updated 2:28 PM CEST, May 24, 2023

Americans and 'accidentals' in Europe react, after EU's Gentiloni quoted saying FATCA not a bloc issue

Paolo Gentiloni European Parliament Paolo Gentiloni

European Commissioner for the Economy Paolo Gentiloni has again drawn fierce criticism from Americans and accidental Americans in Europe, with his remarks on the the U.S. Foreign Account Tax Compliance Act (FATCA) – this time for saying that the European Commission is technically unable to directly address problems with "the monitoring and enforcement of EU data protection rules" that he acknowledges FATCA is causing. 

Gentiloni's comments were contained in a letter dated Tuesday, and said to be in response to correspondence from a Luxembourg parliamentarian. (A copy of Gentiloni's letter has been posted on the European Parliament's website here.)

By Friday, a number of EU citizens who have petitions currently before the European Parliament's Petitions Committee (PETI) had fired off joint letters to PETI chairperson and Member of the European Parliament Dolors Montserrat, as had others, including Mishcon de Reya partner Filippo Noseda, who has represented various clients in their challenges of various aspects of FATCA over the last few years, and testified in EU hearings on the subject.

Others sounded off on social media. 

On Sunday (today), these PETI petitioners joined forces to release a statement in which they called on the European Parliament "to launch a motion of censure against the European Commission," on the grounds that this would be "the only way to save the rule of law and protect fundamental rights in Europe."

Such a motion is a procedural option when a tenth of the MEPs agree to support it, and it would be adopted "if it secures a two-thirds majority of the votes cast, representing a majority" of the constituent MEPs, according to an explanation on the EU Parliament's website.

"As the European Commission attempts to strengthen its brand with European citizens through various new participation schemes and marketing on social media channels, the gap between [it] and the people it purports to serve is only widening," the PETI petitioners' statement begins.

"Resolutions and questions from the European Parliament, the elected representatives of the European citizens, are routinely ignored (see letter signed by 183 MEPs on 15 November 2021), making a mockery of 705 MEPs in front of their constituents.

"This group of EU petitioners is also deeply disappointed in the democratic functioning of the European Union. 

"Since 2016, they have filed various petitions (1088/2016; 1470/2020); 0394/2021 and 0323/2021), against the consequences of the FATCA IGAs between member states and the United States...

"...It is apparent that the Commission attaches more importance to trade interests with the United States than to the rights of more than 1.2 million European citizens, overlooking notable developments such as the U.S. rejection of a domestic version of FATCA, due to concerns about privacy rights for people living in the U.S.; a poor data security record at the IRS; and a wave of GDPR rulings indicating that the United States government cannot be trusted with comparably trivial data. 

"If this farce continues, it will be the death for confidence in the role of the European Union." 

Swift reaction 

Among the first to react to Gentiloni's comments was Paris-based Association of Accidental Americans founder and president Fabien Lehagre, who argued, in comments to the media hours after Gentiloni's letter was posted, that the European Commission had an obligation to citizens of the EU, including accidental Americans like himself, when these citizens had "exhausted all national legal remedies" to address problems like FATCA – a point he suggests that France, at least, is fast approaching. 

"Accidental Americans" are citizens of countries other than the United States who may also be considered by the U.S. to be a U.S. citizen, under American nationality law. Typically such "accidentals" weren't aware of having this status because until the U.S. began to crack down on the use by Homeland Americans of undisclosed overseas bank accounts and other cross-border financial crimes, from 2001 onwards. Many were born in the U.S. to non-American parents, who moved back to their home countries soon afterwards. 

In his comments, the AAA's Lehagre also pointed to indications that the U.S. Treasury has at last begun to take on board the need for it to address certain FATCA-related problems as well as an observation, made by others, that the European Commission could, if it wished to, "open an infringement procedure against the [EU] Member States," and in so doing, prompt these Member States to "invoke Article 8 of the FATCA intergovernmental agreements to request a review" of them.  

'Rights of EU citizens being ignored [by EU]'

Rob Gerretsen, a spokesperson for a Dutch organization of accidental Americans, the Nederlandse Accidental Americans (NLAA), said Gentiloni's response to the MEP's question, "juxtaposed with the views of the Member States' governments and of the local data protection authorities which say the EU has to [produce] a solution, proves that the fundamental rights of European citizens are being completely ignored. 

"The European Parliament and the parliaments in the Member States seem powerless; and this struggle has been going on for years now.

"The winner is the United States, which looks on with a chuckle." 

As for Mishcon de Reya's Noseda, he told Montserrat in a letter on Tuesday that Gentiloni's response to the MEP's question made "a mockery of the whole FATCA debate initiated by the European Parliament" in the last couple of years.

He added, referring to past efforts and resolutions by PETI, the European Parliament's Committee on Civil Liberties (LIBE), and other entities, since the accidental Americans and others began to challenge FATCA, beginning around 2016: "There is no acknowledgement [by Gentiloni] of the [2018] PETI study, the [2021] LIBE study, the European Parliament's resolutions, the EU petitions, the WP29's opinion, the [European] Commission's internal documents, Art. 258 TFEU, nothing. 

"A complete lack of candour that requires a strong response from the European Parliament." 

Gentiloni: 'EU not a party
to these [bilateral] agreements' 

Gentiloni, pictured above, served as prime minister of Italy for around 18 months, beginning in 2016, before succeeding Pierre Moscovici as EU finance commissioner in December 2019.

He didn't immediately respond to a request from the American Expat Financial News Journal  for comment.

In the letter that sparked the reaction from FATCA challengers across the EU, Gentiloni said that although the European Commission has been in "regular contact" with the U.S. authorities over FATCA, in an effort to "[obtain] tangible improvements in the situation of so-called 'accidental Americans" living in Europe, the Commission isn't "entitled to discuss or negotiate" amending these agreements with the U.S., because "the EU is not a party to [the bilateral] agreements" between the U.S. and EU member states that form the basis for the FATCA regime.

Specifically with respect to the EU's data protection rules, and their monitoring and enforcement – which EU courts have flagged up as problematic for FATCA as it's currently enforced – Gentiloni went on, "these fall under the competence of national data protection authorities (DPAs) and courts.

"While the European Data Protection Board (EDPB) confirmed in the past that there had been no occasions where the DPAs ‘had to prohibit the processing and transfer of personal data to the U.S. under the FATCA regime,’ they continued to assess the impact of such agreements on data protection rules, including as part of ongoing national investigations.

"This also includes advising and assisting the Member States in their assessment of international agreements concluded prior to the General Data Protection Regulation to determine whether further alignment with EU law is needed.

"The Commission is in contact with the Member States and the EDPB on this file."

Although Gentiloni wasn't available for comment, one American expat who lives in Europe, and who has worked in diplomatic circles in the past, told the AXFNJ  that he thought Gentiloni was actually correct in his observation that the European Commission isn't in a position to deal with the U.S. directly, with respect to  FATCA.

(This American, who said he wished to remain anonymous because he fully supports the accidental Americans in particular in their struggles to get the  U.S. to fix its flawed FATCA regulations, said he believes that they and others would achieve their goals of fixing FATCA faster if they focus their advocacy efforts on the specific areas where they would be most effective.

"The lines of responsibility [for FATCA] go through [the Member States'] national ministries of finance, which is where the power lies," he said.

"The Commission’s failure is not its failure to deal with the U.S., but with its refusal to press the European Data Protection Board, and the national Data Protection Agencies (e.g., the CNIL in France) to assume responsibility, and enforce the GDPR regulations.

"The Commission could of course, and should, be more proactive with the [Member States'] national finance ministries."  

No stranger to FATCA opponents 

Gentiloni is no stranger to Europe's victims and opponents of FATCA, owing to some of his previous comments on the subject.  

In April of 2020, for example, he was quoted as saying that he found "no evidence of the existence of an infringement" of the rights of the EU's so-called accidental Americans to have "a basic bank account" having been caused by FATCA.  (Under something called the Payment Accounts Directive, all EU citizens enjoy a legal right to a bank account in the country in which they live.)

Growing grass-roots, political
opposition in EU to FATCA

A growing number of politicians in Europe have begun responding to their constituents' growing frustration over FATCA, particularly in France and the Netherlands, although until now they've struggled to achieve the hoped-for results.

Last June, for example, a years-long campaign by French FATCA opponents to force the U.S. to provide French authorities with the same information about French citizens' financial accounts in the U.S. that France currently is obliged to send the U.S. under FATCA failed to progress into law, after members of France's National Assembly voted against a proposed measure that would have provided for this.

Tweede Kamer hearing 28 Sept croppedDutch politicians have also sought to address the "accidentals" issue, holding a number of hearings over the last few years, but here too, Dutch campaigners are often frustrated by the failure of their lawmakers to produce actual change. One such hearing, held last September in the Dutch Tweede Kamer in the Hague (pictured above, left) and accessed online, for example, left the NLAA's members "very disappointed."

A pushback at the EU level has also been seen, led by certain EU politicians, including in 't Veld, and marked by such events as a European Parliament Petitions Committee hearing in 2019 on the topic, as well a resounding vote of approval by MEPs in 2018, in support of Europe's accidental Americans being allowed to give up their U.S. citizenships more easily (470 votes to 43, with 26 abstentions).

There have also been some recent (2020) European Court of Justice (ECJ) decisions that experts have flagged up as "FATCA game changers" – including one known informally as "Schrems II," which effectively struck down the main mechanism used by the EU to protect the personal data of EU citizens when it's transferred to the U.S., known as the "Data Protection Shield." A few months later, the ECJ followed up with a second ruling that Mishcon de Reya's Noseda said was "perhaps even more" of a possible FATCA game-changer than Schrems II. 

In November of 2020, four MEPs from four EU countries were among a series of speakers who criticized what they said was the European Commission's continued failure to address FATCA, during a 36-minute hearing that was intended as a follow-up to that 2019 PETI hearing.

Expat Americans, accidental Americans'
problem: not wanted by banks

Among the problems FATCA has caused that accidental Americans in particular struggle with, as this and other publications have been reporting for years, include the way it makes non-U.S. banks and financial institutions extremely reluctant to have American citizens as clients, particularly if their U.S. citizenship ties are so distant that they lack such U.S. documentation as a Tax Identification Number, normally a Social Security Number.

But even ordinary American expats who do have Social Security Numbers, and who cheerfully file tax returns every year, are nevertheless often unwanted by these banks, because the reporting involved in looking after them is costly- and time-consuming to the institutions in question. Having American clients also puts such banks and financial services companies at risk of significant financial penalties if they're found not to have fully complied with their FATCA reporting obligations.

As more financial institutions are looking to cut costs in order to complete with the growing number of online-only banks and investment entities, banks say they have to pass the extra costs of looking after American clients on to their entire client base – which would put them at a competitive disadvantage to those of their rivals who refuse to accept Americans who live outside of the U.S., and whose banks are thus subject to the FATCA reporting obligations.