* Tax-dodge crackdown centering on bilateral pacts
* Approach seen as most pragmatic path for new law
* At least 40 countries talking with U.S.-lawyers
By Patrick Temple-West
WASHINGTON, Sept 18 (Reuters) - A U.S. crackdown on overseas tax evasion is fast changing shape as officials move to implement it via country-to-country agreements, rather than by enforcing a single law for all financial institutions.
The transformation over the past nine months of the Foreign Account Tax Compliance Act, or FATCA, is largely seen by both advocates and detractors as the most pragmatic way to implement the law, which takes effect in 2014.
"These agreements ... while not perfect, are a good first step," said Nicole Tichon, executive director of U.S. Tax Justice Network, a nonprofit, nonpartisan activist group.
Enacted in 2010, FATCA requires foreign financial institutions to tell the U.S. Internal Revenue Service about Americans' offshore accounts worth more than $50,000.
Banks, funds and other institutions failing to comply could effectively be forced out of U.S. financial markets.
After it was enacted, FATCA drew fire from the financial industry and foreign governments. Complaints ranged from the cost of compliance to what the law would do to countries, such as Switzerland, where bank secrecy is a long tradition.
In February, in the face of industry complaints, the U.S. Treasury Department said some countries could comply by collecting required financial data from their home-country institutions and forwarding it to the United States.
Initially, Treasury said that France, Germany, Italy, Spain and the United Kingdom would be allowed to take this "intergovernmental approach." Japan and Switzerland were later added to that list under a different model.
The UK on Friday became the first country to finalize a tax information-sharing pact with the United States under FATCA.
The U.S.-UK agreement, pending approval by Parliament, spares UK banks, funds and other financial companies from reporting client information directly to the United States.
Treasury is now negotiating with at least 40 countries for FATCA tax information-sharing pacts, tax lawyers said.
A Treasury FATCA negotiating team is scheduled to meet with foreign financial businesses on Thursday in Paris and on Sept. 26 in Singapore on tax information exchanges.
Bilateral agreements to implement FATCA are "a workaround," said Mark Matthews, a lawyer at Caplin & Drysdale and former head of the criminal investigation division at the Internal Revenue Service.
"It is clearly less airtight and bulletproof. But the (FATCA) statute as written was wholly unachievable," he said.
Direct reporting to the IRS could be the only route left for financial institutions, such as private equity and hedge funds, in tax havens like the Cayman Islands if they fail to work out pacts of their own with the U.S. government, lawyers said.
An IRS spokesman said final FATCA regulations will be published later this year.