Online FATCA Registration Beginning Soon
FATCA guidelines requiring foreign financial institutions to report offshore accounts held by American Citizens were enacted in 2010 and are finally ready to go into effect in July 2014. The original date of implementation was January 2014, but January of next year is now included in the registration period – a period ending in April 2014 in which participating foreign governments and financial institutions are required to register online or face stiff withholding procedures on US-sourced income.
US Sidestepping Foreign Financial Institution Resistance
Many foreign financial institutions were hesitant about reporting confidential account information to the United States. Some were concerned about the sheer thought of ‘ratting out’ American Citizens and others were afraid to find themselves in violation of their country’s banking privacy laws. In order to sidestep this hesitation, the United States has been negotiating IGAs (intergovernmental agreements) with foreign governments rather than signing individual agreements with specific FFIs (foreign financial institutions). Through these IGAs, FFIs will adjust their account opening procedures to collect specific information on US Account Holders and submit the information to their governments which will, then, submit the required information to the United States.
Full Implementation of FATCA Guidelines Still More Than 1 Year Away
While registrations are required to have been completed by April 25, 2014, information sharing still isn’t scheduled to take effect until January 2015. Any FFI that chooses not to register, however, will be facing a 30% withholding of US-sourced income by the United States and participating FFIs. During the month of May, 2014, registered FFIs will be processed and a list of participating FFIs will be published on the registration website in June 2014.
Institutions With Registration Requirement Remains Ambiguous
Currently, the penalties for non-participating FFIs are set in stone, but the institutions that will be subject to such penalties are still massively undefined. When it comes to foreign banks, investment firms, and insurance companies, the requirements are all too clear. There are other financial institutions such as those established overseas to finance production of US-based manufacturers, and it remains unclear whether or not these and other institutions will be face the choice of either registering online and complying with FATCA demands or be subject to the stiff withholding procedures which are capable of bankrupting any institution dependent up0n US financial markets and/or imports/exports to and from the United States.