Avatar photo About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.


  1. I think you misapprehend the real focus and purpose of the proposed bank regulations on identification of beneficial ownership. It is not domestic tax compliance.
    The preamble to the proposed bank regulations allude to FATCA as merely one of the reasons for their promulgation. The several inter-governmental agreements (IGAs) entered into by the U.S. Department of the Treasury to implement FATCA in foreign countries also require the United States to provide specified information about holders of U.S. financial accounts. Each signed IGA and the model IGAs also has a provision like the following:
    “The Government of the United States is committed to further improve transparency and enhance the exchange relationship with Mexico by pursuing the adoption of regulations and advocating and supporting relevant legislation to achieve such equivalent levels of reciprocal automatic exchange.”
    Art. 6, ¶1., U.S.-Mexico IGA (Apr. 9, 2014)[emphasis added].
    The requirement in these proposed bank regulations to identify beneficial owners is intended to satisfy this mutual exchange requirement. This follows the position of the Organisation for Economic Co-operation and Development that all tax authorities of the world should have automatic exchange of tax information.
    The advance notice of these proposed regulations came out in 2012 but the only group that noticed was the bankers, who saw it as just another compliance requirement to be staffed and funded.
    Consider whether it is appropriate for foreign countries to have automatic access to financial account information of U.S. residents under the guise of exchange of tax information.

    • ….”Consider whether it is appropriate for foreign countries to have automatic access to financial account information of U.S. residents under the guise of exchange of tax information….”

      Of course gentlemen it is absolutely appropriate for for foreign countries as well to have automatic access to financial account information of U.S. residents especially from States like Delaware,Wyoming,Nevada and Florida ……this is called reciprocity !! or in layman`s terms what’s good for the goose is good for the gander.

      Btw. may I remind everybody that the legal status of these IGAs is unclear and susceptible to challenge. They are not treaties under U.S. law because they have not been submitted to the Senate for advice and consent pursuant to the Treaty Clause of the U.S. Constitution, Art. II, sec. 2, cl. 2. Nor are they congressional-executive agreements because Congress has not authorized the Treasury Department to conclude the IGAs as part of the FATCA implementation effort. Attempts to pass them off as “pre-authorized” or as “sole executive agreements” are questionable because the latter is normally only used for “routine, non-substantive, administrative matters” and it’s quite a stretch to consider the FATCA IGAs “routine”.

      • Why reciprocation won’t happen any time soon……..

        Despite what they may have led foreign governments to believe, the Treasury Department has no existing authority to collect and disperse FATCA-level information on foreign investors, a fact confirmed by the administration’s solicitation of such authority in recent years’ budget requests. Several significant obstacles make it unlikely that will change in the near future.
        After FATCA was passed, Republicans gained control of the House and may soon take the Senate as well. Most Republicans would prefer the U.S. move to a territorial tax system, which would render FATCA largely moot. Anti-FATCA activists also recently succeeded in getting the Republican Party to add FATCA repeal to its official platform, though only a small number, such as Senators Paul and Lee, have openly made similar calls.
        Compounding the administration’s uphill battle for reciprocal FATCA sharing is the likely entrance of the U.S. financial industry into the fight. American banks have sat on the sidelines until now. They don’t bear FATCA’s costs and would only draw unfavourable regulatory attention and make themselves political targets by getting involved prematurely. But should reciprocation gain steam, thus putting domestic institutions into the crosshairs of the same outlandish compliance burdens as their international peers, it’s a solid bet they will ramp up anti-FATCA lobbying efforts. And unlike overseas institutions, domestic banks have political clout in Washington D.C.
        It is possible that Treasury might simply grant themselves the authority they need, but doing so in order to impose billions in new compliance costs on a fragile U.S. economy and financial system would awaken a sleeping Congressional giant. Even a relatively minor rule recently adopted by Treasury to require only the reporting of interest deposit information for non-resident aliens took over a decade to implement and sparked strong bipartisan opposition from elected officials. That rule was able to skate by because the impact was limited to only a few states. The same would not be said for domestic FATCA.
        It remains to be seen how the international community will react if Treasury is unable to honour its promises for reciprocity. Can it spark enough international resistance to force the U.S. to scrap its unilateral initiative? Unfortunately, there may be insufficient self-awareness left in Washington for the serious soul searching that requires. But if there is, it’s past time for the injection of even basic respect for international comity and political boundaries into the FATCA debate.

  2. Thanks Joe. I agree that there is very little in terms of domestic compliance objectives that these FinCEN rules are meant to achieve.
    The point I was making is that checklists or due diligence forms can assist a third party in collecting accurate information on behalf of the government. I was suggesting by my post that perhaps use of targeted due diligence can be a way to reduce the tax gap.
    I do not have a view as to whether the exchange of information procedures adequately protect US residents.

    • Dick Harvey says

      Les – Although it has been 4 years since I dealt with FINCEN and the anti-money laundering/terrorist financing arm of the US Treasury, my recollection is that there also was benefit to these organizations in collecting better information on beneficial ownership. Said differently, they were also very concerned about making sure US banks collected information about the beneficial owners of US accounts.

      Thus, in addition to collecting information that the US can exchange under the IGAs for tax purposes, the proposed FINCEN guidance likely also serves a significant domestic non-tax purpose.

Comment Policy: While we all have years of experience as practitioners and attorneys, and while Keith and Les have taught for many years, we think our work is better when we generate input from others. That is one of the reasons we solicit guest posts (and also because of the time it takes to write what we think are high quality posts). Involvement from others makes our site better. That is why we have kept our site open to comments.

If you want to make a public comment, you must identify yourself (using your first and last name) and register by including your email. If you do not, we will remove your comment. In a comment, if you disagree with or intend to criticize someone (such as the poster, another commenter, a party or counsel in a case), you must do so in a respectful manner. We reserve the right to delete comments. If your comment is obnoxious, mean-spirited or violates our sense of decency we will remove the comment. While you have the right to say what you want, you do not have the right to say what you want on our blog.

Speak Your Mind