FATCA has been used primarily as a tool to increase foreign bank and financial account reporting by establishing a worldwide-financial-industry informant system. The tool of FATCA has increased reporting, but nearly all the money collected is FBAR penalty revenue, which disproportionately harms benign actors.
In FACTA Historical (R)evolution Part I, I argued that in light of JCTX-5-10, Congress failed to engage in the due-diligence necessary to reasonably relate FATCA to the collection of tax revenue lost through “tax schemes” and “tax evasion” by U.S. persons with foreign financial institution accounts. The U.S. Congress is a legislative fact-finder charged with determining whether evidence as presented negates a legislative policy-purpose. If the policy underlying a piece of legislation is negated, then the purpose of the legislation is no longer tied to the policy-purpose. In this case, JCTX-5-10 offered a direct answer to the question of how much revenue would be generated by FATCA. Therefore, Congress knew FATCA would collect less than one-half of one-percent of what it was supposed to collect. Congress also knew that even after ten-years, FATCA would fail to pay for HIRE. Bluntly, the stated policy-purpose for FATCA could not be achieved by FATCA. So, why was it enacted and why does it remain the law? FATCA has been used primarily as a tool to increase foreign bank and financial account reporting by establishing a worldwide-financial-industry informant system designed to curtail the use of secret foreign bank accounts for illegal purposes, including tax evasion, securities manipulation, insider trading, evasion of Federal Reserve margin limitations, storing and laundering funds from illegal activities, and acquiring control of U.S. industries without detection by the SEC.