Mexicans worried about disclosure rules for U.S. banks

The IRS plans to require U.S. banks to report interest payments to nonresident depositors. Mexican nationals are concerned the sensitive info will wind up in the wrong hands.

Jeremy Hobson: It is Tax Day, so if you haven't filed yet, you might be trying to figure out the difference between line 42a and 42b or whatever on your tax form. Well, get ready for another potential rule.

The IRS wants to require U.S. banks to report the interest payments they make to wealthy foreigners. That's creating some trouble down on the Mexican border where banks are worried
about losing customers.

From KUT in Austin, Texas, Nathan Bernier reports.

Nathan Bernier: The IRS is trying to hunt down tax evaders. In order to do this, they created a deal with other countries. They'll track down information on U.S. banks and the IRS will get information from banks in other countries.

But here's the problem.

John Dorsey: As you may know, Mexico is undergoing a period of unfortunate political instability, and a significant number of those clients are concerned about information being shared by the Internal Revenue Service with Mexico's tax authority that could be placed into the wrong hands.

That's John Dorsey. He's a tax attorney in Austin, and his client list includes many rich Mexican citizens. By the wrong hands, he means the drug cartels.

Dorsey: The real risk in Mexico is kidnapping and security.

Some Mexican nationals are already pulling out their money. And that scares banks, according to John Heasley with the Texas Bankers' Association. His informal survey suggests Texas banks hold at least $20 billion in deposits from foreigners -- and most of that comes from Mexico.

John Heasley: Many banks have 40, 50, 60, 70 percent of their deposits. Obviously it is more extensive in places like Laredo and San Antonio. If that kind of capital leaves, it could cause a liquidity crisis.

Opponents of the proposed rule have some powerful political allies, including Florida Sen. Marco Rubio and both Senators here in Texas, John Cornyn and Kay Bailey Hutchison. But others say the banks are just trying to scare people.

Rebecca Wilkins: I think their claims are greatly exaggerated.

Rebecca Wilkins is with Citizens for Tax Justice, a nonprofit that helps low- and middle-income families. She thinks depositors have nothing to fear from regulations as long as their money is legitimate.

Wilkins: I think those are depositors who are hiding their money and not paying taxes on it in their home country. And I wonder do we really want to protect a bank whose primary business is facilitating tax evasion?

The IRS will not comment on the rule and won't say when it could take effect. But either way, banks won't have to start reporting interest paid to foreigners any time before Jan. 1st.

In Austin, I'm Nathan Bernier for Marketplace.

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Well, if your in the country illegally, and unable to work legally, by default isn't ANY money earned illegally obtained?

Just a note, and I know it is way too late for anyone to notice, but since it was not said anywhere in this story, I thought I would point out what may not be obvious to a reader or listener.

-This regulation is a direct fallout from FATCA which was part of the 2010 Hire Act. It is an imposition of a domestic requirement by the IRS, (call it DATCA) so they have a reciprocity tool to force Governments around the world into what is called Inter Government agreements, or IGAs as a replacement for the onerous and almost unenforceable complex 388 draft pages of FATCA regulations.

-It is a story that gets almost no coverage in US media, but widely reported overseas. I don't think I over state to say, it is much hated by the foreign Financial Institutions, (FFIs).

-It is very expensive and difficult for them to figure out who a 'US Person" is and report their account information directly to the IRS.

-Rather than trying to segment them out, banks around the world are just shedding Americans as an alternative. Or, they are trying to get their governments to join these IGAs and set up global Tax Data exchanges, or GATCA.

-The problems for Americans Abroad was recently well described in an Oct 19 WSJ story entitled "Wary Swiss Banks Shun Yanks" You can google that headline or see if this link works.


-Also, there have been recently announced delays that the Financial Times reports October 26th. It's title is "Fatca faces delay after bilateral disagreements"


-I just add this information to broaden the story, as it is way more than just some Mexicans worried that their accounts will be discovered.

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