FATCA Foreign Account Tax Compliance Act

Following on from our last article we will show you the effects the UBS (United Bank of Switzerland ) case had on the world.  As a result of the UBS case, in March of 2010, the US government passed the Foreign Account Tax Compliance Act, (“FATCA”), implementing reporting requirements for certain financial institutions.

Although they differ depending on the type of institution, they all involve customer identification programs, reporting suspicious activity, having compliance officers, and audits. Laws were subsequently passed making these same requirements apply to businesses and individuals. We will look at how these affect individuals working and living abroad in a later article.

In response to the UBS case, Switzerland signed an agreement to share financial information with nearly 60 other countries, completely changing the worldwide financial landscape. This was a giant leap towards banking transparency and was prompted by pressure from the US, Germany, and France. The agreement came into effect in 2010 and requires participants to pool tax collection information and to automatically exchange information. Under the agreement, the Swiss government can require large private banks to turn over their confidential information.

Although historically Switzerland had refused to take steps towards banking transparency, they finally agreed to be bound by FATCA.