There are quite of few mentions of tax collectors in the Bible. Most of them are not flattering. Luke 15:1 says, “Now the tax collectors and sinners were all drawing near to hear him.” Luke 7:34 is even more blunt, “The Son of Man has come eating and drinking, and you say, ‘Look at him! A glutton and a drunkard, a friend of tax collectors and sinners!” Things have changed quite a bit in the thousand+ years since that New Testament chapter was written. This month the IRS and the Holy See have agreed to sign an intergovernmental agreement regarding FATCA.
Short for the Foreign Account Tax Compliance Act, FATCA requires foreign banks to cull through their accounts and report those with ties to the United States. Many people don’t realize that the Roman Catholic Church is also a country of sorts and has its own bank, the Vatican Bank.
Until very recently, the Vatican Bank was shrouded in secrecy. Unlike other banks, it doesn’t publish annual reports or file reports with regulators. Times are changing, however. Shortly after Pope Francis was installed as Pope, the Vatican Bank issued its first ever report in modern times. According to the report, the bank claims to hold billions in assets and has 33,000 accounts representing 19,000 clients.
Most of the Vatican Bank clients are probably churches or religious orders. But Italian banking officials have long suspected that the Vatican Bank allows nominee accounts.
What is a nominee account? These are accounts in which the beneficial owner of the money opens or holds an account in the name of another person or entity. There can be legitimate business reasons for nominee accounts but they have also become the favorite of money launderers and tax evaders. The IRS hates them and considers them a red flag unless they have a legitimate business purpose.
It’s not clear if the Vatican’s FATCA move will affect many Americans but it shows the long reach of Uncle Sam and how seriously world governments are taking tax transparency. Hiding money from Uncle Sam offshore or by using a nominee account was once quite easy. FATCA has changed the rules, however.
U.S. taxpayers with unreported foreign accounts need to come into compliance immediately. The penalties for having an unreported account are huge. More importantly, FATCA is making it much harder to hide and much more likely that one will be caught.
Have an unreported account or operate an offshore financial institution and need more information about compliance? Contact attorney Bethany Canfield at or by telephone at (414) 223-0464. We are a full service, boutique offshore tax law firm representing clients worldwide. All inquiries are protected by the attorney – client privilege and kept in complete confidence.