Part 1: What God Hath Wrought – The #FATCA Inquisition (Review, Identify and Report on “U.S. Persons”) – “Entity Edition”

Prologue – All non-U.S. “Entities are subject to the FATCA inquisition” …


How the U.K. IGA affects the U.K. PTA …

The online discussion referenced in the above tweet is about a U.K. PTA account. How can FATCA, (like the recent passport revocation bill which is one of the many “Revenue Offshore Provisions” used to target Americans abroad), included to finance the costs of the 2010 HIRE Act, possibly intrude into a U.K. PTA? To be clear, a U.K. PTA is similar to a U.S. PTA. Full details on a UK PTA are here. The information (maybe U.S. Treasury doesn’t believe it) is that a U.K. PTA is a charity and is described as:

A PTA is an excellent way to bring together parents, teachers and your local community to raise money and to support the school. It provides an opportunity for everyone to work together towards a common goal. All parents, teachers and school staff can get involved even if they only have a small amount of time available. Whatever type of association you decide to form, your school will benefit from the additional funds it will raise and the increased opportunity for parents to be more involved in school life.


Yes, this is real. This U.K. PTA has received a FATCA letter. (To understand the implications of the “FATCA Letter” read here.) The poor Treasurer is now required to comply with the FATCA inquisition. It’s obvious she doesn’t understand the letter. It’s obvious she is not confident she can complete it. It’s obvious that she needs professional help to comply with this obscene and unjustifiable intrusion into her life. It’s hard to imagine (for anybody except the U.S. Congress) a U.K, charity being an instrument of tax evasion or any other things that the United States finds objectionable.

Therefore one would ask the question:

Q. How the F___ could this be going on?

A. It’s because the UK PTA is an “Entity” and the USA regards all “Entities” as possible ways for “U.S. Persons” to hide money from the U.S. Treasury. (Is it any wonder that the world is gradually beginning to understand the risks of “Having an American in your business, your family, your life and now even the local PTA”?)

The purpose of the FATCA letter was force the PTA to:

1. Review its membership to identify those members, having an interest in the PTA Bank account that might be “U.S. persons”
2. Identify those members are are “U.S. persons
3. Report those “U.S. persons” to the HSBC Bank for eventual transmission to the IRS.

So, what’s a “U.S. person”?

According to the definition section of the U.S. Canada IGA (here is the U.S. Canada IGA for your reading pleasure):


(The U.K. IGA is more or less the same.)

“ee) The term “U.S. Person” means (1) a U.S. citizen or resident individual,” (and more).

What are the rules for determining whether a carbon life form is a “U.S. citizen”?

“This subparagraph 1(ee) shall be interpreted in accordance with the U.S. Internal Revenue Code.”

This provision:

First, ensures that the United States and the United States alone decides who (including citizens of other nations) are to be defined as “U.S. persons”; and

Second, allows the United States to change the definition of “U.S. Person” at will setting the stage for unilateral expansion of its tax base. (There sure do seem to be a lot of U.S. citizens these days …)

For a comprehensive discussion of the nature of “Who decides who is a U.S. person“? problem see: “FATCA and Extra-territorial Taxation“.

FATCA IGAs, Entities and the difference between “Individual” and “Entity” accounts

In “FATCA Speak” an “Entity” (See the definitions section of the U.S. Canada IGA) is:

“gg) The term “Entity” means a legal person or a legal arrangement such as a trust.”

(What this means is that an “Entity” is a “legal person” (corporation) or “legal arrangement” that is not a “DNA person”.)

An example of an “Entity” would be a corporation. An account held in the name of a corporation will NOT reveal who the shareholders are. As Robert Wood recently explained:

A key element in many tax prosecutions is the use of shell entities and hidden names. Although celebrities have their own reasons to make their financial affairs opaque, some governments now want to infer tax avoidance. In that sense, secrecy itself is under attack. For example, the U.K. has moved to make company ownership entirely transparent. The topic of company ownership transparency is being discussed in Brussels too.

Nominee ownership used to be common. Nominees are straw-men listed as owners or directors of a company, but who are acting on behalf of someone else. This once common device is now often seen as a problem that triggers others. From Spanish and other authorities, the message has been a stern one. Whatever happens in Spain, secrecy and willfulness may be linked like never before.

To put it simply: in order to know who are the real owners of an “Entity” (for example corporations in Delaware, Nevada and South Dakota and other noted tax havens) one must take specific steps to learn who the real owners are.

Coming back to the poor U.K. PTA Treasurer …

She has two distinct problems:

Problem 1:
The problem of being able to understand the form (I am not kidding. Nobody could understand and complete this form without professional advice professional advice from somebody who understands the FATCA forms, definitions and inquisition)

Problem 2: How do we determine whether somebody is a U.S. citizen anyway? “U.S. citizenship” seems to be determined through a combination of the Immigration and Nationality Act and S. 7701(a)(50) of the Internal Revenue Code. The lawyers can’t even agree in some cases on whether somebody is a U.S. citizen for FATCA purposes.

What a nightmare!!! It’s no wonder that CoachBeth (see above) is advocating willful non-compliance! Perhaps the HSBC Bank should be asked to pay for the PTA’s legal costs to complete this form?

What does the FATCA (Review, Identify and Report) “Entity Inquisition” mean for the world as a whole?

Forget about the U.K. PTA. It is just being caught in “Treasury’s FATCA War On The World”. Let’s consider this more broadly. What this means is that by signing the these FATCA (wink, wink) IGAs, countries have agreed to:

1. Force their banks and financial institutions to inquire about the “US indicia” of the known individuals who are listed on the bank accounts.  In this case it is a direct bank to individual inquisition.

2. Force the banks and financial institutions to search for individuals who are unknown to the bank, by forcing representatives of “Entities” to search through their beneficial owners for possible “US indicia”. If  found,  that “US indicia” is to be reported to the banks.

The “FATCA Entity Inquisition” has raised “FATCA Hunt” to a new and even more dangerous level!

When it comes to the “FATCA Entity Hunt”  it is no longer the bank making inquiries of the individuals. It is the representatives of the Entities – the business partners, friends, neighbors, who are making inquiries about possible “US indicia”.

FATCA will continue to make non-U.S. persons avoid U.S. persons …

Notice how “CoachBeth” recognizes that the target is “U.S. nationals”. In other words, “CoachBeth” perceives that it is the “U.S. Person” that is the target of the inquisition. In any case, this is creating a problem for the PTA. The following recent comment at the Maple Sandbox blog comes to mind:

As a former U.S. citizen, who renounced just in order to survive, as my four non-U.S. business partners gave me an ultimatum, either get rid of your U.S. citizenship, which was contaminating our totally German business and subjecting our company’s accounts to U.S. Treasury and IRS scrutiny, or you must sell your shares and leave. This all started upon the advice of our German bank, who said that they wouldn’t deal with our accounts if there was any American/’U.S. Person’ involvement? Not to mention the personal impact on my mortgage, on my bank closing all of my investment accounts and everything else that every reader here knows all too well.

What amazes me most, and also amazes all of my personal and professional friends, all of them non U.S. persons, is how obedient and conforming the organizations supposedly representing the interests of U.S. citizens abroad are. With all that has happened, and especially now, subsequent to the Senate Finance Committee’s “report” on tax reform, paying nothing but contemptuous lip service to the plight of US citizens abroad, it should be more than obvious that U.S. Citizens abroad are of absolutely no relevance for lawmakers and legislators in Washington. Yet, the attitude of all of the organizations supposedly looking out for and fighting for the rights of US citizens abroad has been to follow a very respectful path of presenting the case for change, as if they were dealing with a fair democratic system, that respects equal representation and justice. They look ridiculous, all of them! When I read that Democrats Abroad have been trying to push the “bandage” fix of ‘Same Country Exception’ for more than four years, with no result, I say that this is absolutely pathetic. When I see American Citizens Abroad sending endless delegations to Washington, year after year, and even opening an office there, only to see the interests of overseas Americans relegated to a footnote, with no action proposed n the recent Senate Financial Committee report, I would think that they should be embarrassed and ashamed, as they should be. It has taken the group Republicans Overseas over one year to formulate an intended lawsuit, which has been postponed endless times, with a “promise” to file it next week, I say that they too have not approached this in the right way. Too much damage has been done in the interim.

What astonishes all of my “foreign” friends is how passive, obedient and fearful U.S. people are of their government, especially when confronted with such outright injustice, literal extortion and destruction of their financial well being and that of their families and business partners. Even the ever law abiding Germans wouldn’t put up with any of this and they would probably, en masse, as one lawyer friend told me, simply refuse to cooperate with any of this Byzantine filing of forms and endless intrusions into their privacy and that of their families and business partners. They would collectively refuse and file class action suits against the authorities behind these injustices worthy of a fascist totalitarian regime. Perhaps the Germans understand better than the Americans what this sort of thing leads to, when a society becomes so beaten down, so subservient, so fearful of authority that it complies with the most horrific and undemocratic “laws” and is unable to unite and simply say NO, collectively. Until Americans fight to recover some form of democracy and fairness, the ravages of FATCA will be but one in a coming litany of similar such abuses. To continue believing that they are dealing with democratic institutions and that reason and fairness will prevail is nothing but a naive attitude that will lead them nowhere, as we can now see with the recent Senate Finance Committee report.

This concludes part 1 of the “FATCA Entity Inquisition”. In case you missed the point:

The FATCA IGAs are now being used AROUND THE WORLD to hunt for people with “US indicica. The purpose of FATCA is clearly to:

  1. Review non-U.S. “Entity Accounts”; to
  2. Identify those beneficial owners who are “U.S. Persons”; to
  3. Report those “U.S. owners” to the banks who will report them to the IRS

It’s the “RIR” principle! Understand that pursuant to the “RIR” principle, the United States is using FATCA to force disclosure of beneficial ownership of “Entity Accounts” in the whole wide world. The goal is to locate “U.S. Persons”. “U.S. Persons” are composed primarily of those with a U.S. place of birth.

When it comes to the hunt for those with a “U.S. place of birth”, FATCA is being used to “smoke em out“.

Back at the ranch, what about the Canadian Controlled Private Corporation?

It’s clear that if a U.K. PTA is an “Entity” that is subject to the “FATCA Entity Inquisition” a Canadian Controlled Private Corporation would be subject to the same inquisition. How many Canadian Controlled Private Corporations are owned by those with a “U.S. place of birth”? In Part 2 I will discuss how the FATCA Entity Inquisition applies to Canadian Controlled Private Corporations and the implications of this.


John Richardson