I wonder how you feel about financial privacy? Or how much of it you think you have? The answer, should you be wondering too, is absolutely none at all.
Over the last few years you will probably have heard mention of FATCA, the Foreign Account Tax Compliance Act. This is a newish piece of US legislation (July 2014) that caused outrage by effectively forcing financial institutions all over the world to report on all financial accounts of any kind held with them – directly or indirectly – by US citizens.
It represented – or so we thought at the time – not only an introduction of a whole new level of admin hell and a nasty extension of US law to places where US law should have no jurisdiction, but a fairly grotesque invasion of privacy: Americans can’t hide any money anywhere any more. We like the idea that everyone pays the tax that is due. But we prefer people to be presumed innocent by their governments rather than guilty.
Bad news, then, that the rest of the world now has its own FATCA – the CRS or Common Reporting Standard. The UK already adheres to the EU Savings Directive which provides for a certain amount of financial data sharing, but the CRS takes both the geographical scope and the breadth of information sharing required to a new level.
Here’s how BDO describes it: “The CRS is a global initiative which will allow HMRC to track details of bank accounts and trusts under a UK taxpayer’s name in over 90 countries. It will begin for ‘early adopter’ countries, on 1 January 2016 with the first reporting under CRS from September 2017. From this date, all reportable information on offshore bank accounts held by UK residents will be automatically shared with HMRC which will ensure that all information is being properly disclosed.”
Reportable information is the income from an account, the gains from any sales of investments, and the balance on or value of any accounts. So that’s that. No matter where you keep your accounts, HMRC will now know all about it – automatically.
However that’s not the end of the new transparency. Also on the way are new rules about public beneficial ownership (companies will be required to keep a register of those who hold or have voting rights over 25% plus of their shares and to submit that register to Companies House from this summer) and the UK government is also working to have the Land Registry publish data showing which offshore companies hold which land/property in the UK.
It may be that none of this much matters – or that in preventing all manner of abuses of the tax system and the UK’s safe haven status it is a good thing. But we aren’t sure it is that simple.
A UK policymaker told me recently that privacy doesn’t matter any more. I disagree. It does. As one letter to the FT noted this morning: “each step that we travel away from privacy and freedom may appear small on its own, but the big danger is that we sleepwalk into a totalitarian state before we know it.”
But that aside, what of the security of financial information? Every time your data moves between bodies – be they corporate or state – it is vulnerable. With transparency will come security breaches – to say nothing, in the case of CRS, of endless mistakes.
Huge volumes of highly sensitive and very complicated data winging its way across borders and institutions. What could possibly go wrong?