Banks in the Caribbean are trying to band together to fight the imposition of a new rule from the United States government that would force the banks to turn over information that would identify U.S. taypayers trying to hide money in the Caribbean to avoid paying U.S. taxes.
According to the Jamaica Observer, the banks are looking to the Jamaican government and other Caribbean governments to fight the U.S. rules on their behalf. If they aren’t successful in stopping implementation of the new rules, which are known as the Foreign Account Tax Compliance Act (Fatca), the banks would be required to turn over client information to the U.S. starting in 2013.
Representatives of the Caribbean Association of Banks (CAB) are holding a conference in November where they hope to develop a regional stance on the new rules to enable them to fight the rules more effectively.
“The conference offers an opportunity for the first time for regional banks and financial institutions to come together on this issue, so that we may now know where we are in terms of Fatca,” Tasha Manley, chief compliance officer at Jamaica National Building Society (JN), told the Jamaica Observer. “We hope to have this issue addressed and discussed by all, in terms of coming to a united stance on where we go.”
Officials in the banking industry were hoping that the Jamaican government could initiate the same sort of discussions that the U.S. has been having with the UK, France, Germany, Italy and Spain to establish reciprocal arrangements that will help the banks deal with the new reporting rules.
If the financial institutions don’t come up with a solution by next June 30, they could face face the termination of correspondent banking relationships in the U.S. and internationally, which would prove to be crippling.
“The position of Jamaica National, is the same as every financial institution in Jamaica,” said Carlton Barclay, JN deputy general manager and chairman of CAB’s strategic planning and advocacy sub-committee. “In terms of compliance, we have to be preparing to comply. All the requirements, all the system changes, all the reporting requirements, we are preparing to do that.”
He added that banks were doing their part but “nothing else has happened,” referring to government inertia on the issue.
The new Fatca rule is intended to crack down on tax dodgers who hide hundreds of millions of US dollars in offshore accounts annually in an effort to avoid paying taxes—an issue that has become central to the U.S. presidential campaign because multimillionaire Republican candidate Mitt Romney has accounts in several foreign countries to evade tax requirements..
Financial institutions are being asked to report the names and tax identification numbers of “US persons” with balances above $50,000 to the Internal Revenue Service (IRS) if they want to continue doing business with the U.S.