The Foreign Account Transactions Compliance Act (FATCA) was fully implemented on July 1, 2014. FATCA made sweeping changes to the financial reporting guidelines for foreign banks; they are now required to report financial information to the IRS on all U.S. account holders with an average balance of $10,000 or above. And those who fail to report this information are required to withhold 30% of the funds on deposit for all U.S. account holders or risk being shut out of U.S. financial markets. 
When FATCA was fully implemented last year, there was some uncertainty about whether foreign governments and their financial institutions would go along with it. Some feared they would simply refuse to do business with Americans rather than fulfill compliance requirements from a U.S. taxing authority. The question essentially was did the IRS have enough clout to compel other countries to cooperate with their global hunt for American tax cheats?
A year later, nearly everyone is playing ball. Over 80 countries and 77,000 financial institutions worldwide are on board with FATCA; and this includes historically “difficult” countries such as China and Russia, as well as known tax havens such as Switzerland and the Cayman Islands. Several other countries have pending agreements, and when it’s all said and done, there will likely be only a handful that do not comply.
Last year there was another major development that scared many in the foreign financial institutions who tried to double-cross the IRS. Credit Suisse, a Swiss-based financial services holding company, pled guilty to “conspiracy to aid and assist U.S. taxpayers in falsifying tax returns” and agreed to pay a record $2.6 billion fine. After this monumental takedown by the Department of Justice, there are likely to be very few (if any) global institutions that are willing to knowingly aid and abet U.S. tax fraud.
What Does FATCA Mean to You?
The enormous success of FATCA leaves Americans with significant holdings in foreign bank accounts only a couple of options. You could renounce your U.S. Citizenship, pay the required fees and exit tax and be done with the IRS. But this is not a viable option for most people, especially those who still live in the United States. The second option is to continue going along without filing an FBAR (Report of Foreign Bank and Financial Accounts). But with most of the world now compliant with FATCA, it is only a matter of time before this catches up with you. And when it does, you could be responsible for back taxes owed as well as fines of up to $500,000 and up to 10 years in federal prison.
If you have one or more foreign bank accounts with average balances of $10,000 or above and have not filed the required FBAR for the years you have held the account(s), the best option is to get in compliance as soon as possible. Fortunately, the IRS rolled out a streamlined Offshore Voluntary Disclosure Program (OVDP) last year to make it easier for taxpayers to come clean. To learn more about how FATCA may affect you personally and to make sure you take full advantage of the streamlined OVDP, it is best to consult with an experienced tax professional.