FATCA scrutiny cause of concern for LatAm investors

Pedro Gonçalves
FATCA scrutiny cause of concern for LatAm investors

The wealthy Jewish community in Latin America fears that FATCA regulations demanding fiscal information be shared with the US will bring and added layer of scrutiny to their businesses.

Jewish communities in Colombia, Argentina and Mexico have traditionally relied on the US, particularly Miami, and Israel as places to discreetly keep their capital. However, under FATCA these investors may be subject to bilateral data transfer.

"The Israeli banking industry was based for years on receiving deposits, especially from Jews abroad, which served the Israeli economy's foreign currency needs. It was a kind of conspiracy of silence between the governments and the banks. The government didn't ask the banks to be selective about where they got their foreign deposits, either in Israel or abroad, because it served a purpose when Israel was short on foreign currency. That's not the situation today," Haaretz reported.

It was a kind of conspiracy of silence between the governments and the banks"

Israel joined FATCA in June 2014, "pledging that the Israel Tax Authority would share the information it held about US citizens" with US authorities. 

Many Jews, it has been alleged, use the jus sanguinis citizenship status which Israel offers people of Jewish descent to deposit funds in Israeli bank accounts without disclosing them to their country of origin or main country of residence, for example the United States or Mexico, the Jerusalem Post reported.

Foreign deposits in Israeli banks have shrunk by 30% following "heavy pressure brought to bear by the United States on financial institutions worldwide in its fight against money laundering".

This year Israel published regulations pertaining to CRS (Common Reporting Standard). CRS affects people who are residents of foreign countries but have bank accounts in Israel, or who are Israeli residents who have bank accounts abroad. Mexico and Israel's agreement is "effective for taxable periods starting on or after 01 January 2017". 

Experts believe there are already clear indications of data transfer concerning ultimate beneficial ownership between Mexico, Israel and the United States, and say banks today look for the origin of funds, sometimes ignoring whatever source or nationality the account holder had declared. International banks are now required to report these funds to both the declared country of origin and the suspected country of origin, AP reported.

Mexico is currently not a part of FATCA, but experts place capital flight from Mexico to the US at $217bn, a number high enough to justify a mutual decision by the US and Mexico to enforce FATCA in the near future.


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