Treasury starts talks with more than 50 new jurisdictions, hoping to add to its growing list of FATCA signatories.

Celebrating an achievement probably nobody but themselves thinks is all that great, US Treasury officials today announced that the department had engaged more than 50 new jurisdictions that it hopes will comply with the Foreign Account Tax Compliance Act (FATCA).

FATCA of course is the measure US tax authorities came up with to “improve international tax compliance and implement the information reporting and withholding tax provisions.” The Treasury said widening the broad coalition of world governments to implement FATCA was an “important milestone in establishing a common intergovernmental approach to combating tax evasion.” It’s a controversial law with some observers saying the amount of avoidance pales compared to the cost of compliance.

Treasury has already concluded a bilateral agreement with the United Kingdom and is in the process of finalizing an intergovernmental agreement with France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway. These countries it hopes will be looped in by year end.

Treasurers already know FATCA will be an onerous, labor-intensive, paperwork monster that they’ll have to deal with in the coming years. That Treasury is adding more adherents is nothing to celebrate. As IT pointed out in October, treasurers have been bracing to field requests for information from different banks, and in some cases different parts of the same banks that are barred from sharing information by privacy laws. Generally the confluence of FATCA and the great heaping of post-financial crisis regulatory changes has raised some disturbing possibilities.

For example, Systematically Important Financial Institutions (SIFIs) that are generating living wills and Basel III-compliant risk management approaches must begin to evaluate their activities along legal entity lines, rather than business lines. This means that all assets—including client records—will have to be assigned ownership by specific legal entities.

The one silver lining lately is that Treasury announced at the end of October that it was postponing FATCA-related deadlines to a staggered start between January 1, 2014 and January 1, 2017. Prior to the announcement, many lending, derivative and capital market transactions entered into prior to 1 January 2013 were to be “grandfathered,” and potentially, never subject to FATCA withholding or compliance. Now that date has been extended:

• Gross proceeds withholding pushed back two years to January 1, 2017 from January 1, 2015.
• Grandfathering protection from pass-through withholding extended to July 2013 (at the earliest; some say it might not be green lighted at all) from January 1, 2013.
• The posting of collateral under a grandfathered derivative will now itself be grandfathered.
• FATCA reporting dates for IGA and non-IGA FFIs now aligned (January 1, 2014 instead of 1 January 2013.

Despite the delays, it is certain to cause grumbling in treasurers everywhere (and triumphant milestone celebrating at the US Treasury). Treasury said the jurisdictions with which is actively engaged include: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden. It expects to be able to conclude negotiations with several of these jurisdictions by year end.