Lawmakers Fight to Protect Anonymity for Foreign Accountholders

July 25th, 2011

Claims of Dire Economic Consequences ‘Unfounded;’ U.S. Citizens Already Required to Disclose Information

WASHINGTON, DC – The U.S. Treasury Department is finalizing a regulation (REG-146097-09) that would require that the interest earned on the U.S. bank accounts of non-resident aliens be reported to the Internal Revenue Service (IRS), as is currently required for U.S. citizens. The proposed IRS regulation has been touted as an important tool in the fight against international tax evasion, money laundering, drug trafficking, corruption, and terrorist financing.  However, a small group of legislators have introduced a bill (H.R. 2568) that would prevent the Treasury from taking such action.

“It is absurd that banks are required to report account information for U.S. citizens and legal residents to the U.S. government, but not information on the U.S. accounts owned by people who aren’t living here,” said Global Financial Integrity Legal Counsel and Director of Government Affairs Heather Lowe. “In addition to posing multiple national security risks, this lack of reporting hampers the U.S. government’s ability to comply with our international tax treaty obligations and makes it even more difficult for law enforcements to keep the proceeds of international drug trafficking, money laundering, corruption, terrorist financing and other crimes out of the U.S.”

The lawmakers behind H.R. 2568 claim that the new IRS regulation will place “more than $10 trillion in passive foreign investment in the U.S. economy at risk… force an exodus of much-needed capital, hamper the resurgence of the U.S. financial sector, [and] harm our fragile economic recovery…”  However, as Rebecca Wilkins, Senior Counsel for Federal Tax Policy at Citizens for Tax Justice, noted in her May testimony at an IRS hearing on the issue:

The claims of dire economic consequences are completely unfounded. There is no foundation that billions of dollars of deposits will leave the U.S. if these rules take effect. It’s estimated that foreigners have invested roughly $10 trillion in the U.S. economy. Only $4 trillion of that is in banks. Three-fourths of that is in the name of foreign governments, international and regional organizations, foreign banks and foreign government officials. Of the less than $1 trillion left, only the amounts held in the names of individuals are subject to this rule and I believe that only those people who are evading tax will move their money as a result of this regulation.[1]

“If the Treasury regulation is adopted, some foreigners engaging in tax evasion or other criminal acts may choose to move their funds out of their U.S. accounts to avoid any possibility of being groused to the tax authorities in their home countries, but even that doesn’t necessarily mean that U.S. banks will lose that capital,” stated Ms. Lowe.  “If a person wants to keep their money in U.S. dollars because of the stability of our currency, even if they open a U.S. dollar account in the Caymans or Jersey, that money must be held in that Cayman or Jersey bank’s correspondent account in a U.S. bank.  That capital would remain in the U.S. system.”  The proposed rule was published in January 2011. Previous attempts by Treasury to implement similar rules in 2001 and 2002 were also opposed by those who feared that such measures would drive away foreign investment.

“We have made a lot of progress since 2002 in understanding how U.S. banks, as part of the international financial system, must do their part to prevent money laundering, terrorist financing and tax evasion,” said Lowe.  “Understanding who keeps their money in U.S. banks and why is an important part of our ability to detect and respond to threats to our national security and our economic stability.  We strongly encourage lawmakers to consider all aspects of this issue and look more closely at any claims that this regulation would put massive amounts of U.S. capital at risk.”



Clark Gascoigne
+1 202 293 0740 ext.227


Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

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[1] The figures quoted are from the Board of Governors of the Federal Reserve System’s Statistics Reported by Banks in the United States, January 2011, available at

Written by Global Financial Integrity

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