updated 6:47 PM CET, Jan 23, 2020

French finance minister reassures French banks over FATCA concerns, on eve of TIN reporting deadline

On Tuesday – the last day before all non-American banks and financial institutions around the world were officially required to supply the U.S. authorities with the so-called Tax Information Numbers of all their American clients, or potentially be in breach of the Foreign Account Tax Compliance Act – French Finance Minister Bruno Le Maire issued a statement reassuring France's banks with respect to any American account-holders whose TINs they still don't have.

Le Maire's statement of reassurance came in the form of a three-page letter to French Banking Federation president Frédéric Oudéa, a copy of which the American Expat Financial News Journal has seen. In it, Le Maire explained that although the situation was "a cause for legitimate concern, both for the banks and those of their clients affected by the TIN requirement", once the Dec. 31, 2019 deadline had passed, "the absence of transmission of the TIN by the banks will in no way characterize, immediately and automatically, a significant breach of their obligations with regard to the FATCA law".

"Such details are of a nature to secure banking establishments and their customers from the risk of financial sanctions".

Le Maire's letter of reassurance was reported by the French newspaper and news website Le Figaro, which cited AFP as having contributed to its story. It came after months of statements by French politicians and others over the approaching deadline, which was seen to pose a risk of the closure of some 40,000 bank accounts held by French citizens who also have American citizenship, typically as a result of having been born in the U.S. to French parents who subsequently returned to France.

Under American law, anyone born in the U.S. remains a U.S. citizen, with U.S. tax obligations, the remainder of their lives, unless they formally renounce their citizenship.

In July, as reported, French Banking Federation chairman Laurent Mignon formally warned Le Maire in a letter that that the country's banks faced having to close as many as 40,000 bank accounts by the end of the year because of the need to comply with the FATCA TIN requirement.

Specifically, Mignon noted in his letter, the banks – like other non-U.S. banks and financial institutions around the world – faced significant financial penalties from the U.S. if they failed to provide TINs for all of their American clients. This was the case in spite of the fact that many of these clients were in fact "French-speaking [French] citizens" who, though, in spite of having been born in the U.S., "lack any concrete link with the United States, where they no longer reside," and therefore don't have TINs or other similar documentation, such as Social Security numbers, that the U.S. is seeking.

 In October, in what was seen as a response to pressure from European banks and politicians in particular, the Internal Revenue Service issued an unprecedented clarification with respect to the FATCA TIN requirement, which was seen to indicate that the financial sanctions the banks feared for having American account-holders whose TINs they hadn't obtained nor provided to the U.S. would not be introduced immediately. 

The clarification came, curiously, in the form a new question and lengthy answer added to the IRS's FATCA FAQs page, which among other things noted that a financial institution "would have at least 18 months from the date of the notification of noncompliance [to the FATCA TIN requirements by the IRS]  to correct the TIN error before the IRS took any other further action, such as removing the [financial institution's] Global Intermediary Identification Number from the IRS FFI [foreign financial institutions] List."

AAA: 'Lasting solution must be found'

Fabien Lehagre croppedThe Paris-based Association des Américains Accidentels (Accidental Americans Association) acknowledged on Tuesday that Le Maire's letter of reassurance indicated, as the AAA has said in the past, that "French banking establishments should no longer be tempted to close the accounts of accidental Americans".

However, AAA president Fabien Lehagre went on, "a lasting solution must be found by France, because the underlying problem remains, and it has been going on far too long already." 

Lehagre, pictured left, founded the AAA in 2017 to represent and defend Accidental Americans "against the extraterritoriality of U.S. law". It currently claims to have more than 1,000 members, and has led to the creation of other AAA groups elsewhere, such as in the UK. 

Thus far France, possibly because of Lehagre's tireless activism, is one of the only countries to have acknowledged the difficulties its American/French dual nationals struggle with as a result of FATCA and America's citizenship-based tax regime.The Netherlands, Belgium and Canada have also spoken out on occasion.

The silence on the part of many other countries, particularly some that are understood to have large numbers of American expat residents, many of whom, in theory at least, are dual nationals who are as at-risk of having their bank accounts closed as those in France, has never been explained.

FATCA was signed into law by President Obama, buried inside a domestic jobs bill known as the HIRE Act, and came into force around the world in 2014. It was facilitated on a jurisdiction-by-jurisdiction basis by means of intergovernmental agreements (IGAs) agreed between the U.S. and each individual country. 

FATCA was conceived in response to a series of revelations that a number of non-U.S. banks had been enabling American taxpayers to avoid their tax obligations by stashing money in offshore accounts. U.S. lawmakers thought that enabling the U.S. tax authorities to know the details of the offshore bank accounts held by U.S. citizens would put an end to the ability to hide money in such banks.

What they failed to anticipate, however, was how severely the law would impact those Americans who live overseas, including many whose American citizenship was due to the fact they had happened to have been born in the U.S. to non-American parents who subsequently returned to the countries from which they were from.