The Foreign Account Tax Compliance Act (FATCA), requires Foreign Financial Institutions to report to IRS all financial accounts held by US Taxpayers!
Per the IRS, "beginning in 2013, the Foreign Account Tax Compliance Act, (FATCA) will also require foreign financial institutions (“FFIs”) to report directly to the IRS certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. To properly comply with these new reporting requirements, an FFI will have to enter into a special agreement with the IRS during 2012. Under this agreement a “participating” FFI will be obligated to:
(1) undertake certain identification and due diligence procedures with respect to its accountholders;
(2) report annually to the IRS on its accountholders who are U.S. persons or foreign entities with substantial U.S. ownership; 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 FFIs, (b) individual accountholders failing to provide sufficient information to determine whether or not they are a U.S. person, or (c) foreign entity accountholders failing to provide sufficient information about the identity of its substantial U.S. owners.