FATCA – A Case of Privacy Hypocrisy?
Following the Financial Crisis of 2007-8, there has naturally been a spike in scrutiny of the banking sector. Many of the practices were condemned as traders were found to be conducting illegal practices in certain cases, there is still much debate about what measures can be taken to fully prevent any incidences of malpractice. A large chunk of the work done comes within compliance, and through the extensive work by Regulators. The added pressure of media, government and the general public has lead to a change in stance on banking and a by-product of this is a law passed by the US, titled FATCA.
FATCA’S Requirements
FATCA, or the Foreign Account Tax Compliance Act, is one of the many regulatory introductions brought into action after the Global Financial Crisis. It became active on the 1st of July 2014. This is what it states:
FATCA focuses on reporting by US taxpayers about certain foreign financial accounts and offshore assets
FATCA focuses on reporting by foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest
To clarify the governmental jargon, it is effectively taking accounts/assets of all US Citizens, regardless of their locale, and are entitled to a 30% taxing on all assets if full information is not provided.
Regulatory changes
FATCA is a part of a widespread scheme to re-establish the troubled financial industry; MiFiD, Dodd-Frank Act and the Basel documents are other regulatory changes that have been implemented. There have been major fines, court-cases and policy changes in the last few years, and an alarming amount of time and money has been spent on improving Compliance divisions within financial institutions in regard to the vast set of regulations put in place.
The fight for privacy
The line that comes with this specific policy, one of farcical requirements, is with regards to privacy. At a time where so much emphasis is placed on security, to ensure that the people of the US specifically are put in the safest position possible. The military is one sector, but a whole new presence of cyber-space is now very much a risk. The number of hacks, threats and leaks that have occurred to established governmental groups in the last decade is monumental. When a teenager is able to tackle supposedly “the most secure network in the world”, then should one not be more cautionary in handing out every single detail about assets owned?
When various attempts to keep personal passwords, emails and phone numbers secure have been thwarted by a new wave of hackers, why should there be a new regime to collect the most sensitive of information from the mass public? The government themselves have been showcased in the past about their obsessive and inhumane data collection methods, ranging from the NSA to the recently published report on Terrorist Torturing. This was only released via force, and showed the tactics that were unknown to the public, that had been at work for a prolonged period of time. How can the same group be trusted with information about where someone’s multi-million dollar assets are housed or financed?
Future continuation
These show no signs of stopping, and the handing over of data has lead to much-publicised fines and even criminal charges (in the case of Credit Suisse) being filed. But what hasn’t been widely discussed is the oppressive, somewhat Big Brother nature, of this entire movement. While the government strives to keep personal information at bay from criminal use, they themselves are requesting the handing over of similar, if not more, sensitive data. Lessons need to be learned by banks moving forward, and evident steps have been taken in recruitment, operation and interactions within financial institutions. But the burden of these regulatory changes are far beyond just ensuring Finance as a whole remains lawful, they’re reaching a point of mass surveillance akin to that of George Orwell’s 1948.
The regulatory steps taken may be necessary at this point in time, but we must ensure that the involvement is limited, to avoid the major problems that come with privacy in this technology-dependent age.
