The first of July was the deadline for all financial institutions in the country to comply with the US tax compliance rules called FATCA (US Foreign Account Tax Compliance Act). According to the US Internal Revenue Service website, 122 local financial institutions were prepared for the July deadline, meeting the standards set by the US government.

According to the Central Bank (BDL) records there are a total of 129 banks and other financial institutions supervised by the Central Bank. But some of the registered financial institutions are not in fact operational locally.

The FATCA went live internationally the first week of July, with local banks having had two years to ramp up for the regulations, which removes local secrecy rules and requires transparent reporting on all US held accounts. Depositors have been asked for the last year to sign disclosure agreements on their accounts if they come under FATCA rules.  Concerned depositors are US citizens, green card holders, and foreigners with income coming from the US, among other similar categories. Accounts less than $50,000 will not be submitted for IRS scrutiny under the FATCA regulations. Banks have been also been increasing the ‘Know Your Customer’ (KYC) rules in the wake of a large push to stop money laundering and deposits connected to any criminal or terrorist activity. 

FATCA was designed to stop tax evasion by high net-worth US depositors abroad. The draft rules promulgated over two years ago set off local banking questions as there are a large number of Lebanese-Americans who deposit here.  After more than a year of clarifications, BDL circulars, and banks dialoging with the US government, local financial institutions began integrating the FATCA regulations.  While the BDL requested early on that all financial institutions comply with these rules, it signaled that each bank would be required to deal directly with the IRS.

Infractions of the new FATCA regime are penalized by 30 percent withholding tax on any deposits which are undeclared and possible fines for any bank involved.  The toughest sanction for any respective bank is being cut off from their network of correspondent relationships with US banks, thus being de facto cut from the US financial system.