(Corrects to make clear VTB is phasing out business with
Russia-based U.S. taxpayer clients only)
MOSCOW, June 5 Russia's second-largest bank, VTB
, said on Thursday it is phasing out business with
around 2,000 Russia-based individual and corporate clients that
are U.S. taxpayers ahead of a new law to fight tax dodging by
Scheduled to take effect on July 1, the U.S. Foreign Account
Tax Compliance Act (FATCA) will require foreign banks to share
information with the Internal Revenue Service (IRS) about
Americans' accounts worth more than $50,000.
The law was written after a scandal involving Americans
dodging U.S. taxes through secret bank accounts in Switzerland.
Foreign firms that don't comply with FATCA face a tax on
their U.S. investment income and could be frozen out of U.S.
State-controlled VTB said it registered with the IRS in
order to maintain compliance with FATCA and would voluntarily
abide by the legislation.
"However, as part of its prudent approach to managing risk,
VTB's senior management has instructed the group's entities to
gradually phase out business with clients, both individuals and
legal entities, that are US taxpayers," VTB said.
VTB said it would phase out business with Russia-based U.S.
taxpayer clients only; those based in the United States are not
Nearly 70 countries have negotiated FATCA pacts with
Treasury officials that allow their firms to comply with the
U.S. law whilst preserving national privacy laws.
Negotiations with Russia, however, broke off earlier this
year as the crisis in Ukraine intensified, yet hundreds of
institutions in Russia signed up voluntarily to comply.
The United States and European Union have imposed sanctions
on officials, lawmakers and a few companies close to President
Vladimir Putin to punish Russia for annexing Ukraine's Crimea
They are threatening further sanctions, which could affect
entire sectors such as banking, if it thwarts efforts to bring
stability to Ukraine, where pro-Russian separatists are fighting
against the government.
U.S. citizens are already required to disclose foreign
assets to the IRS if the value of their foreign accounts exceeds
$10,000 during a year.
(Reporting by Megan Davies and Oksana Kobzeva; Editing by