UAE Banks Now Advising Customers of FATCA
I just received a copy of correspondence sent from the Head of Personal Banking at a major UAE bank to its clients. The letter makes clear that the bank will be complying with the mandates of FATCA. Indeed, I believe all banks in the UAE will have no choice as they must rely on US correspondent banks to clear USD denominated transactions. There has been discussion that one of the FATCA sanctions that may possibly in future be imposed against banks for not complying, will be withdrawal of US dollar clearing rights with correspondent banks. This penalty could cripple any bank in the UAE since the dirham is pegged to the US Dollar. This fact was pointed out in the letter sent to clients.
Generally, FATCA provisions will force non-US financial (and certain non-financial) institutions to provide the IRS with information about accounts held by Americans. Reporting will include the name, address and taxpayer identification number of each US account holder; the account number; account balance and value; the account’s gross receipts and gross withdrawals or payments; and other account related information requested by the IRS. The reporting mandates are scheduled in stages, with applications to join the IRS program commencing January 1, 2013; participating banks will be required to document all new accounts by June 30, 2013; search for existing accounts is to be completed by June 30, 2014 and the first reporting date for accounts will be September 30, 2014. Time is definitely running out.
A Time Bomb Ready to Explode for US Persons with Unreported Foreign Assets
In just a short while, those who are ‘hiding’ will be caught out. By then, it will be too late to enter the IRS Offshore Voluntary Disclosure Program (OVDP). If you are not in compliance and have unreported income or assets, you must act now. The best advice is to consult a US tax attorney and obtain a full understanding of the possible civil and/or criminal implications you are facing. Learn about the latest OVDP and other options that you can consider. With the attorney examine the possible penalties and risks under each option.
The Importance of Attorney-Client Privilege
Only by consulting an attorney can the information and documentation you reveal be given protection from disclosure to the US tax authorities pursuant to the attorney-client privilege. Accountants and financial advisors do not have this privilege. If your matter must be worked on with such third parties, it is best if your attorney works under a so-called Kovel agreement which generally tries to extend the attorney-client privilege to information revealed to these persons.
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