Everyone is now a US citizen. How FATCA was applied to me this week.

“Keep your friends close and your enemies closer”. It’s a proverb commonly attributed to the Chinese philosopher Sun Tzu and it’s why I was on a bank website earlier today to create the image for this article. Banks are not our friends.

I want to share some insider information that I’ve come across over the past week. The following experience fairly starkly illustrates the growing problems rumbling with inter-bank operation and perhaps more importantly in the realm of banking privacy at this point in history.

Like most of the global citizenry, I am not a U.S. person. I did however discover this week that I am now being treated like one. You see, in the course of my business I deal with the transfer of funds internationally via the SWIFT system. These funds move between jurisdictions and it was only Friday gone that a particular sizable international transfer was cleared after – get this – 37 days “in transit”.

Yes, that’s right, over five weeks between the funds leaving the source account in one country and arriving at the target account in the destination country. A few weeks into this debacle I initiated a funds trace to find out what on earth had gone wrong. After some time, I received notification that the funds had “been sighted” but no word on where they were or what the delay was.

What’s more interesting however is how the receiving bank acted when they finally got their hands on the loot. Inward wires are required to be accompanied by a declaration that stipulates where the funds have come from, how they were obtained and other details for anti-money laundering reasons. I was surprised to find that this inward wire was being held by the receiving bank as they were not satisfied with the fund declaration that I had submitted.

The details on the declaration were boilerplate. The same details had been successfully submitted for previous transfers into this bank. Suddenly however, the bank wanted more information and was holding funds ransom until they got the additional details they wanted.

So what was going on here? Well, I happen to have a well-connected North American contact who I converse with on geo-political, economic and financial trends. I queried them on the issue and was quite alarmed to hear that they too were experiencing similar problems with international transfers..

According to my contact’s research, the world of international banking has changed due to recent intrusions by the OECD into privacy and bank secrecy. The powers that be are apparently attempting to bully smaller banks into sharing information on clients. Many have held out, but the pressure is growing. This pressure is being applied via the large correspondent banks as they have begun to re-examine or end their relationships with the smaller banks in certain jurisdictions where privacy laws still hold.

This is having a number of effects. Smaller banks are being forced to find alternative avenues of transaction for clients such as Western Union and other payment systems. These targeted banks are now also making certain their internal files reflect intense care in the area of KYC--know your customer—to prepare for the event that an enquiry or court order should succeed in bringing a file to light. Translation: Clients are required to expose ever increasing information when banking.

My contact states that most of the mounting pressure is related to FATCA (the foreign account tax compliance act) relating to U.S. persons and the banks with U.S. clients have begun to operate differently. Non-U.S. clients are feeling the "spill-over" from this in how they are treated with regards to these requirements, communications, etc. The protocols are now in place for all. Earlier, a bank would be satisfied with obtaining a client statement confirming that they are not a U.S. person in any of the myriad potential definitions. Now they are simply applying the protocols universally.

Not being a US person has advantages, but these are shrinking in a world where government and banking are becoming monolithic. Consequently, we will all feel the effects of the mounting inter-bank pressure regardless of citizenship. For now these pressures appear to be manifesting themselves in the international space but I see this migrating to domestic banking operations in the future.

I don’t wish to disclose the bank in question or the jurisdiction in which it operates but the key is that it is one where banking clients’ data is private by law and actually respected as such – for now. The OECD is placing the remaining vestiges of sovereignty on alert with the ultimate goal of control and all that might imply.

This is not a good trend and restrictions on wealth transfer and monitoring of activity regardless of location or citizenship is a legitimate concern. I do not see these developments at all a feature of the current zeitgeist so when these restrictions do hit domestic operation, people will find their lives changed in seemingly sudden and nefarious ways.