Introduction:

The @RepMaloney "Overseas Americans Financial Access Act" (#FATCA Relief) while requiring banks to disclose custodial accounts https://t.co/Sc2E1Iurcq exempts individuals from disclosure of those same custodial accounts https://t.co/ztHAW6Uz3r – Why the different treatment?

— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) September 20, 2019

FATCA imposes obligations on both foreign banks (report on individuals to the IRS – Internal Revenue Code Section 1471) and obligations on individual Americans abroad (report foreign assets to the IRS – Internal Revenue Code 6038D).
Depository vs. Custodial Accounts
In general a “Depository” accounts is a basic day-to-day bank account (checking, savings, etc.)
In general a “Custodial” account is a brokerage or other account that holds assets for management.
The Maloney bill addresses these obligations (with respect to the reporting of “Custodial” accounts) differently.
The Maloney bill and foreign banks – Section 1471 Amendments – custodial accounts are reportable
Representative Maloney’s H.R. 4362 – “Overseas Americans Financial Access Act” – includes relief provisions for both foreign banks AND for individual Americans abroad.
My previous post discussed how the Maloney bill impacts the reporting requirements of foreign banks. Notably the Maloney bill relaxes the reporting requirements for foreign banks ONLY with respect to depository accounts.
The Maloney bill and individuals – Section 6038D Amendments – custodial accounts not reportable
It appears that the Maloney bill would relax the Form 8938 reporting requirements for individuals with respect to BOTH depository and custodial accounts. Although not a model of clarity, it means that (as a general principle) Americans abroad would not be required to report their local (foreign to the USA) accounts (depository or custodial) to the IRS. This is a variant of what has been called FATCA SCE (“Same Country Exemption”).
Bottom Line: Foreign banks and Americans abroad do NOT get the same treatment under the Maloney bill. Is this an oversight? Is it careless drafting? Is it deliberate?
________________________________________________________________
Technical analysis (of interest to few people) follows:

Part A – A view of 6038D with the Maloney amendment inserted
https://www.law.cornell.edu/uscode/text/26/6038D
26 U.S. Code § 6038D.Information with respect to foreign financial assets
U.S. Code
(a)In general
Any individual who, during any taxable year, holds any interest in a specified foreign financial asset shall attach to such person’s return of tax imposed by subtitle A for such taxable year the information described in subsection (c) with respect to each such asset if the aggregate value of all such assets exceeds $50,000 (or such higher dollar amount as the Secretary may prescribe).
(b)Specified foreign financial assetsFor purposes of this section, the term “specified foreign financial asset” means—
(1)any financial account (as defined in section 1471(d)(2)) maintained by a foreign financial institution (as defined in section 1471(d)(4)), and
(2)any of the following assets which are not held in an account maintained by a financial institution (as defined in section 1471(d)(5))—
(A)any stock or security issued by a person other than a United States person,
(B)any financial instrument or contract held for investment that has an issuer or counterparty which is other than a United States person, and
(C)any interest in a foreign entity (as defined in section 1473).
(c)Required informationThe information described in this subsection with respect to any asset is:
(1)In the case of any account, the name and address of the financial institution in which such account is maintained and the number of such account.
(2)In the case of any stock or security, the name and address of the issuer and such information as is necessary to identify the class or issue of which such stock or security is a part.
(3)In the case of any other instrument, contract, or interest—
(A)such information as is necessary to identify such instrument, contract, or interest, and
(B)the names and addresses of all issuers and counterparties with respect to such instrument, contract, or interest.
(4)The maximum value of the asset during the taxable year.
(d)Penalty for failure to disclose
(1)In general
If any individual fails to furnish the information described in subsection (c) with respect to any taxable year at the time and in the manner described in subsection (a), such person shall pay a penalty of $10,000.
(2)Increase in penalty where failure continues after notification
If any failure described in paragraph (1) continues for more than 90 days after the day on which the Secretary mails notice of such failure to the individual, such individual shall pay a penalty (in addition to the penalties under paragraph (1)) of $10,000 for each 30-day period (or fraction thereof) during which such failure continues after the expiration of such 90-day period. The penalty imposed under this paragraph with respect to any failure shall not exceed $50,000.
(e)Presumption that value of specified foreign financial assets exceeds dollar threshold If—
(1)the Secretary determines that an individual has an interest in one or more specified foreign financial assets, and
(2)such individual does not provide sufficient information to demonstrate the aggregate value of such assets,
then the aggregate value of such assets shall be treated as being in excess of $50,000 (or such higher dollar amount as the Secretary prescribes for purposes of subsection (a)) for purposes of assessing the penalties imposed under this section.
(f)Application to certain entities
To the extent provided by the Secretary in regulations or other guidance, the provisions of this section shall apply to any domestic entity which is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets, in the same manner as if such entity were an individual.
(g)Reasonable cause exception
No penalty shall be imposed by this section on any failure which is shown to be due to reasonable cause and not due to willful neglect. The fact that a foreign jurisdiction would impose a civil or criminal penalty on the taxpayer (or any other person) for disclosing the required information is not reasonable cause.
“(h) Exception For Certain Financial Accounts Of Individuals Living Abroad.—
“(1) IN GENERAL.—In the case of a qualified individual with respect to any foreign country, subsection (a) shall not apply to such individual for any taxable year if such individual would not be required to provide any information under such subsection for such taxable year if the qualified foreign accounts in which such individual holds an interest were not taken into account as specified foreign financial assets for purposes of this section.
“(2) QUALIFIED FOREIGN ACCOUNT.—For purposes of this subsection, the term ‘qualified foreign account’ means, with respect to any qualified individual, any account described in subsection (b)(1) which is maintained by a financial institution which is licensed to conduct business in the foreign country with respect to which such individual is a qualified individual.
“(3) QUALIFIED INDIVIDUAL.—For purposes of this subsection, an individual is a qualified individual with respect to any foreign country if such individual would be a qualified individual under section 911(d) if the only foreign country taken into account under such section were such foreign country.”.
(i)Regulations The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which provide appropriate exceptions from the application of this section in the case of—
(1)classes of assets identified by the Secretary, including any assets with respect to which the Secretary determines that disclosure under this section would be duplicative of other disclosures,
(2)nonresident aliens, and
(3)bona fide residents of any possession of the United States.
Part B – Parsing The Maloney Amendment – What does it mean?
https://www.congress.gov/bill/116th-congress/house-bill/4362/text?fbclid=IwAR2RrGLOoAkJZXQ6OyfKweBmZdocqk0iLTEJxIHzWhpY28UZ1gD8GWWST-o
“(h) Exception For Certain Financial Accounts Of Individuals Living Abroad.—
“(1) IN GENERAL.—In the case of a qualified individual with respect to any foreign country, subsection (a) shall not apply to such individual for any taxable year if such individual would not be required to provide any information under such subsection for such taxable year if the qualified foreign accounts in which such individual holds an interest were not taken into account as specified foreign financial assets for purposes of this section.
(JR note: Read in the context of the whole, this means that neither depository nor custodial accounts are reportable as Foreign Financial Assets if (1) the person qualifies for the Section 911 FEIE AND the financial account is in the country which is the basis for qualifying for the FEIE.)
“(2) QUALIFIED FOREIGN ACCOUNT.—For purposes of this subsection, the term ‘qualified foreign account’ means, with respect to any qualified individual, any account described in subsection (b)(1) which is maintained by a financial institution which is licensed to conduct business in the foreign country with respect to which such individual is a qualified individual.
(JR note: Qualified foreign accounts include BOTH depository and custodial accounts as per Section 1471(d)(2) – This means that all accounts would be exempt from reporting on Form 8938.)
“(3) QUALIFIED INDIVIDUAL.—For purposes of this subsection, an individual is a qualified individual with respect to any foreign country if such individual would be a qualified individual under section 911(d) if the only foreign country taken into account under such section were such foreign country.”.
(JR Note: Qualified individual means somebody who would qualify for the Section 911 Foreign Earned Income Exclusion.)
John Richardson – Follow me on Twitter @Expatriationlaw