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Front Page » Top Stories » Tax Haven Crackdowns Concern Latin American Bankers

Tax Haven Crackdowns Concern Latin American Bankers

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Written by on November 17, 2011

By Scott Blake
Regulatory crackdowns on banking tax havens are weighing heavy on the minds of international bankers, as evidenced at this week’s Latin American Federation of Banks annual assembly in Miami.

Spurred by the US financial crisis that started in 2008, such reforms were a topic of discussion among the gathering of about 1,500 banking industry representatives from 50 countries.

"The war drums are still beating," said Frank Robleto, president of the Florida International Bankers Association, referring to regulatory efforts in his address Monday to the group at downtown’s Intercontinental Hotel.

Of particular concern is the Foreign Account Tax Compliance Act, or FATCA.

Enacted last year with a compliance deadline of Jan. 1, 2013, the measure requires US taxpayers holding foreign financial assets exceeding $50,000 in value to report certain information about those assets directly to the Internal Revenue Service.

The measure also requires foreign financial institutions to report directly to the IRS certain information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership stake.

Foreign bankers are concerned the measure will drive away overseas deposits by the US customers, and they are seeking strategies to continue to attract US investments, said Richardo Anhesini Souza, head of markets in Sao Paulo, Brazil, for auditing and consulting firm KPMG.

"I think resisting is not an option," said Mr. Souza, whose company, a sponsor of this week’s banking conference, is providing advice to financial institutions on the issue.

In July, federal officials announced plans to phase in the FATCA requirements.

The measure "is an important development in US efforts to combat offshore noncompliance," IRS Commissioner Doug Shulman said in a statement. "At the same time, the IRS recognizes that implementing FATCA is a major undertaking for financial institutions."

Meanwhile, similar US regulatory efforts were a topic of debate last week in Washington, where all 27 members of Congress from Florida are opposing an IRS proposal to also collect details about foreigners who deposit money in US banks.

Sunshine State lawmakers and the Florida Bankers Association fear the proposal could cost Florida banks, especially those in Miami and South Florida, billions in foreign deposits.

The US Treasury Department, on the other hand, contends that knowing more about foreign deposits in US banks would enable the regulators to trade information with other nations, which would help hunt down tax evaders costing the US as much as $100 billion a year.

During his address at the Miami banking conference, Mr. Robleto said the financial crisis that spurred the regulatory reforms is continuing, marked by still-declining real estate values in many US markets.

"We meet this year in the midst of a long and tiring financial crisis," he said.

The situation has spurred the most drastic regulatory reforms since the Great Depression of the 1930s, Mr. Robleto said, noting that the International Monetary Fund recently warned that the US economy will fall back into recession unless policymakers take substantial action.

"We, as an industry, perhaps have become overregulated," he added.

The Latin American Federation of Banks’ annual assembly has been held in Miami since 1997, as the city is considered the financial capital for Latin America, said Serge Elkiner, president and founder of Yellowpepper, a Miami-based firm that provides mobile banking consulting services.

"Many of the management offices [for the Latin American financial sector] are here," Mr. Elkiner said.

In February, the increased regulatory environment for banks will be a focus of the Florida International Bankers Association’s annual Anti-Money Laundering Compliance Conference, also to be held at the Intercontinental Hotel.

The impact of FATCA also will be discussed then.

"FATCA is here to stay," a statement from the association about the conference reads.

"US and foreign financial institutions affected by FATCA will need to implement best practices in their FATCA compliance programs quickly and efficiently in this new high-risk environment to avoid steep penalties, including a 30% withholding tax on certain US-sourced payments."To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.

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