FATCA – The Long Arm of the Tax Man
A decade after FATCA reshaped global finance, the law’s reach extends further than ever—and so do its contradictions.
In the summer of 2017, a man identifying himself as an American stock manipulator walked into the Budapest offices of Loyal Bank Ltd. and asked to open several accounts. He wanted his name kept off the paperwork, he explained, even though he would be the true owner of the funds. The bank’s chief business officer, Adrian Baron, saw no problem with this arrangement. When the client returned a month later—this time in Miami—and specifically mentioned his need to circumvent IRS reporting requirements, Baron reportedly joked that he could see “no U.S. involvement” in the corporate accounts. The client, of course, was an F.B.I. agent. Baron became the first person ever criminally convicted for violating FATCA.
Seven years earlier, when President Obama signed the Foreign Account Tax Compliance Act into law, its architects envisioned a global dragnet for tax evaders. The premise was straightforward, if breathtakingly ambitious: require every financial institution on earth to identify American account holders and report their assets to the Internal Revenue Service, or face exclusion from the U.S. financial system. The stick was a thirty-per-cent withholding tax on all American-source payments to non-compliant institutions—a penalty severe enough to make even the most secretive Swiss banker reconsider his commitment to discretion.
A decade later, FATCA has reshaped the architecture of international finance. Some hundred and thirteen countries have signed intergovernmental agreements with the United States. The first criminal convictions have been secured. Banks that once advertised their opacity as a selling point have paid billions in fines. And yet the law remains as controversial as ever—a monument to American extraterritorial ambition that has managed to unite Swiss bankers, European privacy regulators, and millions of expatriates in shared grievance.
The mechanics of FATCA are deceptively simple. Foreign financial institutions must identify accounts belonging to “U.S. persons”—a category encompassing citizens, green-card holders, and certain corporate structures—and file annual reports detailing balances, interest, dividends, and other income. American taxpayers with foreign assets exceeding fifty thousand dollars (or two hundred thousand for those living abroad) must file Form 8938 with their tax returns. Companies with even ten-per-cent American ownership must disclose their U.S. shareholders.
The law’s global reach depends on a web of bilateral agreements. Under “Model 1” arrangements, foreign institutions report to their own tax authorities, which then share data with the I.R.S. Poland signed such an agreement in 2014, conscripting its banks, brokerage houses, and insurance companies into service as unpaid informants for the American treasury. “Model 2” agreements require institutions to report directly to Washington. Switzerland—historically the exemplar of banking discretion—operated under Model 2 for years before announcing, in a quiet capitulation, its transition to Model 1 beginning in January, 2027.
The human trafficking metaphor that privacy advocates sometimes invoke is hyperbolic, but not entirely without merit. FATCA effectively deputizes the world’s financial institutions as enforcement agents for American tax policy, at their own expense. Estimates suggest that major global banks spend between fifty and a hundred million dollars annually on combined FATCA and Common Reporting Standard compliance. For smaller institutions, the calculus often favors a simpler solution: refuse American clients entirely.
The law’s most spectacular successes have come in the realm of institutional prosecution, where the sums involved approach the sublime.
Credit Suisse, the venerable Swiss institution founded in 1856, has proved a particularly recalcitrant offender. In May, 2014, the bank—the parent company itself, not some expendable subsidiary—pleaded guilty to operating an illegal cross-border banking business. The conduct was brazen: Credit Suisse had actively solicited American clients for undeclared Swiss accounts, employed managers as unregistered investment advisers, helped falsify I.R.S. forms, destroyed account records, and weaponized Swiss secrecy laws to obstruct investigations. The fine was two billion six hundred million dollars, then the largest ever imposed on a foreign financial institution for tax-related offenses.
One might have expected this experience to concentrate minds in Zurich. Instead, Credit Suisse appears to have learned nothing. On May 5, 2025, Credit Suisse Services AG pleaded guilty to conspiring to hide more than four billion dollars from the I.R.S. across at least four hundred and seventy-five offshore accounts, maintained primarily through Singapore operations, between 2014 and June, 2023. The bank had committed new crimes while violating the terms of its 2014 plea agreement. Personnel fabricated documents, processed fictitious donation forms, and managed over a billion dollars in accounts showing no evidence of tax-compliance efforts. UBS, which absorbed Credit Suisse in 2023 after the bank’s collapse, paid five hundred and eleven million dollars to resolve the matter—describing it, with admirable understatement, as “another of Credit Suisse’s legacy challenges.”
The fate of Wegelin & Co. offers a more definitive cautionary tale. Founded in 1741, Wegelin was Switzerland’s oldest private bank—an institution that had outlasted the French Revolution, two world wars, and the rise and fall of multiple monetary systems. It did not survive FATCA.
After American authorities targeted UBS in 2009, Wegelin’s senior management made a strategic decision that, in retrospect, appears almost comically ill-advised: they would capture the illegal business that UBS had been forced to abandon. The bank marketed its lack of U.S. offices as protection against American law enforcement. Employees assured clients that undeclared accounts would remain confidential, citing Wegelin’s “long tradition of secrecy.”
The bank’s leadership believed that purely Swiss operations immunized them from American prosecution. They were mistaken. Wegelin maintained a correspondent account at UBS in Stamford, Connecticut, through which it issued checks to repatriate concealed funds for American clients. This modest Connecticut connection provided the jurisdictional hook for criminal charges. In January, 2013, Wegelin pleaded guilty to helping more than a hundred Americans hide one billion two hundred million dollars over nearly a decade. The bank paid approximately seventy-four million dollars and announced its immediate closure—the first foreign financial institution to plead guilty to U.S. tax-evasion charges, and, as it turned out, the last to bear the Wegelin name.
Adrian Baron’s conviction, secured in September, 2018, represented something new: individual criminal liability for FATCA violations. The prosecution revealed the methodical patience characteristic of modern financial-crime investigation.
The F.B.I. agent’s initial contact came in May, 2017—a recorded telephone call expressing interest in Loyal Bank’s services. A month later, at the Budapest office, the agent explicitly identified himself as a U.S. citizen involved in stock manipulation, requesting account structures that would obscure his beneficial ownership. Baron obliged. In July, meeting in Miami with Baron and the bank’s C.E.O., Linda Bullock, the agent specifically described his need to evade I.R.S. reporting requirements. After Bullock left the room, Baron made his joke about seeing no American involvement—a quip that would later feature prominently in court documents.
Baron, a Hungarian resident and British citizen, was arrested in Budapest and extradited to the United States in July, 2018. He faced up to five years in prison. Prosecutors emphasized the deterrent message: the sentence “should send a strong signal to offshore banks and bankers about the importance of complying with FATCA.” Loyal Bank entered liquidation the following month.
The investigation swept up a broader network: London-based Beaufort Securities Limited, related entities in Mauritius and Belize, and multiple individuals. Panayiotis Kyriacou, a former Beaufort investment manager, pleaded guilty to conspiracy charges. Arvinsingh Canaye, former general manager of Beaufort Management Services in Mauritius, admitted to money laundering.
For individual American taxpayers, FATCA’s penalty structure ascends with Dantean precision through circles of increasing severity.
Failure to file Form 8938 incurs an initial penalty of ten thousand dollars per unfiled return. Continued non-compliance after I.R.S. notification adds ten thousand dollars for each thirty-day period, capped at fifty thousand annually. The maximum exposure: sixty thousand dollars per year, plus a forty-per-cent penalty on any tax underpayment attributable to undisclosed foreign assets.
FBAR violations—failures to report foreign accounts on FinCEN Form 114—carry separate penalties. For non-willful violations, the I.R.S. may assess up to $16,536 per unfiled form (the 2025 inflation-adjusted figure). The Supreme Court’s 2023 decision in Bittner v. United States clarified that penalties apply per form rather than per account—a distinction that matters considerably when a taxpayer holds multiple foreign accounts across several years. Before Bittner, the I.R.S. had assessed ten thousand dollars per unreported account, generating exposure exceeding two million seven hundred thousand dollars for taxpayers with diversified international holdings.
Willful violations inhabit a different category entirely. The penalty is the greater of $165,353 or fifty per cent of the account balance—assessed per violation and potentially per account. Criminal prosecution remains available for the most egregious cases: up to five years’ imprisonment for tax evasion, five to ten years for FBAR violations, depending on severity.
The I.R.S. offers amnesty programs for taxpayers demonstrating non-willful conduct. The Streamlined Foreign Offshore Procedures, available to Americans residing abroad, require filing three years of delinquent or amended returns, six years of FBARs, and payment of back taxes with interest. No penalties apply—complete amnesty for those who qualify. The Streamlined Domestic Offshore Procedures, for U.S. residents, impose a five-per-cent penalty on the highest aggregate balance of foreign assets during the six-year FBAR period. Both programs require certification that failures resulted from negligence rather than intent. False certifications carry perjury liability.
The contradictions embedded in FATCA become most apparent when viewed from Brussels.
The Belgian Data Protection Authority issued landmark rulings in 2023 and April, 2025, determining that FATCA data transfers to American authorities violate the General Data Protection Regulation. The violations identified were numerous and fundamental: FATCA’s vague references to “tax evasion” lack the precision required by GDPR’s purpose-limitation principles; automatic transfer of comprehensive tax data absent any indication of actual fraud constitutes disproportionate collection; account holders receive insufficient information about data processing and their rights; institutions failed to conduct mandatory data-protection impact assessments; transfers lack adequate safeguards for international data flows.
The authority ordered Belgian tax officials to achieve GDPR compliance within one year—a directive that, if taken seriously, would require either substantial modification of FATCA’s automatic bulk-transfer framework or suspension of Belgium’s intergovernmental agreement with the United States.
On November 26, 2025, the Brussels Court of Appeal referred thirteen preliminary questions to the Court of Justice of the European Union. The referral requests definitive guidance on whether E.U. member states may rely indefinitely on GDPR grandfathering provisions for pre-2018 international agreements; whether FATCA transfers qualify as lawful under GDPR’s legal-obligation exception; and whether the E.U.-U.S. Data Privacy Framework adequately safeguards transferred data.
The C.J.E.U.’s eventual ruling could fundamentally destabilize FATCA implementation across Europe. If the court applies its previous jurisprudence prohibiting “general and undifferentiated” collection of personal data without strict necessity, FATCA’s automatic reporting framework likely fails proportionality analysis. Such a ruling would force either substantial framework modifications—restricting automatic exchanges to cases of suspected evasion—or risk termination of U.S.-E.U. FATCA agreements.
Jenny Webster, a former American citizen whose data British tax authorities transferred to the I.R.S. between 2016 and 2020, has initiated litigation challenging FATCA transfers under U.K. data-protection law. The case continues, with implications extending beyond Britain’s borders.
In March, 2022, a French court ordered Banque Rhône-Alpes to pay fifteen thousand euros in damages, five thousand in costs, and fifteen hundred euros in daily fines for failing to correct erroneous FATCA reporting. The bank had incorrectly classified a Canadian-born client as a U.S. person despite multiple correction requests and documentary proof to the contrary, transmitting false data to American authorities over several years.
Perhaps FATCA’s deepest irony lies in American exceptionalism of a different sort.
The United States demands comprehensive financial transparency from the rest of the world while declining to participate in the very system it inspired. The Common Reporting Standard, developed by the O.E.C.D. on the FATCA model and now encompassing more than a hundred jurisdictions, facilitates multilateral automatic exchange of account information among participating countries. The United States has not joined.
American financial institutions do not report account-balance information to foreign governments—the single most valuable element that foreign institutions must disclose to the I.R.S. This asymmetry is not accidental; it reflects domestic banking-privacy laws and Congressional resistance to imposing on American institutions the burdens FATCA mandates for foreign ones.
The consequences are predictable. Delaware offers corporate structures without beneficial-ownership disclosure requirements. Nevada and Wyoming provide similar opacity. South Dakota has emerged as a global trust center, with assets exceeding six hundred billion dollars. The Tax Justice Network’s 2023 Financial Secrecy Index ranked the United States third globally—behind Switzerland and Singapore, but ahead of the Cayman Islands and Luxembourg.
Approximately ninety-five countries—nearly forty-six per cent of the world’s sovereign states—remain outside FATCA’s network entirely. Some are traditional offshore centers protecting their financial-services industries: Monaco, Andorra, Belize, Vanuatu. Others face American sanctions or diplomatic estrangement: North Korea, Syria, Iran, Cuba, Russia. The largest category comprises developing nations lacking the technical infrastructure or sufficient American investment flows to justify compliance costs.
China presents a particularly significant gap. Listed as having an “agreement in substance” since 2014, formal implementation remains incomplete. Major Chinese banks have voluntarily adopted FATCA-equivalent procedures to maintain U.S. market access, operating in practical uncertainty while negotiations continue.
The State Department estimates that approximately nine million American citizens live abroad. For many, FATCA has transformed routine financial activities into compliance ordeals.
Banks across Europe increasingly refuse accounts to anyone holding American citizenship or a green card, viewing such customers as excessive compliance risk—a practice known as “de-risking.” Democrats Abroad estimated in 2014 that roughly a million Americans overseas had accounts closed because of FATCA. The problem has not improved.
“Accidental Americans”—individuals who acquired U.S. citizenship through birth on American soil but departed as infants or young children—report systematic discrimination. Financial institutions close accounts, deny mortgages, refuse life-insurance policies, and withhold business credit. Some report career limitations: employers declining to promote them to positions requiring banking relationships they cannot maintain.
The reporting burden is substantial: Form 8938 for FATCA, FinCEN Form 114 for FBAR, Form 5471 for controlled foreign corporations, Form 8865 for foreign partnerships. The complexity generates its own compliance industry.
Renunciations of American citizenship rose from approximately seven hundred fifty annually before FATCA to five or six thousand at peak. Recent years have seen the number fall to two or three thousand—partly because of the $2,350 fee and months-long consular queues, not because the underlying grievances have been addressed.
The 2016 Republican platform contained an explicit promise to repeal FATCA. “Republicans call for repeal of the Foreign Account Tax Compliance Act,” it declared, citing the law’s burden on Americans abroad and its violation of privacy principles.
Donald Trump’s first term produced no changes. His return to office in January, 2025, theoretically reopened possibilities, but the administration has shown no interest in the issue. Tariffs, immigration, deregulation in other sectors—these command attention. FATCA does not.
More realistic than repeal are incremental modifications: relaxed reporting thresholds, simplified forms, expanded exceptions for low-income taxpayers. Such changes might pass Congress as technical corrections, avoiding the political debate that wholesale repeal would require.
The fundamental unknown remains the C.J.E.U. ruling on Belgian data-protection challenges. A decision applying strict proportionality requirements could force renegotiation of intergovernmental agreements across the European Union—or their suspension.
FATCA has proved more durable than its critics predicted. It established valuable infrastructure for international tax cooperation while generating extraordinary contradictions: a law demanding global transparency from a country that remains the world’s premier destination for undisclosed wealth; criminal prosecutions of foreign bankers alongside continued American banking secrecy; privacy violations in the name of tax compliance.
The Swiss bank that believed it could outlast American enforcement now exists only in history books. The Budapest banker who joked about seeing no American involvement discovered that American involvement sees everywhere. And nine million expatriates continue navigating a system designed to catch wealthy tax evaders but experienced primarily by ordinary people trying to maintain checking accounts.
The long arm of the tax man reaches further than ever. Whether it reaches fairly remains an open question.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
