• Friday, August 01, 2014

American Citizens, Firms in Bangladesn

US flexes muscles to know account info

Sajjadur Rahman

Bangladeshi banks have come under pressure from the United States to send account information on American citizens or foreign companies where US investors have at least 10 percent ownership.
If any local bank fails to report to the US Internal Revenue Service (IRS), the bank's money at Nostro accounts in the US will be withheld. Local banks maintain the accounts with American banks to facilitate settlement of foreign trade.
Bankers fear if local banks comply with the US regulation, it will directly affect deposits and investments by non-resident Bangladeshis, who are also taxpayers in the US. Moreover, the local banks have to do the task at their own cost.
The Daily Star has talked to half a dozen bankers who said the move would not only cost them money but also time for collecting data from millions of account holders. Some of them said an officer has been engaged in each branch to do the job.

The US seems to be oblivious of the trouble the local banks have to take for doing the job, said a chief executive officer of a bank, asking not to be named.
Bangladesh Bank issued a notice on January 16, asking all banks to report to the IRS, US government agency responsible for tax collection and tax law enforcement.
“This obligation can alternatively be discharged at individual bank level by registering and signing participation agreements with the IRS,” BB said.
“The National Board of Revenue also consented on registering with the IRS if a bank has US taxpayer accounts,” it said.
The US started putting pressure on foreign financial institutions (FFI) to send it information after enacting a special law, Foreign Account Tax Compliance Act (FATCA), in March 2010 to check tax evasion by US citizens and entities residing or doing business in foreign countries.
The US tax authority had previously extended the registration deadline three times to give breathing space to FFIs for complying with the FATCA. It set July 1 this year as the final deadline for the FFIs to get registered with the IRS.
The latest development has rattled the local banking industry. Banks are confused over disclosing data of account holders, as it will breach their confidentiality ensured by the country's banking law.
“We got registered with the IRS after the central bank instructed us to do so in a circular,” said Helal Ahmed Chowdhury, managing director of Pubali Bank.
Golam Rabbani, deputy managing director at Al-Arafah Islami Bank, said, “From a bank's point of view, the consequences of non-compliance of the FATCA could be far reaching,”
If a local bank fails to comply with the FATCA, 30 percent tax from any payment to the bank's Nostro accounts in the US will be withheld, said Rabbani.
“This could be any payment that we receive from an US source.”
Some bankers have criticised the US move, saying it would be tough for them to collect data on US citizens and send it to the IRS at their own cost.
According to the IRS website, an FFI will receive a notice of acceptance after registration and approval. It will also be given a Global Intermediary Identification Number.
The IRS will post the list of registered FFIs on its website by June 2.
After that date, non-registered FFIs will face punitive action, including withholding of tax on certain payments.

Published: 12:01 am Wednesday, May 14, 2014

Last modified: 9:40 pm Wednesday, May 14, 2014

TAGS: Bangladeshi banks American Citizens Firms in Bangladesh US Internal Revenue Service (IRS) Nostro accounts foreign financial institutions (FFI)

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