Why Facebook Co-Founder Chose Private Banking Over U.S. Citizenship
Eduardo Saverin, the co-founder of Facebook, gave up his U.S. citizenship for the full range of private banking options in the equity-investing, asset-protection, and tax-planning world of high finance. Why? Because of the intricate and often bizarre complex of rules imposed on private banks throughout the world for any U.S. citizens holding money in any private bank located outside the borders of the United States. Saverin, not surprisingly, chose one of the increasingly popular locales for private banking — Singapore, the Switzerland of Asia, which caters to the overflows of Asian wealth and investment opportunities. It increasingly supplants Switzerland as the private banking destination for high finance and the financially sophisticated. Mr. Saverin, who now lives in Singapore as well, decided last year to renounce his U.S. citizenship, a decision made public just recently. Saverin spokesman Tom Goodman said Saverin's renunciation was prompted not by tax considerations, but by U.S. rules that make it more difficult for U.S. citizens to live and invest overseas. “U.S. citizens are severely restricted as to what they can invest in and where they can maintain accounts,” Goodman said. “Many foreign funds and banks won’t accept Americans. This was a financial rather than a tax motive.”
Private banks likely forced the move. Private banks refusing to take U.S. citizens as customers. Why? Because such private banks would rather forego customers than submit themselves to U.S. bureaucrats or experience the wave of punitive and excessive prosecutions such as those the Swiss banks experienced the last few years.
The new law triggering this? The Foreign Account Tax Compliance Act (FATCA), which requires foreign financial institutions to start reporting to the IRS on U.S. citizens’ accounts.
What are some of these provisions that are so intrusive, invasive, and infringing upon ancient and American liberties of privacy and travel that more and more private banks prefer no deposits from U.S. citizen customers?
FATCA will require private banks to report directly to the IRS certain information about financial accounts held by U.S. citizens. To comply with these new reporting requirements, a private bank had to enter into a special agreement with the IRS by June 30, 2013. Under this agreement a “participating” private bank will be obligated to:
(1) undertake certain identification and due diligence procedures with respect to its accountholders (e.g., spy on their customers);
(2) report annually to the IRS on its accountholders who are U.S. citizens (e.g., rat on their customers); and
(3) withhold and pay over to the IRS 30 percent of any payments of U.S. source income, as well as gross proceeds from the sale of securities that generate U.S. source income, made to (a) non-participating private banks, (b) individual accountholders failing to provide sufficient information to determine whether or not they are a U.S. citizen, or (c) foreign entity accountholders failing to provide sufficient information about the identity of its substantial U.S. owners (e.g., steal 30% of your money, converting your private banker and private bank into a debt collector for the Internal Revenue Service).
So is it any surprise a savvy investor like Saverin chose private banks over U.S. citizenship?
His spokesman said Saverin plans to continue to invest in tech companies around the world, including the U.S. “His decision had nothing to do with dissatisfaction here, but with his strong desire to do business there,” Mr. Goodman said. He also plans a charitable foundation. He just won’t be participating in the IRS' forced charity program imposed on private banks with U.S. citizen customers.