Lebanese banks are ready to give up their financial secrets about wealthy US clients under the Foreign Account Tax Compliance Act (FATCA).
Often referred to as the ‘Switzerland of the Middle East’, Lebanon has long fostered a lucrative but confidential business relationship with wealthy Americans who would rather keep their finances out away from the prying eyes of the Internal Revenue Service (IRS).
FATCA laws due to come in to force in 2013 have turned the tables on Lebanese bankers who must comply with laws demanding they supply names and financial details of US passport holders or organisations controlled by US passport holders direct to the IRS.
Failure to do so means an offending bank will be fined, blacklisted and banned from trading in the US.
To try and save face and maintain the confidentiality of non-US customers, Lebanese banks intend to ask them to sign a waiver that lets the bank release their account details to the IRS.
Although many of the banks are clearly disgruntled by the laws, most see no option other than to comply as being cut-off from one of the world’s largest financial markets is not a prudent choice.
Lebanon’s Central Bank Governor Riad Salameh said that the law “only affects” U.S. citizens.
“This law will have no bearing on Lebanese nationals or other nationalities. We are preparing a mechanism to implement the US action in accordance with the Lebanese law and in a way that will not affect the banking secrecy law,” he said.
Besides reporting financial transactions of US passport holders, FATCA also imposes an obligation on non-US banks to withhold 30% tax on disposals of some assets.
FATCA laws apply to accounts with US$50,000 or more on deposit. Some banks serving few US clients are asking them to close their accounts so they do not have to take on the cost of FATCA compliance.
Want to know about FATCA then read our basic guide, click here