After two delays and much angst among both individuals and foreign financial services companies, the Foreign Account Tax Compliance Act finally took effect on July 1. The act, known as Fatca, aims to combat tax evasion by U.S. citizens with offshore accounts by mandating that foreign banks, investment entities, brokers and insurance companies notify the U.S. Internal Revenue Service about Americans’ offshore accounts.

U.S. taxpayers with more than $50,000 in foreign accounts must report those assets to the IRS on Form 8938. Reporting requirements are higher for Americans living abroad––$200,000 for single taxpayers and $400,000 for joint filers.

Fatca was enacted by Congress in 2010 and originally was supposed to take effect in 2013, but was twice pushed back to give foreign countries more time to conform with its mandates. Fatca is expected to increase compliance obligations for foreign financial institutions (FFIs) worldwide, except for those exempted such as most government entities and nonprofit organizations, as well as certain small, local financial institutions.

FFIs need to report the name, address and taxpayer identification number of each American account holder, along with the account balance or value at year end. Noncompliance by FFIs will result in a 30% reduction on certain U.S.-source payments made to foreign entities.

Critics says Fatca will do little to curb tax evasion, adds compliance costs to FFIs and is making it harder for expats to manage their finances overseas. “Some expats are finding they might have difficulty opening bank accounts outside the U.S. because some banks said they don’t want to deal with Americans because they don’t want to be subject to U.S. reporting,” says Joan Arnold, chair of the tax group at the law firm Pepper Hamilton LLP in Philadelphia. “I think that is a very real problem.”

As of mid-June, 34 jurisdictions had signed agreements to be on board with Fatca, including many Western nations and some of the leading money centers such as the Cayman Islands, Guernsey, Isle of Man, Luxembourg and Malta. Thirty-seven additional jurisdictions have reached agreements in substance.

Recent reports have described a spike in U.S. expats who are considering giving up their U.S. passports rather than face tougher asset-disclosure rules. The U.S. is one of the few nations that taxes its citizens who live abroad.

Arnold, for one, believes Fatca is a good thing. “People who weren’t paying tax were effectively hiding,” she says. “There’s been a significant problem of expats who haven’t been [tax] compliant. But that was independent of Fatca, which was enacted to make sure people woke up and were compliant. After living with it for four years and seeing the rest of the world’s level of agreement with it, I think it’s a remarkable change in global approach to tax reporting, and I think it will be a healthy addition to the reporting system,” she says.