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Much like the war on terror or the war on drugs, the US government is engaged in a War on Bank Privacy. Much like other wars of ideology, they cannot win in the long run unless they fight with better ideas, regardless of the conventional battles they fight and “win.” They can, however, make it very uncomfortable in the short term.
Recent Developments In The War On Bank Privacy
The War on Bank Privacy has been extended recently with the aggressive pursuit by the IRS of holders of undeclared overseas accounts. This pursuit has prompted the IRS to make plans to open offices in Beijing, Sydney and Panama City. That is not exactly “internal” now is it. Attorney William Sharp has also commented recently that “the IRS is going global…the days of bank secrecy are over.” Although the IRS has long required disclosure of your foreign bank accounts by filing an FBAR, the power of the IRS to discover “tax evaders” has grown and will continue to grow.
The amnesty period for reporting previously undeclared accounts to the IRS, which recently expired, is reported to only have only prompted 2% of total undeclared overseas account holders to voluntarily disclose their assets to the IRS. This means that those who chose not to “voluntarily disclose” their accounts will be subject to severe monetary fines and possible criminal prosecution.
These strict penalties will also apply to those who open foreign bank accounts and fail to meet the reporting requirements in the future. The purpose of vanishing is not to evade taxes. All laws and regulations should be complied with at all times regarding disclosure of foreign assets and income. You cannot completely vanish from the government without breaking the law or renouncing your citizenship.
Reaction To Bank Privacy Laws
The laws of some other countries have in the past allowed Americans to exercise their right of privacy, even though the US government does not allow people subject to US law to recognize the right to privacy in banking. This conflict, and the aggressive nature of the IRS in pursuing “tax evaders” in recent months, has prompted some Swiss banks to cease doing business with American citizens. It is likely that other countries will do the same and succumb to the same pressure from the US. The questions then become, which idea is better, bank privacy or required disclosure, and how long will it take for the better idea to win out.
Conclusion
The fundamental right of freedom of contract and the right to privacy are in direct opposition to the policies of the War on Bank Privacy. Although some countries around the world recognize these rights, the might of the US has forced them, and will continue to force others, to refuse to defend that right. Although the better idea will eventually prevail, it may take time and effort to overcome the obstacles that stand in the way. Understand the threats of US law and the remaining bank privacy havens around the world in this bank privacy report.
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