Barrie McKenna has an article up that provides a good overview of the FATCA situation and some of its unintended consequences.
One of the great complaints of the article, and one that I think needs to receive more attention, is one of sovereignty. The US has not approached other countries to work out a solution, as one does in diplomatic situations. Instead, it has merely issued a fiat and imposed harsh penalties on banks that refuse to comply. The article quotes a European official who complained: “the legislation assumes the world is the United States.”
McKenna covers some of the negotiations taking place with the US to mitigate the financial burden FATCA imposes on Canadian financial institutions.
The Investment Funds Institute of Canada, which represents mutual funds, is seeking exemptions for RRSPs and other registered plans, as well as accounts worth less than $500,000. Without those concessions, mutual funds say they would have to regularly comb through millions of accounts looking for evidence of U.S. ownership.
This has happened before. As a frequent traveller, I can certainly attest to knee-jerk “security theatre” (projecting the appearance of increased security with little or not benefit, or even possible harm) after 9/11.
It’s similar to the post-9/11 border restrictions, which, while aimed at combating terrorism, have sideswiped trade. Tougher U.S. visa rules have similarly hurt U.S. tourism, along with the kinds of academic exchanges that drive innovation.