New bank law raises privacy fears
Attempts by the country’s banks to comply with new American tax legislation are raising fears about customers’ privacy.
The United States is one of two countries – the other being Eritrea – that tax their citizens who live overseas, even if their income is generated in a foreign country and they live abroad permanently.
Under the US Foreign Account Tax Compliance Act (FATCA) which comes into effect in July, New Zealand banks will be required to identify accounts in the name of US citizens or residents and report these to Inland Revenue, which will then pass them on to the United States.
The law will apply to all accounts that earn interest, including credit cards, term deposits, savings accounts and some bonds. Banks have until the end of 2015 to review accounts and determine whether they are covered by the US requirements.
ANZ bank has responded by changing its credit card terms and conditions so it can provide cardholder information to any government authority in this country or overseas.
The bank said the government authorities it is referring to are Inland Revenue or the United States Internal Revenue Service. The relatively broad language “does not mean any government authority can collect and use customer information,” the bank said in a statement. “We will only be collecting and using customer information where there is a legal requirement or as directed by law as in the present case with FATCA.”
It had also used these terms in case other countries decided to implement a similar system. “We understand that global discussions are currently occurring,” it said.
Privacy lawyer Kathryn Dalziel told Radio New Zealand’s Morning Report programme the bank’s move to facilitate handing over information breaches the Privacy Act.
Ms Dalziel said the wording in the new clause is too broad and ANZ runs the same risk as the Accident Compensation Commission did over a privacy waiver which was ruled unlawful.
The Bankers’ Association chief executive Kirk Hope said New Zealand banks have no choice but to comply with the US law, but take confidentiality of client’s information very seriously.
“New Zealand banks are not just subject to privacy laws. They also have a common law duty of confidentiality, which is an important consideration to remember.”
The association estimates 1.5 percent of customers will be affected. It said New Zealand banks source funds through the US and failing to comply would have a significant impact on this country’s economy.
David Tripe, from Massey University’s School of Economics and Finance, said every bank in New Zealand has to be compliant, regardless of whether they do business with the United States.
ANZ said that under FATCA regulations it is not required to notify customers of any change, but had done so as a matter of customer service.
Kiwibank spokesperson Bruce Thompson said the bank had two months in which to make changes in response to the US legislation and is still working out how it will notify customers.