Global banks hit with ‘Russian FATCA’
Banks around the world must now notify the Russian authorities when a Russian national opens a bank account with them, in what PwC is calling the “Russian FATCA”.
The new requirement was enacted on 18 December 2015, but has so far received little attention in the media.
PwC summarised the rule as follows: “Under the Order, foreign financial institutions shall submit to Russian tax authorities reports on foreign bank accounts of Russian individuals and legal entities directly or indirectly controlled by Russian individuals.”
Banks must reportedly pass on personal information of their clients, including passport details and addresses, PwC says. However it appears that, in its finalised form, the rule does not require banks to disclose details of the amount held in the bank account. Earlier drafts did have such a requirement. PwC said this amendment was “favourable to foreign financial institutions”.
Sean Wakeman, tax investigations partner at Crowe Clark Whitehill, said this new rule will in part make up for Russia’s late adoption of the Common Reporting Standard.
“Since Russia is one of the ‘late adopters’ to the Common Reporting Standard, it will only start supplying information from 2018,” he said. “This unilateral move allows it to rein in its own citizens at a far earlier date, particularly those wealthy Russians who may be moving their money around to try and avoid disclosure by the ‘early adopters’ in 2017.”
He suggested that the decision to bring this law in may been “hastened by the current difficult financial conditions in Russia and the potential flight of money and assets from that country”.
FATCA, or the Foreign Account Tax Compliant Act, is a United States law requiring all US citizens, including expats and those who have never lived in the US, to report all their financial accounts to the Financial Crimes Enforcement Network (FINCEN).