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FATCA Detailed Implementation
Stanley Foodman CEO Foodman CPAs & Advisors
Stanley Foodman is CEO of Foodman CPAs & Advisors.
Mr. Foodman specializes in international and domestic tax
matters including tax compliance and tax controversies with
the IRS. Mr. Foodman uses his extensive experience as a
forensic accountant and reputation as an expert witness to
represent clients in resolving their tax compliance matters,
entering the voluntary disclosure program and tax controversies.
Mr. Foodman along with his team of accountants also represent
clients with a full range of accounting matters including
compliance, voluntary disclosure, corporate and individual
taxation, estate and trust tax and wealth planning. Foodman
CPAs & Advisors consistently rank as one of the top accounting
firms in South Florida. Foodman CPAs & Advisors represent
individuals and businesses from around the world including
the United States, Latin America, Europe and the Middle East.
T: 1(305) 365-1111 E: [email protected]
Agenda
Session – Detailed FATCA Implementation
Bank Participation Options
Bank Implementation Implications
PFFI Detailed Requirements
• Management Commitment and Policies
• Organizational & Technical Commitment
• FATCA Indicia in KYC
• Due Diligence
• Reporting
• Withholding
• Refunds
• Record Maintenance and Retention
FATCA Chronology
Concluding Consequences of Non-Compliance
The FATCA Implementation Project / Challenges
A Bank Participation Options
• IGA Model 1 Participating FFI (Govt. to Govt.)
– Model 1 a) Reciprocal
– Model 1 b) Non Reciprocal
• IGA Model 2 Participating FFI (PFFI to IRS)
• Participating FFI (No IGA) (PFFI to IRS)
• Exempt / Deemed Compliant
– Registered/ Certified/ Owner Documented
– Can Include Exempt FFIs Under Model 1 or 2 Agreement,
Sponsored FFIs and Government Banks (not competing in
private sectors)
FFI Participation Options (1)
FFI Participation Options(2) Implications
Requirements PFFI(no IGA) Model 1 * Model 2
Sign Agreement with IRS Yes No** Yes
Report Data as per FATCA Regs Yes Yes Yes
Report direct to IRS or to Own
Government
IRS Own Govt. IRS
Comply with FATCA Regs or
Model Agreement only
FATCA Regs Model
Agreement
FATCA Regs
Comply with local Regs re:
confidentiality / waivers
Yes No Yes
Withhold as per Regs Yes Limited
(NPFFIs)
Limited
(NPFFIs)
Report Recalcitrant Accounts Aggregate Individually
(if suspect)
Aggregate
Close Recalcitrant Accounts Yes No No
• * Reciprocal Version Model 1(a) affects USFIs; Model 1 (b) is Non-Reciprocal
• ** Model 1 FFIs will register/ or be registered in IRS Portal to get GIIN Number
Requirements PFFI(no IGA) Model 1 * Model 2
Sign Agreement with IRS Yes No** Yes
Report Data as per FATCA Regs Yes Yes Yes
Report direct to IRS or to Own
Government
IRS Own Govt. IRS
Comply with FATCA Regs or
Model Agreement only
FATCA Regs Model
Agreement
FATCA Regs
Comply with local Regs re:
confidentiality / waivers
Yes No Yes
Withhold as per Regs Yes Limited
(NPFFIs)
Limited
(NPFFIs)
Report Recalcitrant Accounts Aggregate Individually
(if suspect)
Aggregate
Close Recalcitrant Accounts Yes No No
B PFFI (No IGA)Implementation
Implications
1. PFFI – Most Banks
➔Sign Agreement with IRS by January 1, 2014
➔Agree to : Carry Out FATCA Due Diligence on Existing Accounts
Set up new FATCA Account Identification Procedures
Report annually to IRS (or your government) on U.S. owned accounts
Obtain waivers where needed
Withhold as needed
Report Recalcitrant Account Holders
Close accounts as necessary
Strong Commitment of Cooperation to IRS and no assistance to clients on evasion (August 2011)
Provide IRS with additional information as requested
Bank Implementation Implications
➔Three Categories Registered (Can include Model exemptions/Sponsored/Govt
Certified
Owner Documented
➔Registered Meet Detailed Requirements
Agree to Conditions and Register with IRS
Renew the Certification with IRS every three years Examples:
– Local FFIs
– Non reporting members of FFI groups
– Qualified Investment Vehicles
– Restricted Funds
2. DCFFI
Bank Implementation Implications
➔Certified Certify directly to specific withholding agents (Form w-8)
Examples: – Non registering local banks
– Retirement Plans
– Non Profit Organizations
– FFIs with only low value accounts
➔Owner Documented FFI Certifies directly to withholding agents and provides all ownership documentation
Not an FI or affiliated to an FI
It does not maintain Financial Accounts
It does not issue debt (in excess of USD 50,000)
3. DCFFI
Bank Implementation Implications
C PFFI (No IGA) Detailed Requirements
PFFI Requirements
Management Commitment and Policies
Organizational & Technical Commitment
FATCA Indicia in KYC
Due Diligence* Pre-existing Account New Accounts
Reporting*
Withholding*
Refunds
Record Maintenance and Retention
* Dates in Chronology Slide
➔Options for registration (FFI individual or combination for
EAGs)
➔IRS Agreement & Certifications
➔Embed FATCA Commitment and New Focus into Bank Wide
Policies; Systems and Internal Testing and Audits
➔Roles and Responsibilities
➔Financial Commitment
PFFI Requirements
1. Management Commitment & Policies
➔FATCA Responsible Officer (RO) or Officers (ROs) Completes and signs IRS Registration
Can be assisted with up to 5 Points of Contact (POCs)
Can Authorize 3rd Party (ATP)
➔Functional Ownership for FATCA / Reporting Lines
➔Technology Enhancements
➔Internal Training
➔Communication Plan
➔External Training
➔Integration to Risk Management and Auditing Plans
PFFI Requirements
2. Organizational / HR Commitment
➔U.S. ID of Individual or Beneficial Owner
Passport, Green Card, W-9 or other
A U.S. place of birth or incorporation
A U.S. address
A U.S. telephone number
Standing Instructions to transfer funds to U.S.
Power of Attorney / signatory authority to U.S. address or person
“In care of” or “hold” address
PFFI Requirements
3. Adopt FATCA U.S. Indicia into KYC
➔Pre-existing account review
Aggregate Balances (Elect to use thresholds)
Exemption Thresholds (Electronic Search)
- Individuals - $ 50,000
- Certain Cash Value/ Insurance and Annuity - $250,000
- Entity - $ 250,000
Perform Manual Searches for accounts exceeding $1,000,000
PFFI Requirements
4. Due Diligence
➔New accounts
Obtain all US Indicia and Documentation at opening
Obtain waivers as applicable
Some exemptions (i.e. PFFI account, exempt NFFEs)
PFFI Requirements
4. Due Diligence
➔Phase 1
Account Name
Account Number
Address
U.S. TIN Number
End of Year Balance
Include: Recalcitrant Accounts
/Payments to NPFFI/
Aggregated Balances and
Account Closures
➔Phase 2 and 3 phase in
Income Amounts (2015 activity)
Gross Proceeds (2017 activity)
PFFI Requirements
5. Reporting (Electronic)
➔30%
➔Grandfathered Obligations outstanding prior to Jan 1 2014
➔Phase 1: US Source Withholdable Payments Jan 1, 2014
➔Phase 2: Phase in Gross Proceeds Jan 1, 2017
➔Including Passthrus to NPFFIs
FFIs are liable for failure to collect Filing of Definition of a Foreign Passthru Payment with the Federal
Register will further define dates for certain Grandfathered Obligations
PFFI Requirements
6. Withholding
➔Allowed:
PFFI when excess withholding out of own funds
U.S. Beneficial Owner through additional
form attached to tax return
Exempt NFFE with submission of documentation
➔Refunds Not Allowed:
Non Participating FFIs
PFFI Requirements
7. Refunds
➔Documentation • US IDs
• Withholding Certificates (W9, W8 ben /e or local equivalents)
• Beneficial Ownership Certificates
• Client communication (including electronic files)
• Official Citizenship Renunciation Certificate
➔Retention – 6 years or more if requested
PFFI Requirements
8. Record Maintenance and Retention
D Chronology – Events & Implementation Dates
Activity Event Due Date
FATCA Regulations
and FFI Agreements
Note that an FFI Agreement
signed prior to January 1,
2014 will still have the
effective date of January 1,
2014.
Final FATCA Regulations
Published
January 28,2013
Expected Availability of IRS On
Line FFI Agreement System –
FATCA Portal
July 15, 2013
Deadline for Timely Filing of
Agreements between FFI and IRS
December 31, 2013
Deadline to appear on first IRS
List of PFFIs which will be
published on December 2, 2013
October 25, 2013
As of this date, all New Account
Opening Procedures must be
FATCA Compliant
The later of January 1, 2014
or effective date of FFI
Agreement if signed after
January 1, 2014
FATCA Chronology (1)
Events and Implementation Dates
FATCA Chronology (2)
Events and Implementation Dates
Activity Event Due Date
FFI and US Account
Due Diligence and
Documentation for
Pre Existing
Accounts
Note that any accounts that
you have not been able to
Identify and Document by
the Due Dates should be
considered and treated as
Recalcitrant Accounts.
Identify and Document all
Prima Facie FFI Accounts
(Participating, Exempt, or
any other FFI Accounts)
The later of June 30, 2014 or
6 months after FFI
agreement effective date
Identify and Document all Entity
accounts (non Prima Facie FFIs)
The later of December 31,
2015 or 2 years after FFI
agreement effective date
Identify and Document all US
Private Banking (Individual)
High Value Accounts
($ 500,000 or more)
The later of December 31,
2014 or 1 year after FFI
agreement effective date
Identify and Document all US
Private Banking (Individual)
Other Than High Value Accounts
(less than $ 500,000)
The later of December 31,
2015 or 2 years after FFI
agreement effective date
FATCA Chronology (3)
Events and Implementation Dates Activity Event Due Date
Reporting to the IRS Reporting of Identified US Accounts;
Account Name, Address, Number, US
TIN, and 2013 and 2014 Year End /
closing balances and any Account
Closures during the reported years.
Reporting will be due latest by
March 31, 2015 for the activity with
respect to 2013 and 2014 (from
the effective date of FFI
Agreement)
Reporting of Identified US Accounts;
Account Name, Address, Number, US
TIN, and 2015 Year End / closing
balance and Income amounts
Reporting will be due latest by
March 31, 2016 for the activity with
respect to 2015
Reporting of all US Accounts as above
but including all gross proceeds as well
Enhanced Reporting with Gross
Proceed Amounts commences in
2018 with respect to 2017 activity
for any sale or disposition
occurring after December 31,
2016.
Reporting of Recalcitrant US Account
Holders
Report with other account
reporting above as the due dates
for documentation and due
diligence in previous slide
materialize and you have not been
able to comply.
FATCA Chronology (4)
Events and Implementation Dates
Activity Event Due Date
Withholding Withholding Begins on US Source
Withholdable Payments (including
FDAP)
From January 1, 2014
Withholding Begins on Gross
Proceeds from any sale or other
disposition occurring after
December 31, 2016
From January 1, 2017
Enhance Withholding to include all
Foreign Passthrus
See Note
Notes:
Once a particular account has been documented (i.e. a U.S. account or a non participating FFI)
withholding and reporting for that account must commence
even though it may be before the deadlines Stated.
Filing of Definition of Foreign Passthru Payment with Federal Register will further define
dates for certain Grandfathered Obligations. Additional Clarification is expected on
PFFI withholding responsibilities when final regulations are published.
E FATCA Consequences
of Non-Compliance
➔Already Covered Withholding / Correspondent Banking
Relations and Isolation
➔Practical Consideration of flows coming from the US
that may be withheld (even if no US Beneficial Owner)
Examples:
Interbank US Flows (Bene-Deduct)
US Corporate Vendor Accounts
FATCA Consequences of Non-Compliance
To You: Banks & Financial Institutions
➔Banks will be reporting on their accounts to the IRS Serious Penalties and Incarceration are involved
OVDP program can help them to achieve compliance before the IRS starts investigation
They need to consult a Licensed U.S. International Tax Attorney and Certified Public Accountant
They need to be careful not to use advisors who supported them during non compliant years
FATCA Consequences of Non-Compliance
To Your customers: Individuals & Entities
➔KYC becomes Know and Keep Your Customer
➔Foreign MNCs will see your transparency as a plus
➔Transparency will help you strengthen
your Correspondent Banking
➔Strengthens your AML /ATF
➔Minimizes your risks
FATCA Consequences of Non-Compliance
Turn FATCA Compliance
to your advantage
F FATCA Implementation Project
And Challenges
Overview
Initial Scoping and Impact Assessment
Strategic Decisions
Project Initiation & Execution
Ongoing FATCA Program
Key Challenges
➔Business Units
➔Local Countries/ Laws / Agreements
➔Business Lines
➔Affected Clients / Volume
➔Available Data / Gap
➔Affected transaction Flows (including Passthru)
➔Technology Gap (ID / Aggregation)
➔Available Options
➔Report
FATCA Implementation Guidelines
1. Initial Scoping and Impact Assessment
➔Participation Options
➔Organizational and Business Adjustments
➔Roles and Responsibilities
➔Human and Technical Resource Requirements
Internal
External
➔Budget
➔Policy Communication and Empowerment
FATCA Implementation Guidelines
2. Strategic Decisions
➔Project Team Kick Off
➔Communication of Roles and Responsibilities FATCA Committee / RO/ POCs /ATP
➔Internal Training
➔FFI Agreement
➔Systems / Technology solution and implementation
➔Develop New Account Opening (KYC) Procedures
➔Plan and Execution of Due Diligence
➔Develop and Implement new Reporting, Withholding Documentation and Retention procedures
➔Policy for Discrepancy Resolution
➔External Communication (Clients/ Corrbanks)
FATCA Implementation Guidelines
3. Project Initiation and Execution
➔Incorporate all new policies and procedures
FFI Documentation
Ongoing Training Requirements
Internal Controls
Audits
Management Oversight
FATCA Implementation Guidelines
4. Ongoing FATCA Program
➔Timing – Need to start now
➔Key to Identify your Local Authority Intentions
➔Work Around Local Law / Pending Agreements
➔Develop New Mind Set / Culture/ Education Needed on
new risks/ focus and targets
➔IRS Chapter 4 Regulations
Hard to Understand
Build upon and refers to other chapters
Multidisciplinary team required
- Banking / International Tax (U.S. Tax Specialty a must) /
Legal / IT / Ops
Resources and Commitment
FATCA Implementation Guidelines
5. Key Challenges
Questions & Answers
Thank you
Closure
