International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Saturday, February 28, 2015

IMF Surveillance in Europe

DownloadThe International Monetary Fund has significantly improved its surveillance of the EU and the euro area, along the lines suggested by the Fund’s 2011 Triennial Surveillance Review and in application of its 2012 Integrated Surveillance Decision. Nonetheless, there is still margin for further enhancing IMF surveillance of the EU and the euro area.

This report by the Task Force on IMF Issues of the International Relations Committee of the European System of Central Banks was prepared with the aim of contributing to the preparation of and debate on the 2014 IMF Triennial Surveillance Review.


ECB Occasional Paper No. 158

CAROLINE JANSSENSNational Bank of Belgium
EVELIEN VINCENTNational Bank of Belgium
PETR SEDLACEKUniversity of Amsterdam
AXEL BRÜGGEMANNBank of Finland - Institute for Economies in Transition (BOFIT)
FELIX HAUPTDeutsche Bundesbank
MARY KEENEYCentral Bank and Financial Services Authority of Ireland
JON FROSTDe Nederlandsche Bank
SIMON WHITAKERBank of England - Monetary Analysis
JULIE MCKAYEuropean Central Bank (ECB)
RAYMOND RITTEREuropean Central Bank


February 28, 2015 | Permalink | Comments (0)

Friday, February 27, 2015

United Capital Grows $2B Through Hires, Not Acquisitions

Investment News reports that United Capital's recruitment of a $2 billion registered investment adviser out of a bank is not only the firm's biggest addition since its founding in 2005, it also marks a shift in how the firm plans to compete going forward.

With the hire of the 23-member team, which had formerly operated as Capital Investment Counsel Inc. under Compass Bank, United Capital is now focused on recruiting rather than making acquisitions, according to Matt Brinker, senior vice president of acquisitions at United Capital. The firm had previously only acquired independent RIAs, usually established offices with about $500 million in assets under management.

“It's a bit of a pivot,” Mr. Brinker said. “The platform has evolved to such a point that people are going to be joining us, much like CIC, to avail themselves of the platform, and that means folks that are doing $500,000 in revenue all the way to the size of CIC.”  see Investment News' story

February 27, 2015 | Permalink | Comments (0)

Former VA Governors Wife Sentenced to Prison for Graft

NY Times reports that

"Maureen McDonnell, the wife of former Gov. Bob McDonnell of Virginia, who along with her husband was found guilty last year of trading favors in return for loans, vacations and gifts from a wealthy businessman, was sentenced Friday to a year and a day in prison for her role in a bribery case that upended her husband’s political career."

February 27, 2015 | Permalink | Comments (0)

Thursday, February 26, 2015

FinCEN Launches Web page to Assist FBAR Filers

720px-US-FinancialCrimesEnforcementNetwork-Seal.svgFinCEN has launched a Web page to assist those individuals and institutions required to file a Report of Foreign Bank Account (FBAR).

Filers can determine if they are required to file the FBAR by going to

Filers will also find numerous resources to aid in FBAR filing. Please note, the FBAR filing deadline is June 30, 2015.

February 26, 2015 | Permalink | Comments (0)

New Roth 401(k) Rollovers Maximize After-Tax Contribution Value

ThinkAdvisorAs 2015 opens, clients are beginning to focus on retirement income savings strategies for the year—and many are concentrating on newly available options for maximizing the value of employer-sponsored retirement accounts. 

While the non-Roth after-tax contribution option offered wealthy clients a way to increase their 401(k) account values in the past, it did little to mitigate the current or future tax bite. The increasingly widespread availability of in-plan Roth 401(k) rollovers, however, has changed the retirement income planning landscape, creating new opportunities for higher income clients who wish to truly maximize their 401(k) contributions using after-tax dollars. 

Despite this, the rules can prove tricky, and small business and individual clients alike should be advised as to the potential impact of using this nontraditional 401(k) savings strategy. ... read Byrnes and Bloink at Think Advisor

February 26, 2015 | Permalink | Comments (0)

How Does HSBC Group CEO Avoid Paying UK Tax ?

Bloomberg reported that "Only one British client of HSBC has been convicted for tax evasion after failing to disclosed funds held offshore in Switzerland."

HSBCThe UK HMRC has the account details of hundreds (or possibly thousands) of UK persons with HSBC Swiss bank accounts though (see ICIJ story).  

Now HMRC has HSBC's CEO Stuart Gulliver's Swiss bank account information (see the Guardian story excerpted below about Stuart Gulliver's Swiss bank account and UK non-dom status).  

Gulliver is also among those current and former clients of HSBC Suisse to take advantage of non-dom status. Gulliver is a registered non-dom based on his long residence in Hong Kong – now a special administrative region of China – which he considers to be his home, despite his UK-based position.

A representative for Gulliver said: “Having lived there since the 1980s, our client has become a permanent Hong Kong resident with right of abode, as has his wife who is an Australian national. Hong Kong continues to be their home albeit that our client now works primarily in the UK. As a matter of law, our client is domiciled in Hong Kong.”

Non-dom status can confer several tax advantages on those who claim the status compared with those domiciled in the UK. These include advantages in how inheritance tax is applied, but can also exempt worldwide income earned from outside the UK from incurring UK taxes – a system known as the remittance basis.

Separately, Gulliver did not become employed by HSBC’s main holding company when he took over as chief executive of the bank in 2011. Documents seen by the Guardian at the time showed that Gulliver took the job of chief executive officer as a secondment from the Dutch-headquartered HSBC Asia Holdings, rather than take a straightforward appointment to the UK parent company.

A spokesman for HSBC said around 350 of its staff were employed through the Netherlands. “About 350 of the bank’s most internationally-mobile employees are employed by HSBC BV,” he said. “This enables them to be employed/seconded to any part of the global group without the need to change contracted employer.”

February 26, 2015 | Permalink | Comments (0)

SEC to Target Deals Giving Visas to Rich Foreign Investors

Bloomberg reported that -- The SEC is preparing sanctions against as many as two dozen immigration lawyers, people familiar with the matter said, for collecting deal fees from foreign investors trying to access the EB-5 visa program, which grants U.S. residency for $500,000 investments that create 10 jobs.

The lawyers were prohibited from earning transaction fees because they weren’t registered as brokers, according to the people, who asked not to be named because the investigations aren’t public.

Previous SEC actions regarding EB-5

SEC Investor Bulletin (EB-5)

February 26, 2015 | Permalink | Comments (0)

Wednesday, February 25, 2015

Will a New Fiduciary Standard Fix the Advisor-Client Conflict of Interests for Retirement Accounts?


See President's Obama Speech about enacting a fiduciary standard for retirement advisors.

Defined contribution plans and IRAs are intricately linked, as the overwhelming majority of money flowing into IRAs comes from rollovers from an employer-based retirement plan, not direct IRA contributions.

Collectively, more than 40 million American families have savings of more than $7 trillion in IRAs. More than 75 million families have an employer-based retirement plan, own an IRA, or both. Rollovers to IRAs exceeded $300 billion in 2012 and are expected to increase steadily in the coming years.

The decision whether to roll over one’s assets into an IRA can be confusing and the set of financial products that can be held in an IRA is vast, including savings accounts, money market accounts, mutual funds, exchange-traded funds, individual stocks and bonds, and annuities. Selecting and managing IRA investments can be a challenging and time-consuming task, frequently one of the most complex financial decisions in a person’s life, and many Americans turn to professional advisers for assistance.

However, financial advisers are often compensated through fees and commissions that depend on their clients’ actions. Such fee structures generate acute conflicts of interest: the best recommendation for the saver may not be the best recommendation for the adviser’s bottom line.

A retiree who receives conflicted advice when rolling over a 401(k) balance to an IRA at retirement will lose an estimated 12 percent of the value of his or her savings if drawn down over 30 years. If a retiree receiving conflicted advice takes withdrawals at the rate possible absent conflicted advice, his or her savings would run out more than 5 years earlier.

Reuters reports - Speaking at an event hosted by the AARP Inc, formerly known as the American Association of Retired Persons, Obama said, "It's a very simple principle: You want to give financial advice, you’ve got to put your client’s interests first. You can't have a conflict of interest."

The proposal is opposed by many Republicans, financial firms and some of Obama's fellow Democrats who fear the plan will limit retirement products available to investors and curb brokers' compensation.

Ken Bentsen, president of the Securities Industry and Financial Markets Association, said the SEC is the appropriate entity to consider any new rules, and called the White House's research supporting reforms inadequate.

Think advisorThink Advisor reports thatSecurities and Exchange Commission Commissioner Daniel Gallagher argued Friday at the SEC Speaks conference in Washington, however, that DOL’s rule to amend the definition of fiduciary on retirement accounts is a “runaway train,” and that the recent White House memo supporting release of the redraft is “thinly veiled propaganda designed to generate support for a widely unpopular rulemaking.”

SEC Chairwoman Mary Jo White said Friday at the same event that she would speak about her position regarding an SEC rule to put brokers under a fiduciary mandate “in the short term,” stating that it remains a priority of hers “to get the Commission in a position to make that decision” on such a rule.


February 25, 2015 | Permalink | Comments (0)

Overcoming Sequence of Return Risk in Retirement Income

ThinkAdvisorWhen it comes to retirement income planning, considerations underlying a client’s accumulation of assets during working years traditionally take center stage.  Equally important, however, are the issues that a client will face regarding investment decisions once he or she has reached retirement age—but unfortunately, in many cases these concerns are overlooked when determining how best to structure the client’s retirement assets. 

Sequence of return risk is one of these critical, yet too often overlooked, decumulation-stage issues that can make or break your client’s retirement income withdrawal strategy—luckily, this type of risk can often be diminished by incorporating annuities into the mix, safeguarding the client’s retirement resources in the process.  read Byrnes & Bloink at Think Advisor

February 25, 2015 | Permalink | Comments (0)

Politicians and Regulators Scrambling to Explain Lack of Action Against HSBC

HSBCICIJ story  - The political row over the Swiss Leaks revelations is building in a number of countries, as HSBC faces committee investigations in the United Kingdom, and politicians in the United States weigh the nomination of a potential attorney general who previously investigated the bank.

And the fallout continues in jurisdictions around the world, as governments respond to allegations the bank and some of its clients were potentially involved in tax evasion and alleged wrongdoing.

Read the latest reactions to the Swiss Leaks revelations at ICIJ story 

February 25, 2015 | Permalink | Comments (0)

Greece Granted 4 Months and Billions More of EU Funds

Greece has 'promised' to undertake reforms, like fight corruption and tax evasion, stop luxurious in-kind benefits for politicians, and yet in the same letter stated it would spend even more for social programs like rolling out nationally a minimum wage.  

EcbThe EU Commission and IMF have, in response, given Greece a "pass" of an additional four more months and another E7 billion more from the EU Central Bank (i.e. German taxpayers) and the IMF.   Greece can borrow up to E240 billion under the current plan versus its E182 billion GDP (2013), though it has already reached 175% public debt to GDP.

Greece does not have to meet month by month milestones - no timeline for reforms.  Chalk up a big win for Greece!  When in debt, borrow more, much more, until the creditors (the ECB primarily) have no choice but to meet demands for substantial forgiveness to squeeze out any repayment.

Several commentators are pointing to Greece's past five years of lack of action of reform progress, the inability to collect tax, and the lack of willingness to stop public employee corruption.  This can has been kicked down the road until June.  Perhaps Greece will discover oil by then?  Oops - at $60 a barrel, not going to dent US$270 billion of debt.

Greece's Reform Proposals to Obtain 6 More Months of Borrowing from EU Central Bank and IMF

Greece's Formal Request for 6 Month Extension 

EU Commission Statement on Greece Debt Proposal (24 Feb 2015)

The Commission underlines its willingness to continue to provide technical assistance in key areas to assist in the design and implementation of policies. As part of this process, the Commission underlines the importance of Greece fully respecting its commitment undertaken at the Eurogroup of 20 February 2015 to refrain from any roll back of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.

IMF Statement on Greece's Debt Proposals

DownloadWhile the authorities’ list is comprehensive, it is generally not very specific, which is perhaps to be expected considering that the government is new in office. In some areas, like combating tax evasion and corruption, I am encouraged with what appears to be a stronger resolve on the part of the new authorities in Athens, and we look forward to learn more about their plans. In quite a few areas, however, including perhaps the most important ones, the letter is not conveying clear assurances that the Government intends to undertake the reforms envisaged in the Memorandum on Economic and Financial Policies. We note in particular that there are neither clear commitments to design and implement the envisaged comprehensive pension and VAT policy reforms, nor unequivocal undertakings to continue already-agreed policies for opening up closed sectors, for administrative reforms, for privatization, and for labor market reforms.

February 25, 2015 | Permalink | Comments (0)

Tuesday, February 24, 2015

85th Country Signs Up For Global FATCA (Automatic Tax Information Exchange)

Today the Seychelles became the 85th signatory of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

The signing of the Convention represents another important step in Seychelles’ efforts to improve its legal framework and practices in the field of exchange of information for tax purposes.

OECDThe Convention provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange of information, tax examinations abroad, simultaneous tax examinations and assistance in tax collection, while simultaneously protecting taxpayers’ rights.

The Convention was developed jointly by the OECD and the Council of Europe in 1988 and amended in 2010 to respond to a call by the G20 to align it to the international standard on exchange of information and to open it to all countries, in particular to ensure that developing countries could benefit from the new more transparent environment. The Convention continues to be a key item on the tax transparency agenda of the G20, which has repeatedly called on all jurisdictions to sign the Convention and has asked the Global Forum on Transparency and Exchange of Information for Tax Purposes to report on progress made by its members in signing the Convention.

The 85 jurisdictions participating in the Convention can be found at:

February 24, 2015 | Permalink | Comments (0)

JD Graduate Careers? financial advisers count falls fifth straight year because no replacements for retirements

Reuters reports - The number of U.S. financial advisers fell for the fifth straight year as the industry suffers a continuing wave of retiring veteran advisers ... 

There were roughly 285,000 financial advisers in 2014, a 1.9 percent drop from 2013, according to a report by the Boston-based research group Cerulli Associates. The industry has lost more than 39,000 advisers, roughly 12 percent, since its peak in 2008, when there were 325,000 advisers.

Nearly half of all financial advisers are over the age of 55. Over the next decade, Cerulli expects nearly 100,000 brokers will retire.

A 2014 study by Cerulli Associates found more than one-third of U.S. financial advisors (cited by ThinkAdvisor) plan to retire over the next decade, and more than 237,000 new financial ThinkAdvisorprofessionals will need to be added to keep up with the demand of retiring baby boomers.

Are there opportunities for law graduates within wealth management and financial advisory? 

“The 10,000 baby boomer that reach retirement age each day in America are waking up to the probability that they will outspend their retirement plan designed twenty or thirty years ago, forcing a drastic reduction in quality of life style for the ‘golden years’” revealed William Byrnes, author of National Underwriter’s Tax Facts Library.  Cerulli Research Finds 53% of Advisors Clients are between 50 and 70 Years Old."

Cerulli suggests firms encourage advisor teams to bring in junior advisors and train them in a specific area of expertise in order to increase the success rate of these new recruits. To guard against asset attrition, broker/dealers and custodians need to provide support and resources to help advisors tackle succession planning, and development of internal succession candidates.

Increasing pool of retirement clients, high net wealth individuals, and wealth transfer

“By example, social security increases since Ronald Reagan’s presidency, when many Baby Boomers crafted their family retirement plans, did not keep up with the actual inflation.  Also, baby boomers are outliving their retirement plans by ten or more years”, continued William Byrnes.  “Stretching the retirement savings available for an additional twenty years of life expectancy requires correctly managing the complex retirement taxation rules established by Congress and the IRS."  

Are law graduates prepared to be these advisors?

Robert Bloink added, "Lawyers are just as apt to this advising as accountants and financial planners, but most law students skip over courses in the wealth management field that will prepare them for such positions with firms.”

IRA rollover contributions have reached well over $300 Billion.  Thus, generally baby boomer clients have IRA questions: How are earnings on an IRA taxed? What is the penalty for making excessive contributions to an IRA? How are amounts distributed from a traditional and from a ROTH IRA taxed?  How is the required minimum distribution (RMD) calculated?”

“By example of managing the retirement taxation rules, if the baby boomer engages in a prohibited transaction with his IRA, his or her individual retirement account may cease to qualify for the tax benefits.  Thus, then baby boomer needs to understand what is a prohibited transaction?  When can the baby boomer tax pull retirement funds as a loan from a retirement account or policy without it being prohibited?”

"But very few law graduates that my company interviews studied advanced planning and thus can't sit down with clients to address these tax and financial advisory questions." 

What must law graduates know for these careers?

“For complex modern families with multiple marriages and various children, a retirement and estate planner should analyze the non-probate assets”, interjected George Mentz, Esq. of the American Academy of Financial Management which is mentioned as an association for information on the Department of Labor website.  “Such assets may include the client’s 401k, 403b, 459, annuities, property and joint tenancy, among others.  Regarding insurance policy designations, the client may need to reexamine the beneficiaries, contingent and secondary, and percentages among them, based on current circumstances.

"If law students want a career as a financial advisor or financial analysts-wealth manager, they need to have followed a tailored wealth manager curriculum that, at a minimum, will allow then to both pass a Series 7 after the Bar and to understand wealth planning.  Until that happens, these advisor positions will continue to go to MBAs who have more opportunities to follow either financial planning or wealth management curriculums.”

“Because client’s are outliving their life expectancy and thus outliving their retirement planning, and medical expenses certainly factor into retirement planning, long term care for family members must also be addressed,” said William Byrnes.  "Thus, students interested in these positions need to take estate planning and retirement planning seminars during law school."

“Moreover, recent press has focused client’s attention on tragic incident and end of life issues, such as a durable power of attorney for health care (DPA/HC), living will, or advance directives that explain the patient’s wishes in certain medical situations.  Finally in this regard, a client may require a Limited Powers of Attorney to address situations of incapacity, as well as orderly continuation of immediate family needs upon death.  Again, these are issues that are perfect for an attorney to advise upon." 

Robert Bloink included, “Other important issues to address with the client include pre-marital property contracts/pre-nuptials involving the second marriage(s), IRA beneficiary planning in blended families, spousal lifetime access trust (SLATs), and planning for unmarried domestic partners.”

February 24, 2015 | Permalink | Comments (0)

5 Hot Retirement Planning Topics for 2015

ThinkAdvisor2014 brought about significant changes to the retirement planning landscape for advisors and clients alike, so that we’ve now ushered in a year that will be full of new planning opportunities—and pitfalls.  Whether your client is concerned with maximizing tax-preferred account options, planning for increased longevity or using their retirement accounts as estate planning vehicles, the rules have changed for 2015. 

Here are some of the top retirement planning trends that your clients need to be aware of in order to maximize their retirement account values in 2015 and beyond. ...

read the full article by Byrnes & Bloink at National Underwriter's ThinkAdvisor

February 24, 2015 | Permalink | Comments (0)


ICIJ follow up story - Swiss prosecutors have opened a criminal investigation against HSBC Private Bank, and raided the bank’s Geneva offices for evidence as it probes allegations of “aggravated money-laundering.”

Citing “recent public revelations” about HSBC’s activities in Switzerland, the prosecutor’s office warned that the investigation could extend to individual employees at the bank as it probes whether adequate measures were put in place to prevent criminal activity....

"I decided, following information made public about HSBC bank, to open a criminal investigation and to verify this information. The goal of this investigation is to verify that the information made public is well-founded and if there are, in fact, allegations that can be made against the bank or against people – be they collaborators or clients," Jornot told Swiss media. "The police raid is ongoing and will probably last the whole day."

The raid comes amid growing scrutiny of the bank following ICIJ’s Swiss Leaks investigation. Together with more than 140 journalists from more than 50 media outlets, ICIJ analyzed a series of leaked files based on information taken from HSBC’s Swiss branch and handed to French authorities by former bank employee and IT specialist Hervé Falciani.

February 24, 2015 | Permalink | Comments (0)

Monday, February 23, 2015

February FATCA Updates: GIINs and IDES

GIIN Lists Analysis: June 2014 through February 2015

Since the publication of the U.S. Treasury’s original GIIN list 1 June 2014, Haydon Perryman (FATCA systems designer for several tier 1 financial institutions) and I (primary author, Lexis Guide to FATCA Compliance) have been analyzing on a monthly basis the list that the USA provides of “approved FFIs” (foreign financial institutions).  On 1 February, the IRS published its second 2015 FATCA GIIN list of “approved FFIs” (a list of the financial firms that have registered on the IRS FATCA portal).  

FATCA IGA Scenarios



Model 1A IGA



Model 1B IGA



Model 2 IGA









US Territories









GIIN List (2014/2015)         Total Registrations 

June                             77,354

July                             82,994

August                        95,239

September                  99,861

October                       104,344

November                   116,104

December                    122,881

January                        147,043  

February                      153,797

The original GIIN list released June 2, 2014 contained 77,353 registrations from 205 countries and jurisdictions.[1]  Thus, it required eight months to double the initial FFI registration number.  

Of those June registrations, 74 percent hailed from Model 1 IGAs that had been either signed or recognized by the IRS as agreed in substance.  Approximately 20 percent of the initial FFIs registrations were Cayman Islands firms, and 37 percent of the total from the UK and its Crown dependencies and overseas territories.  

As of 1 February 2015, Cayman Islands, with 28,045, remains the clear FATCA FFI registration leader, which given its financial sector size relative to Germany (3,826 FFIs), Japan (3,627) and China (1,000), is quite surprising. 

On July 1, 2014 the IRS released its second GIIN list. This list contained a disappointing additional 10,000 registrations, bringing the total to 87,993.[2]  82,994 of this total, approximately 95 percent, were from the 98 countries with which, as of July 2014, the IRS signed IGAs.  Only five percent (4,318) of the registrations derived from the remaining non-IGA countries upon which Chapter 4 withholding went into effect on the day of the list’s publication.   It is fair to conclude that as of that time, FATCA registration had not caught on globally.

After the first month of FATCA withholding that began 1 July, the August 2014 GIIN list experienced an unexpected decline in growth of registrations, with only 7,246 additional entities bringing the total registration to 95,239.[3]  Yet, as of this third GIIN list, the IRS increased the amount of IGAs with foreign countries to 101, from which 89,718 institutions (94 percent) registered (even though withholding was suppressed until January 1, 2015).[4]  Thus, FATCA withholding was stalled until January 1, 2015.  Only 4,801 (approximately five percent) registered from the 143 countries and territories without an IGA, leaving multitudes of their FFIs exposed to the 30% withholding. 

September’s GIIN list continued the downward trend in FFI registration growth and did not reach a 100,000 registration mark (99,861).[5]  It was not until after six months of the open registration window (the October 1, 2014 GIIN list) that FFI registration breached 100,000 (104,344 total). 

The November 2014 list saw a jump in registration, led by a significant surge of United Kingdom financial firms, achieving a global total of 116,104 FFIs and branch registrations.[6]  As of November, 43 percent of all registered FFIs were from the U.K., her Crown Dependencies, and Overseas Territories. The December GIIN list released grew by another 6,000 global registrations to 122,881, of which only 6,094 were from non-IGA countries.  Global FFI Registration as of 1 February 2015 stands at 153,797.

153,797 FFI registrations must be viewed in the context that the IRS stated that “… the full FFI list is expected to be less than 500,000 records”.[7]  Moreover, based on upon industry discussions and a review of industry literature of financial institution compliance officers, the Big 4, and upon other revenue authority estimates such as the U.K., it is reasonable to state that more than 500,000 entities are required to register with the IRS, closer to 800,000.

Thus, as of February 2015, it is likely that only an amount of 20 percent to 30 percent of potential FFIs have registered with the IRS to obtain a GIIN.  The primary reason for lack of FFI registrations appears to be one based upon ignorance of the requirement.  Based upon interviews, industry polls, and workshops, many countries’ financial communities still do not have an understanding of FATCA.  As withholding is imposed upon more types of payments from U.S. sources that are currently not included as “withholdable payments”, such as the full amount of a bond redemption, upon the sale price of equities, and upon the sale price of immovables, then the FFIs currently unaware of FATCA will rush to register for a GIIN and move to become compliant with the data collection and reporting requirements.

NAFTA FFI Registration

The initial June 1 GIIN list contained 2,264 FFIs registered from Canada and Mexico at 418.  By November 1, 2014 NAFTA has barely inched forward.  Canada's November 1 GIIN list included an additional 143 registrations, at least breaching the 3,000 mark (3,043, where it remained as of the December list) but with a sizable jump to 4,107 for the 1 February 2015 list.[8]  Mexico, on the other hand, has a lethargic 639 FFI registrations as of 1 February. 

BRIC FFI Registration

BRIC FATCA registration remains disappointing.  For the initial June list, Brazil led the BRIC countries with 2,258 FFI registrations, followed by Russia (514), India (246) with China only having 211.  Based upon the most recent data, the BRIC countries continue to shrug off FATCA.  India and China compete for FATCA lethargy with only 1,000 current China FFIs registered but still more than India that has only 698.  Brazil experienced the largest amount of registration jump to 5,082 as of February 2015, whereas Russia registered 1,072, similar to China’s effort. 

European Financial Center FII Registration

For the first GIIN list, Switzerland had 4,040 registered FFIs, Luxembourg had 3,560, Austria 2,978, Guernsey 2,395, Jersey 1,618, Isle of Man 312, Lichtenstein 239 and Gibraltar only 96.  As of February 2015, Gibraltar reached 2,043, Switzerland increased to 4,747, Luxembourg 7,023, Austria 3,051, Guernsey 3,419, Jersey 4,088, Isle of Man 970, and Lichtenstein 828.

Major OECD Countries FFI Registration

The major OECD trade partners of the U.S. such as France which entered the June GIIN list with only 2,290 registrations have not yet seen robust FATCA registration compliance relative to the size of their financial services industry, but in general experienced significant jumps in the last month of the year for GIIN registrants.  

By the end of 2014, France reached 3,730 (3,755 as of 1 February), Germany went from 2,254 to 3,751 (currently 3,826), Ireland 1,756 to 3,661 (currently 3,764), Netherlands 2,053 to 3,103 (currently 3,204) and Australia 1,864 to 3,067 (currently 3,145).

Caribbean and Atlantic Financial Center FFI Registration

The Cayman Islands remain the global FATCA compliance registration leader with 28,045 FFIs on the GIIN list, 6,000 more registered FFIs than the next country for GIINs, U.K. with 22,022. The June 2014 GIIN list included 1,837 BVI FFI registrations, now at 4,904.  Bahamas has increased from 610 to 906, Bermuda 1,242 to 2,102 and Panama 450 to 795.

FATCA International Data Exchange Services (IDES) Updates

The Internal Revenue Service announces the opening of the International Data Exchange Service (IDES) for enrollment.  Financial institutions and host country tax authorities will use IDES to securely send their information reports on financial accounts held by U.S. persons to the IRS under the Foreign Account Tax Compliance Act (FATCA) or pursuant to the terms of an intergovernmental agreement (IGA), as applicable.

More than 153,797 financial institutions have registered (see analysis of all GIIN registrations by country, trade group, IGA and EAG here) through the IRS FATCA Registration System. The U.S. has more than 110 IGAs, either signed or agreed in substance. Financial institutions and host country tax authorities will use IDES to provide the IRS information reports on financial accounts held by U.S. persons.

Where a jurisdiction has a reciprocal IGA and the jurisdiction has the necessary safeguards and infrastructure in place, the IRS will also use IDES to provide similar information to the host country tax authority on accounts in U.S. financial institutions held by the jurisdiction’s residents.

Using IDES, a web application, the sender encrypts the data and IDES encrypts the transmission pathway to protect data transfers. Encryption at both the file and transmission level safeguards sensitive tax information. 

Host country tax authorities in Model 2 IGA jurisdictions and financial institutions are encouraged to begin the enrollment process well in advance of their reporting deadline. To begin transmitting information in IDES, a financial institution or tax authority will need to first obtain a digital certificate. Digital certificates bind digital information to physical identities and provide data integrity. IDES stores each user’s public key and related digital certificate. All IDES enrollees (including host country tax authorities) must obtain a proper digital certificate in order to enroll; there is a list of approved Certificate Authorities available (see previous post).

For host country tax authorities in Model 1 IGA jurisdictions, the IRS will directly notify them to let them know when it is time to enroll. Financial institutions will initiate enrollment online on their own; in order to enroll, the financial institution will need to have registered as a participating financial institution through the IRS FATCA Registration System and have a global intermediary identification number (GIIN) that appears on the IRS FATCA FFI list. The online address for IDES enrollment can be found here.

IDES runs on all major browsers, including Chrome, Internet Explorer, Safari, and Firefox and will support application-to-application exchanges through the SFTP transmission protocol enabling a wide variety of users to interact with IDES without building additional infrastructure to support transmission.

The FATCA IDES IDES User Guide Publication 5190 was updated in February 2015 and is available online.  This guide is intended to serve as a tool for FIs and Host Country Tax Authorities (HCTAs) who enroll in the International Data Exchange Service (IDES) to transmit FATCA data. The document assumes that the reader is familiar with the FATCA regulations and is experienced with extensible markup language (XML) and schema technology.

The main function of IDES is to provide authorized users with secure exchange services for FATCA data transmissions, with the additional protection of a Public Key Infrastructure (PKI). The primary features of IDES are:

 Enrollment

 Certificate Management

 Account Management

 Secure Data Transmission

 Status of Data Transmission (Alerts and Notifications)

The IDES web application is a secure managed file transfer service that is available to both FIs and HCTAs to facilitate FATCA reporting. This reporting is provided for under U.S. Treasury Regulations, the FFI agreement, Tax Information Exchange Agreements (TIEAs), Intergovernmental Agreements (IGAs), and other guidance issued by the Treasury Department and the IRS that outlines how financial institutions will implement FATCA. The data collected through IDES will be incorporated into IRS compliance operations.

IDES is accessible to enrolled users over the Internet via Hypertext Transfer Protocol Secure (HTTPS) or Secure File Transfer Protocol (SFTP). IDES provides for an end-to-end controlled file transfer with enhanced monitoring and security features. The system only accepts encrypted electronic submissions, and will allow for the transmission of FATCA reporting in the approved FATCA XML Schema v1.1 (FATCA XML).

Authorized IDES users are either FIs or HCTAs. Each authorized user has limited access to the system based on the data flow model described in their agreement with the United States (for example, an IGA or an FFI agreement) or in Treasury regulations. Note that for many IDES users, the IRS is the only valid recipient for files. The table below provides additional information regarding user access based on agreement types.

The FATCA Metadata XML Schema v1.0 User Guide, Publication 5188 is now available online.  This guide is intended to serve as a tool for financial institutions (FIs) and Host Country Tax Authorities (HCTAs) who transmit data through the International Data Exchange Service (IDES). It explains how to prepare and validate the IDES metadata file used in FATCA reporting. The document assumes that the reader is familiar with the FATCA regulations and is experienced with extensible markup language (XML) and schema technology.

Metadata is a collection of data about the content and characteristics contained in the FATCA reporting files. It is used to ensure the data packets are correctly processed. IDES metadata files should never be encrypted. An authorized user should create and validate a metadata file using the FATCA Metadata XML Schema v1.0. An unencrypted metadata file must be included in the data packet (.ZIP). A metadata file can also be generated using a sender metadata template on the IDES Enrollment Site.

read about the Comparison of NAFTA, BRIC, EU and Caribbean of the 8 FATCA GIIN Lists (June 2014 -> January 2015)

The 3rd edition of Lexis' Guide to FATCA Compliance contains 1,200 pages of legal and compliance analysis – manageable over 54 chapters.  70 FATCA compliance experts from tier 1 institutions, former government officials, and professional firms have contributed to this robust compliance guide, filled with numerous practical examples and several chapters written specifically for the non-legal, compliance operations officer.  No filler pages of publicly available documents and regurgitated regulations – it’s all beef.  See the Lexis website to order a copy of this 3rd edition.

[7] IRS FFI List FAQs, FFI List Q7. Available at (accessed February 1, 2015).

February 23, 2015 | Permalink | Comments (0)

Longevity Pegged Annuities - What CPAs Need to Know About the New Rules



Longevity Pegged Annuities - What CPAs Need to Know About the New Rules (William Byrnes & Robert Bloink)

The Treasury Department made sparks fly when it recently issued final regulations governing qualified longevity annuity contracts (QLAC).  

read the full story at CPA Journal of the New York Society of Certified Public Accountants

February 23, 2015 | Permalink | Comments (0)

Sunday, February 22, 2015

EU Capital Markets Plan Raises Concerns On Financial Reporting for Smaller Entities

Bloomberg reports: The European Union's strategy to forge a capital markets union by 2019 poses tough questions about what accounting standards should apply to small and medium sized enterprises, the U.K. Financial Reporting Council said Feb. 18.

The European Commission's Green Paper on the Capital Markets Union “opens the debate around accounting standards for smaller listed entities, an area of keen interest for the FRC,” council CEO Stephen Haddrill said in a statement. ...

The EC is consulting on the green paper through May 13, and is soliciting feedback on whether developing a common EU-level accounting standard for small and medium-sized companies listed on MTFs could prove valuable. ...

The commission also is asking if such a standard could become a feature of SME Growth Markets.

read the Bloomberg story

February 22, 2015 | Permalink | Comments (0)

The IRS's Fresh Start Initiatives Have Benefited Many Taxpayers, But Additional Monitoring and Evaluation is Needed

TigtasealThe Internal Revenue Service (IRS’s) Fresh Starts Initiatives has helped thousands of struggling taxpayers resolve their outstanding tax liabilities.  However, if the potential risks are not mitigated, revenue collection could be jeopardized.  That is the conclusion of a new report by the Treasury Inspector General for Tax Administration (TIGTA).

In 2009, the IRS announced some existing and new alternatives available to taxpayers facing financial challenges and having difficulties paying their balance due accounts because of the declining economy.  In February 2011, the IRS began implementing the first of several initiatives to assist economically distressed taxpayers by offering viable collection alternatives to help resolve their delinquent balance due accounts.  These initiatives are known as the Fresh Start Initiatives and include policy changes to installment agreements, offers in compromise, and Notices of Federal Tax Lien (NFTL).

This audit was initiated to determine the impact of the Fresh Start Initiatives in promoting tax compliance.

TIGTA found that the IRS’s implementation of the Fresh Start Initiatives provided several benefits to thousands of taxpayers.  For example, the number of NFTLs filed on taxpayers with assessed liabilities below $10,000 decreased 60 percent, from 488,378 in Fiscal Year (FY) 2010 to 195,009 in FY 2013.  Many other taxpayers benefited from streamlined procedures for processing installment agreements and offers in compromise.  In addition, penalties were not assessed on certain taxpayers who requested a filing extension.

Although the Fresh Start Initiatives were generally implemented effectively, additional attention should be given in several areas.  For example, 524 taxpayers, who owed approximately $10.5 million, defaulted on their direct debit installment agreements after the IRS had withdrawn the NFTLs, yet the IRS did not file new NFTLs.  In addition, the IRS has not fully assessed the revenue impact of filing fewer NFTLs.  Performance measures may have helped identify potential problems and areas for improvement, but those measures were not established for all of the initiatives.

TIGTA recommended that the IRS:  1) File new NFTLs for the 524 taxpayers who defaulted on their direct debit installment agreements after their NFTLs were withdrawn; 2) establish controls to ensure that new NFTLs are filed on taxpayers who default on their direct debit installment agreements; 3) assess the long-term revenue protection impact of the Fresh Start Initiative that increased the minimum dollar threshold for NFTL determinations in Field Collection; and 4) establish methods to monitor and assess the performance of the Fresh Start Initiatives.

IRS management generally agreed with TIGTA’s recommendations.  They plan to review case files and take action when appropriate for the 524 taxpayers, determine the viability of making a systemic enhancement or procedural changes for filing new NFTLs, and initiate a research request to evaluate potential revenue protection impact on NFTL filing determinations.

Although IRS management agreed that there should be established methods to assess performance, they stated that their limited information technology resources prevent them from submitting or completing a work request at this time.

Read the report.


February 22, 2015 | Permalink | Comments (0)

Saturday, February 21, 2015

Does winning the lottery lead to riches and stable wealth?

Does winning the lottery lead to riches and stable wealth?  Not for the 21 lottery winners who are now insolvent....

"In fact, many people's lives became notably worse after they got super rich, and they managed to lose it all quite quickly." Read more:

February 21, 2015 | Permalink | Comments (0)