FATCA challenge shot down, HK still suffers

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Anyone opening a business bank account for even the smallest start-up in Hong Kong knows about FATCA forms, imposed on us by American regulators. An update on a challenge to this American made ball-and-chain on global banking and business.


The money keeps rolling in for FATCA lawyers and accountants while SMEs suffer.

Lawyers, accountants and consulting firms in Hong Kong servicing individuals or institutions with reporting obligations under the Foreign Account Tax Compliance Act (FATCA) are celebrating this week’s dismissal of a court challenge to the law.

Start-up entrepreneurs, business people, and Americans in Hong Kong however, will find no joy in this announcement. With Hong Kong banks finding it more onerous and harder to approve opening accounts due to FATCA compliance, this far-away law is making life difficult here. HT follows this issue and Ross Feingold provides this update.


Rand-y day in Court

In a ruling dated April 25, 2016 (1), the United States District Court for the Southern District of Ohio dismissed a challenge (2) by Senator Rand Paul and several other plaintiffs seeking declaratory and injunctive relief against enforcement of the Foreign Account Tax Compliance Act (FATCA), intergovernmental agreements entered into under FATCA, and the Report of Foreign Bank and Financial Accounts (FBAR) administered by the US Treasury’s Financial Crimes Enforcement Network. The court determined that the plaintiffs lacked standing to sue.

In his ruling, District Judge Thomas S. Rose wrote that the plaintiffs hadn’t shown that the law had harmed them or probably would harm them, and therefore the plaintiffs lacked standing, and that the plaintiffs failed to fix the problems identified (3) by the judge when he refused to issue an injunction against FATCA’s provisions last September (4). At the time, commentators noted the difficulty the plaintiffs would have in overcoming these issues (5), with some experts going so far as to say that the pursuit of the case is more a way to make a statement and perhaps encourage those who can be encouraged by such futile statements to make contributions (6).


Americans abroad not happy, verbally Bopp judge

James Bopp, Jr., the lead lawyer for the plaintiffs and general counsel for Republicans Overseas, issued a press release criticizing the decision (7). “The Court refused to permit us to amend the complaint to fix the Court’s alleged problems it found originally in our complaint and then dismissed our case. The Court’s theory is that it is the fault of the banks for refusing to do business with American citizens, not the fault of FATCA which causes the banks to do it. This is like blaming the bank cashier for robbing the bank when the robber puts a gun to her head and she gives him the bank’s cash. That cannot be correct.”

Bopp is a prominent conservative lawyer known for his work in opposition to same sex marriage (8) and as the general counsel to the National Right to Life Committee (8). The lawsuit was funded in part by Republicans Overseas Action, Inc., an Indiana-based 501(C)(4) organization that can collect unlimited confidential individual or corporate contributions. Republicans Overseas Action shares an address and several officers with Republicans Overseas, Inc., whose contributors and itemized expenditures are available in its Internal Revenue Service filings. For example, Republicans Overseas Vice Chairman Solomon Yue was paid consulting fees of US$10,000 in 1H2015 (9) and US$40,000 2H2015 (10); Yue is also Vice Chairman and CEO of Republicans Overseas Action (11) and a veteran member of the Republican National Committee (12).

Republicans Overseas Action opposes the ‘same country safe harbor’ (SCSH) proposed by Democrats Abroad (13) and other advocacy organisations, describing FATCA and SCSH as combining to turn expatriates into “the 2nd class citizens subject to discrimination by foreign banks” (14).

The lawsuit’s dismissal came days after Yue made news for a failed proposal (15) to change the upcoming Republican convention’s rules to Robert’s Rules of Order from the convention rules used for decades, which are based on the rules of the House of Representatives. Republican National Committee chairman Reince Priebus opposed Yue’s proposal, with Yue accusing the RNC of “institutional tyranny” for trying to impede it (16).

The Bopp Law Firm’s press release indicated that further action is upcoming, stating that “The decision is expected to be appealsed. [sic]”

FATCA opponents hope their luck, and spelling, improve in future court submissions.