Financial privacy is essentially dead.
I think it’s only prudent to assume that sooner or later all the details of your financial life will come to rest in a government computer—if they haven’t done so already—and to plan accordingly.
We live in a world where pretty much every penny you earn, save, and spend is stored in a permanent record somewhere and can be retrieved for scrutiny one day if needed.
It’s not a comfortable or happy thing. But no matter how unpleasant it is, I believe it’s a reality we have to face.
Knowing that you are financially naked and exposed to an insolvent government hungry for revenue might make you feel like you just ate rat poison for lunch.
That said, don’t be tempted to try to illegally hide your income and skirt reporting requirements. It’s a fool’s errand. The draconian penalties make a cost/benefit analysis easy… don’t even think about it.
An Inescapable Global Dragnet
FATCA is at the vanguard of the global trend for the automatic reciprocal exchange of financial information between governments.
In case you don’t know, FATCA, the Foreign Account Tax Compliance Act, is the wildly unpopular law that forces every financial institution in the world to report information about their American clients to the US government, which imposes huge costs on those financial institutions. In effect, FATCA causes every foreign bank to become unpaid agents of the IRS.
The US is in a position to enforce an extra-territorial law only because it controls the world’s reserve currency and has threatened to effectively cut off access to the US financial system for those who do not comply.
This is why a country like Mexico could never impose its own version of FATCA on the world. Not many would care about losing access to the peso-based Mexican financial system.
This success has unfortunately inspired other bankrupt countries to band together and push for a sort of FATCA on steroids. This is where the OECD’s plans for a “global standard†of automatic information exchange—informally known as GATCA—comes in.
