About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

Comments on this entry are closed.

  • http://pulse.yahoo.com/_OAQ25QG5MNMGUNXFO3JQW4TKBE jake garciaparra

    I wonder if places like China would actually comply with the US government. It seems like the rift b/w China and the US is steadily growing, particularly with their opposite stances on Iran. 

    • https://twitter.com/quant18 Eric

      Chinese media reported that Beijing and DC are in talks for a FATCA agreement along the lines of the 5-country EU deal. However anything that they do won’t likely cover Hong Kong. HK’s government does not seem enthusiastic on a government-to-government deal. HK’s financial services & treasury secretary is going to DC next month so we’ll see what happens then.

      • LWL

         Remember Billary and her give-away to China…

    • Owend

       My guess is probably not. And what about Dubai? Curious that no one ever mentions Dubai at all. Seems to me that there may be some holdouts after all.

  • http://twitter.com/buysilvervsgold The Silver Advocate

    Even more interest in Gold… wonder how the precious metal will do this year… 11 years with gains between 10 and 18% – interesting times we live in !

  • Bitcoin


  • Bud

    With the virtual, financial “Berlin Wall” our feral gummint has built around the U.S., what good are offshore precious metals?  You can’t get money out to buy them offshore. you can’t move them offshore, and if you had them offshore, you couldn’t get them or their value in gummint funny money into the U.S.  Looks to me like the answer is to clean out that cesspool in DC, and take control of our country from the out-of-control NWO bootlickers that now run it.  Bailing out sounds SO wonderful, but why should the REAL Americans leave everything they’ve worked for, including property and relatives, when it’s the Marxist/socialist leeches that should get out.  Run them out.  Don’t allow them to run you out.

    • Steve

      That is the answer for most of us.  We just need to wait for disaster to strike to wake up the silent majority.  A new improved and stronger constitution is needed.

      • LWL

         The CONSTITUTIONIS JUST FINE the way it is! Its the complete disregard for it that leaves us here holding are arses and running away…Im already ‘out’ , but its here too. Kintrol of the planet NWPO agenda , etc, its working unless you Americans send ALL of the rascals packing. Start over, clean house…you cant make a silk purse out of a sows ear, mom used to say. You cant pour wine into old wineskins-they will burst! The best and only way to change things is to clean out the whole DC arena, district of criminals. But Im just dreaming….of a better world where the people of a country actually govern themselves .

  • John Conners

    Last week Sovereign Man posted an article entitled “Freedom*”.  I saw a great article today about a former government employee named Thomas A. Drake.  The US administration had charged with 10 felony counts, punishable by up to 35 years in prison, under the Espionage Act.  His crime: being a whistleblower about wasteful spending and the invasion of privacy by the federal government.

  • curiouser-and-curiouser

    Other than the overall message of this post, that privacy has been all but destroyed, these are the most important statements:

    “Most people who are interested in financial privacy tend to use cash. But since carrying large amounts of cash is more and more being criminalized (and confiscated), this is no longer a viable option.”

    “The best form of financial privacy at the moment is physical gold … Gold may not be useful for day-to-day transactions”

    So there really is no way to conduct business privately these days anywhere in the world?  I can’t use cash except in small amounts (under $10,000) and I can’t use gold.

    @jake – even if China and Russia, both of whom seem to be losing patience with many US policies, won’t honor the FATCA rules, I’m not moving to China or Russia! Since I never plan to live there then what is the point in stashing money there?

  • VoxFox

    What do you have to hide?

    • Sandjstilesco

      Do you work for a union?

    • Sandjstilesco

      Do you work for a union?

    • Darsco3

      let me search your home, what do you have to hide? you lose nothing but your freedom.

    • Rob Nabakowski

      This person does not cherish freedom.  

  • Carmichael0179

    Why not consider holding diamonds in addtion to, or as an alternative to Gold? It’s easier to transport and store high carat diamonds than bricks of gold.

    • Eric

       The Diamond Supply is controlled by the DeBeers.  They have tons of diamonds in reserve.  They control the diamond market to the extent of…well, they’re comparable to the Fed.

      So, yeah, diamonds are good as long as the DeBeers decide they’re good.

  • NYDB

    The more of this the USA does, the more it makes me want to renounce my US citizenship.  I had better get right on that second passport ASAP…

    This kind of “control freak” legislation ALWAYS has unintended
    consequences.  What if some of these countries engage in economic
    retaliation?  [A person with a sharp mind can come up with a few
    frightening scenarios.]

    I guess the only way to maintain some semblance of privacy these days is to not use banks– (maybe for moving money around, but never keep the bulk of your assets in any bank anywhere– even offshore.)  Gold and other high-value precious metals appear to be at least one way one can maintain privacy, but I am certain “they” (whomever “they” are) have plans to frustrate this activity as well.

  • KenJaff3


  • German thinker

    First the US sold us killing the Native Americans as liberty, than the sold us slavery as liberty, then the sold us making war all around the world and killing millions of people and destroying their property as liberty, then they sold us poisoning children with tobacco smoke as liberty and now they are selling us the police state and total government control as liberty. And not to forget to mention the feminist movement, based in the US, that thinks freedom is to fight against men and destroy their life is the real liberty. Yeah, I have to admit, the USA is the real motor of liberty and always was like this. 
    But do you know what, people and the nature are much better off without the US and the “American way of live”!
    We give a shit about your “liberty”-propaganda!

    • Roger

      That is not liberty,but tyranny!

    • kitty

       You forgot to add the set-up and support of Nazis, Fascists and Communists in the early 20th century.

      I lived in this nation of psychopaths and narcissists for half a century.   It is not only just the leadership and celebrities but also the people who are responsible for this.  

      I live in Eastern Europe and have had the pleasure of encountering people from all over the world who have been quite frank with me in discussing their life under authoritarian regimes.  I cannot see much difference in life in America and under Soviet occupation except that America has a prettier facade.   That facade is what Americans use to attract people into their ‘force field’. 

      I was called a ‘washed Russian’ to my face there.  I had no valid response to that generalization.   I have to make it clear by my own conduct that I am not like that and that I am trustworthy.

      It is quite a task.

  • li_bri

    Do foreign banks need to report NON-U.S. Citizens to the IRS?  For example, if Dave is a citizen of Belize, he banks in Belize, and Dave is NOT a U.S. Citizen, does the Belize bank have to tell the IRS about Dave’s account?   How about countries that have layed-down for the IRS; are they reporting their citizens data to the IRS even if those customers are not U.S. Citizens? Anyone know?

    • amerikanka

      I don’t understand – why would the Internal Revenue Service be interested in the bank account of a non-US citizen? Am I missing something here? 

      • li_bri

        I don’t know why they would, but I’m still wondering if the information is shared anyway.

      • amerikanka

        The IRS already has 350 million citizens to collect from and worry about, some of whom, like myself, hold funds in a foreign bank account. If foreign banks and governments see some reason to share this information, I’m moving to the moon!

      • li_bri

         I hear ya.

      • disqus_TLcMqwnySr

        Keeping tabs on ‘terrorism’ is just one reason, and politicians have very vivid imaginations.

  • Obhtpc

    A “taxpayer” is a defined term in the Internal Revenue Code as someone who “subject to” or “liable for” the “Income Tax”. All liabilities within the Internal Revenue laws are based on being a “taxpayer”. Now,if you can find any place within the IRC that makes you “liable for” or “subject to” the Income Tax and hence, a “taxpayer” I challenge you to post them here. Unless you receive direct payments from the Federal Government or are involved in an excise taxable activity like manufacturing cigarettes, I’ll bet my net worth that you can’t.

  • Bitcoin

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  • Chumchingee

    Wake up. The banks have been sharing your information with Medicare, Medicaid for at least 20 years now. Lord only knows who else they share your information with. IRS is just the tip of the iceberg here.
    Anyone that thinks precious metals are a good investment should look at the Hunt Family and what happened to Silver when the government took over. Changing the market rules is going to be the downfall of Silver and Gold in the near future.
    The pure mass of information being processed is incredible. Control of that information is what is fantastic. I cannot even conceive of a system able to control all that information, yet they do.

  • http://oikonomikablog.pblogs.gr/ Chrys Aureus
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