Beseeching the "enforcers' of legislation is not the way you get changes from the "creators' of the legislation. Meetings with these officials are not just useless, they may be counter-productive. We understand representatives of the CBA have made limited efforts to convince some U.S. Senators and Congressmen of Canadian banks' concerns. U.S. legislators, unfortunately, care about their own constituents, not foreign banks' headaches (even if they are caused by a U.S. law).
A rejected Op-Ed is not an example of CBA due diligence. Submitting an op-ed piece to major U.S. publications is laudable, but rejection should not have stopped the effort. The CBA has the resources to run a full page ad and/or resubmit to Canadian Media sources. Why wasn't that done?
Despite CBA's claims, there has been no worldwide effort against FATCA. Instead of pretending to have tried to secure FATCA's repeal and failed, the CBA and its member banks should now direct funds to supporting a strategic and professional Washington-based effort.
FATCA's glaring weaknesses can be easily exposed through standard lobbying and public relations techniques. Perhaps begin with the questionable authority of the IGAs under U.S. law. (Even though they are signed by the State Department, they are not Treaties and will not be presented to the Senate for "advice and consent'.) Treasury delays and timeline failures for reaching a critical mass of IGAs signed add another weak point. IGAs are essential for FATCA to be a success from a U.S perspective. This provides opportunity for real pushback.
Then there is reciprocity -- FATCA's Achilles heel. It is the carrot they promise, but cannot deliver, given the political realities and opposition in Congress. Treasury will never be allowed to impose a domestic FATCA (DATCA) on all U.S. financial institutions (USFIs) to meet the reciprocity promises. You could exploit that very effectively, but you have done little.
The CBA and its members have the resources to do far more. Rick Waugh, Chief Executive Officer of the Bank of Nova Scotia, recently revealed that his institution has spent nearly $100 million for FATCA compliance. ("Electronic spying "a big issue' for banks, Scotia CEO Waugh says," Financial Post, October 23, 2013).
Leaving aside the insoluble data vulnerability and information security problems banks are encountering (compounded by the ongoing scandal of U.S. electronic spying which creates enormous loss of trust in U.S. assurances), FATCA creates massive costs that will be passed on by your member banks to ALL Canadian consumers.
CBA's members are pouring money into preparation for FATCA compliance, implementing procedures that are illegal under current Canadian law. You are pouring all your money into compliance solutions, sold to you by the FATCA Compliance Complex, (FCC) and nothing, as a hedge, on a serious lobby effort to undo this monster! We don't get it! Without some serious expenditure on the other side of the bet, you are placing all your eggs in one basket thus risking everything on one outcome.
To clearly illustrate the risk you take by capitulating, consider the tremendous liability you will visit on your own employees should FATCA implementation go through via an IGA. Each financial institution is required to designate a Responsible Officer whose job is to ensure full compliance with FATCA. Under U.S. law (read the fine print in the FATCA regulations) those Responsible Officers could be subject to imprisonment of up to 3 years, or fined up to $250,000 (and your institution also fined up to $500,000), or both, together with cost of prosecution (not to mention having to pay the cost of legal defence). How likely are any of your employees to apply for the RO job, once they are aware of this aspect of the job description? How will your banking customers view this vulnerability?
2. An IGA is inevitable:
It is not!
The U.S. Treasury Department admits that it cannot compel FATCA enforcement on an extraterritorial basis without IGAs. As stated in the Fiscal Year 2014 Budget request sent up to Capitol Hill in April (Analytical Perspectives to the Fiscal Year 2014 Budget, page 202):
"In many cases, foreign law would prevent foreign financial institutions from complying with the FATCA provisions of the Hiring Incentives to Restore Employment Act of 2010 by reporting to the IRS information about U.S. accounts. Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by FATCA to the IRS."
Among other statutes, this refers to the Charter and other protections in Canadian law. Without an IGA and modification of Canadian laws and Charter, Canadian banks cannot legally comply with FATCA, which would leave the U.S. Treasury Department with the choice of declaring economic war on America's biggest trading partner (the 30% withholding threat about which the CBA rightly complains) or backing down.
By advocating an IGA, the CBA relieves Treasury of this dilemma -- and saves an otherwise doomed FATCA. The IGA's supposed "inevitability" becomes a self-fulfilling prophecy. Indeed, it is worse than that. The CBA would have us believe that the IGA is in the pipeline all by itself, that the CBA is just a passive bystander:
"We have no control over the negotiations or the content of the IGA and neither do the banks or other financial institutions. The financial services industry has not capitulated. and we are not enthusiastic about an IGA. Our concerns about FATCA have not changed but the reality is that an IGA is coming."