"Although FATCA is structured to address offshore tax
abuse [ Note : this is itself inaccurate, as FATCA includes
not a single provision targeting actual tax
evasion activity], offshore account information has significance
far beyond the tax context, affecting cases involving money
laundering, drug trafficking, terrorist financing, acts of
corruption, financial fraud, and many other legal violations and
crimes. Given the importance of offshore account disclosures, FATCA
guidance and implementing rule should create account FATCA forms
that are not designated as tax return information but, like FBARs,
may be provided to law enforcement, regulatory, and
national security communities upon request.
FFIs are not, after all, U.S. taxpayers , and will not be
supplying tax information on behalf of their U.S. clients; they
will instead be providing information about accounts opened by U.S.
persons. The U.S. Supreme Court has long held that bank
account information is not inherently confidential but is
subject to inspection by law enforcement and others in appropriate
circumstances. Foreign account information is too important to a
wide range of civil and criminal law enforcement and
national security efforts to be designated as tax return
information bound by Section 6103 's severe
restrictions on access." [emphasis added, source:
This requires some explanation. "Section 6103" refers to
United States Code Chapter 26, Section 6103 , which
according to the Justice Department "generally
prohibits the disclosure of "tax returns' and other "tax return
information' outside the" IRS, unless certain narrow exceptions
apply, mainly with respect to specific criminal cases.
Here, Senator Levin is saying -- correctly, as far as U.S. law goes
-- that when FFIs sign on to the IRS portal for transmitting data
demanded under FATCA ( https://sa2.www4.irs.gov/
Having established that (a) information received under FATCA may be passed on to these other agencies, (b) there is no legal expectation of privacy or confidentiality, or any limitation on use of any information gathered, and (c) institutions would be required to log onto a portal created and operated by the U.S. government, it is fair to ask, given growing concerns about covert information-gathering by the NSA , whether the motives behind FATCA are limited to tax enforcement and what further use will be made of information supplied to the IRS.
So, Why Would "Intel' Agencies Want Personal Information from Banks?
If information itself, not tax enforcement, is the real underlying "value" of FATCA for U.S. government agencies, this might also help explain exemption of corporations. Perhaps the law's authors figured that corporations, unlike individuals (all presumed to be slimy "tax cheats"), might have the means to fight back and risk upsetting the whole applecart. Or perhaps personal information is more useful for intelligence purposes. Either way, targeting individuals' private data appears to be the most plausible way to impose a mandate that FFIs -- including many thousands worldwide that don't do business in the United States and may not be as readily accessible to U.S. agencies as domestic firms -- log onto a government-controlled site.
How might FATCA compliance by FFIs facilitate intelligence collection? In at least two ways:
First, the FATCA data itself, matched with other information available to the relevant agencies, would greatly enhance creation of a global financial social accounting matrix , using U.S. Persons' account information as a kind of marker or human " taggant " for mapping contacts, relationships, and activities of a wide range of persons and institutions well beyond the U.S. Persons themselves. While email, phone records, blog postings, social media ramblings, and other personal data are valuable for the surveillance state, one could argue that capture of personal financial information is a far more valuable payload for intelligence monitoring and management. FATCA data would be an invaluable supplement to "intel' agencies existing efforts to monitor international finances. (See: " 'Follow the Money': NSA Spies on International Payments ," Der Spiegel , September 15, 2013.)
Second, and more ominously, it needs to be asked what additional types of information-gathering on FFI targets other than "U.S. Persons" may be facilitated by metadata and other transfers incidental to automatic electronic data transmission. There is no reason to suppose the technical capabilities of U.S. agencies would be thwarted by metadata-scrubbing, encryption, or other safeguards FFIs might place on data transfer, whether incidental or anticipated. (With respect to the possible hazards for institutions' data security, see: " XKeyscore: NSA tool collects "nearly everything a user does on the internet' ," the Guardian , July 31, 2013 and " Reports: NSA has cracked much online encryption ," CNN , September 6, 2013). Certainly, from a purely technical point of view, it seems NSA and other intel agencies already are doing fine on their own. But consider how much easier it would be to steal keys , crack encryption, or install a worm , a Trojan horse program, or other malware via a drive-by download to provide backdoor access to all the data in a target network when it's unnecessary to phish the target in. Instead, they can just require the target institution (under threat of FATCA sanctions) to log in at the Black Gate of Mordor and take it from there. As an extra bonus, instead of having to pay for costs incurred by the target firms, as NSA did for U.S. firms involved in the "Prism" program , the FFIs themselves would have to bear the costs of providing possible access for U.S. agencies to acquire data even beyond that demanded under FATCA.
Some might consider the suggestion that U.S. agencies would abuse FATCA compliance for intelligence collection purposes speculative, or even offensive. But then one wonders what would be the impediment to such abuse. Technical? Political? Moral? Legal ? Given almost daily revelations of what the same agencies already have been doing it's hard to take such objections seriously. (And if anyone thinks Treasury and the IRS are not already integral elements of the broader spying program, see: Jennifer Stisa Granick and Christopher Jon Sprigman, " NSA, DEA, IRS Lie About Fact That Americans Are Routinely Spied On By Our Government: Time For A Special Prosecutor ," Forbes , 8/14/2013.)
At the very least, it should be expected that the IRS would have the decency to provide a warning on the log-in portal, which opened on August 19, 2013:
This site is operated by the United States Internal Revenue Service (IRS). Foreign financial institutions are on notice that any information made available to the IRS as a result of logging onto this site may be passed on to other agencies of the government of the United States and that use of such information may not be exclusively for tax purposes.