Russia sees serious threat in FATCA

Russia sees serious threat in FATCA
Russia’s financial system is “threatened” by America’s new tax law that demands foreign banks report on all American citizens’ banking activities, the Russian Federal Financial Monitoring Service said Thursday.

The head of the financial monitoring authority Yury Chikhanchin likened the one-sided data exchange to turning Russian banks into spies for the Americans.

“Essentially, our financial institutions are becoming tax informants for the American economy. As similar systems start spreading to other countries, they can bring serious risks to our financial system,” Chikhanchin said at a banking forum in Sochi.

FATCA requires foreign banks to provide information on American clients, who have over $10,000 in deposits, to the US Internal Revenue Service (IRS). If a bank does not comply; it can be subject to a 30 percent fine.

Before client information is sent to America, it will pass through the Central Bank of Russia and other local financial or government agencies, which still have the right to keep the information private.

On June 30, just before the deadline, Russia signed a law that allows Russian banks to share the tax data of American clients with US tax authorities, but participation isn’t mandatory.

The law simply gives Russian banks the ability to work with FATCA, but does not deem it obligatory. In Russia, only 10 percent of capital in the financial system is owned by foreigners or foreign entities. Participating Russian banks had to register by May 5, 2014.

The Russian financial watchdog believes the American tax law is itself a form of sanctions. The head of the authority believes that such mechanisms can exist, but should be multilateral.

Originally Russia planned a bilateral information exchange with the US over FATCA after the law was passed in 2010 but the US Treasury Department suspended negotiations with Russia in March 2014 over the Ukrainian conflict