Supervisor of Banks David Zaken can’t wait for the Foreign Account Tax Compliance Act (FATCA) to come into effect in July — literally. So, he’s ordered Israeli banks to get started on compliance procedures now, Globes reports.
The banks must map their U.S. customers and have them sign the appropriate forms. The Bank of Israel is instructing the banks to appoint an officer responsible for the matter, and to establish a system to carry it out.
Come July, every financial institution in the world will be required to notify the Internal Revenue Service (IRS) about its U.S. customers, and, if necessary, to deduct tax payments from their accounts.
Most Israeli banks are already moving forward with FATCA, and have lost customers, who decided to withdraw their money and close their accounts. Globes estimates that as a result more than $4 billion have been withdrawn from accounts in Israeli banks.
But the alternative could be even more costly.
“A financial institution that does not cooperate with the U.S. authorities is liable to various sanctions, including a 30% deduction from payments originating in the U.S.,” the Bank of Israel said.