Surviving the Perfect Storm
Yesterday I attended the Perfect Storm II Conference in Tel Aviv, which dealt with IRS Compliance and other hot topics about US and Israeli Tax & Compliance (I attend these events so that you don’t have to!) It reinforced many of the messages from the last STEP Israel Conference and other international discussions taking place on similar topics.
Perfect Storm is a reference to a rare combination of circumstances that coincide and cause drastic damage. The organizers of this conference for finance professionals use the term to describe new legislation in the United States that is having a dramatic impact on American expats in Israel.
In their presentation “Vanishing Bank Secrecy in the Offshore World – the Latest on the Overlapping Perils of US Civil and Criminal Law”, William Sharp of Sharp Partners PA, and Robert Katzberg, Attorney from Kaplan & Katzberg in New York, summed it up with the memorable words: “Elvis has left the building!”. They were referring to the privacy of foreign nationals with bank accounts outside their country of origin.
American “FATCA” legislation requires banks throughout the world to notify the IRS in America of all accounts held by “US persons”. If American customers do not declare these bank accounts to the IRS, the banks must close their accounts and transfer their funds, leaving a trail through the international banking system that customers will be unable to conceal.
This means that Israeli banks have no choice but to comply. It is costing them, and banks worldwide, tens of millions of dollars to implement the FATCA rules. They need to identify Americans by questioning customers and by monitoring money transfers to and from the United States.
Sharp and Katzberg predict that Israel will be in the spotlight for the American tax authorities looking for expats and their money because Israel has the highest proportion of US expats in its population. But it’s not just America any more: the countries of the Organisation for Economic Co-operation and Development (OECD) have agreed to an automatic exchange of data between banks in their countries (that’s 44 countries including Israel, to save you checking).
The world of finance has clearly changed and the balance of power is in favour of the United States. Katzberg believes that U.S. criminal law will be applied and enforced in Israel like it is in Switzerland.
Time is running out because with every day that passes more information is being collected, so American nationals in Israel need to take action quickly and seek advice from competent professionals. Expatriates from other countries should be aware that many countries will follow America’s lead. The storm is spreading around the globe and we need to adapt to the reality that there is no such thing as bank secrecy anymore.
The Perfect Storm II Conference was organized by Philip Stein & Associates and Epstein Rosenblum Maoz Law Office, with sponsors including Braude Wealth.