Confusion still abounds about FATCA terms
Increasingly, Alacra Compliance Enterprise customers and prospects are asking us to facilitate the inclusion of FATCA client classification information in their onboarding workflow. Although the main FATCA challenge is in classifying existing customers (which may number in the tens or hundreds of thousands at some banks) classifying new customers at the time of onboarding is critical enhancement to the KYC workflow.
If you’re not entirely familiar, FATCA stands for Foreign Account Tax Compliance Act. It is an IRS law and set of regulations “to improve tax compliance involving foreign financial assets and offshore accounts.”
“Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. This reporting will be made on Form 8938, which taxpayers attach to their federal income tax return, starting this tax filing season.
In addition, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.” – IRS
Similar laws are planned in Europe and Asia, and some governments are signing reciprocal Intergovernmental Agreements (IGAs) with the United States.
Although the January 1, 2014 deadline for FATCA compliance is rapidly approaching, many financial institutions are unclear as to what they are required to do. This situation is not helped by the large number of terms and acronyms surrounding FATCA. To help identify and define all the terms and acronyms, today we published the Alacra Periodic Table of FATCA Acronyms. Like our Periodic Table of Banking Regulations and Compliance the Periodic Table of FATCA Acronyms organizes and defines the 35 acronyms associated with the far-reaching US law.
There are four categories:
- Entity – an entity identified by FATCA during the classification process, such as RFI: Reporting Financial Institution.
- Forms – a form listed by the IRS as required from the individual account holder or the bank.
- Individual – a specific person or officer identified by the Act.
- Regulation – a regulator, agency, or regulation.
Each “element” of the periodic table includes a Name, Description, Type, Jurisdiction, Sponsor or Regulator, and a Summary of the acronym.
The Alacra Compliance Team is currently working with several financial institutions to develop best practices for new client onboarding that incorporate FATCA classifications. If you would like to talk to us about this, please contact us.
If you find the Periodic Table of FATCA Acronyms helpful, please link back to us or share it with your colleagues. And if you have anything we should add or change, just let us know.