We received another enquiry today with respect to a New Zealand Bank closing/placing on hold the bank account of a US citizen. We have had similar instances previously and in other countries including Australia.
This is why.
The Foreign Account Tax Compliance Act (FATCA), enacted in 2010, requires foreign financial institutions (FFIs) and certain non-financial foreign entities (NFFEs) to report information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold substantial ownership.
This includes banks.
Due Diligence Procedures (this applies to all US citizens with foreign bank accounts).
Banks are required to implement due diligence procedures to identify U.S. accounts. This involves:
- Screening new and existing accounts to determine whether they are held by U.S. persons.
- Conducting periodic reviews to maintain accurate records of account holders.
Banks must report specific information to the IRS, including:
- The name, address, and taxpayer identification number (TIN) of U.S. account holders.
- The account number, account balance or value, and the total gross amount of interest, dividends, and other income generated from the account.
- Reporting on accounts held by foreign entities that are owned by U.S. persons, often referred to as “substantial U.S. owners.”
Banks must collect the appropriate documentation from their customers to substantiate their tax status. This often includes:
- IRS Form W-9 for U.S. persons.
Overall, FATCA imposes substantial compliance obligations on foreign banks and financial institutions regarding U.S. taxpayers. These institutions must be diligent in their customer identification processes, compliance efforts, and reporting to the IRS to avoid penalties and ensure they meet their legal obligations under the act.
This applies to all US citizens living abroad.
If you are concerned about this, there are solutions, both pre-emptive and if this occurs to you.
Please feel free to make contact to find out whether this affects you.
Lance: [email protected]
Daria (NZ): [email protected]
Shalen (AU) [email protected]