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Responsible Officers Certifications Under FATCA

TaxConnections Blogger Jim Calvin Posts about FATCAWhat could be the consequences to a Responsible Officer making a false certification under FATCA?

It is expected that participating FFIs will be required to identify a Responsible Officer who will be required to certify, under penalty of perjury, as to compliance with FATCA (Chapter 4 of the Internal Revenue Code). The proposed regulations describe several certifications by Responsible Officers and by others. Implementation will likely require that subordinate certifications and documentation from other persons will be required to support the certification made by the Responsible Officer.

The Internal Revenue Service may criminally prosecute a false document case under more than one statute. Only one of those possibilities is discussed below – that is, section 7206 of the Internal Revenue Code – because it is the one most likely to be invoked, and, in fact, it is the most frequently charged criminal tax violation. It applies where a “return, statement or other document…contains or is verified by a written declaration that it is made under penalties of perjury.” In addition, civil sanction may, and almost always does, follow a criminal investigation.

Sometimes referred to as the false-statement, tax perjury or fraud statute, section 7206 aptly illustrates the serious consequences of a false certification. Consider those consequences: Any person who willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; shall be guilty of a felony and, upon conviction thereof:

•  Shall be imprisoned not more than three years;

•  Or fined not more than $250,000 for individuals ($500,000 for corporations);

•  Or both, together with cost of prosecution.

No tax deficiency must be shown in order for the Government to succeed in its prosecution. All which must be proved are the elements of the offense. The essence of the statute lies in the willful falsity of a statement.

The FAQ here focuses on false certifications made by Responsible Officers. It can apply to any false document certified under penalties of perjury such as Forms W-9, W-8IMY, W-8BEN, W8-BEN-E, W-8EXP, and W-8ECI.

Responsible Officer Certifications under the Proposed Regulations

Proposed regulation section 1.1471-4 describes the FFI Agreement. The FFI agreement will specify a participating FFI‘s obligation to comply with specified verification procedures. The Agreement will require a responsible officer of a participating FFI to make certain certifications in order to verify compliance.

The agreement will require that the participating FFI adopt written policies and procedures governing its due diligence procedures for identifying and documenting account holders and its withholding and reporting requirements under the FFI agreement. The FFI agreement will further require that the participating FFI conduct periodic reviews of its compliance with these policies and procedures and its chapter 4 obligations. Based on the results of such reviews, a responsible officer of the participating FFI will periodically certify to the IRS the participating FFI‘s compliance with its obligations under the FFI agreement.

A responsible officer may be required to provide factual information and to disclose material failures with respect to the participating FFI‘s compliance with any of the requirements of the FFI agreement. If the IRS identifies concerns about the compliance of the FFI based on the reporting and certifications provided by the FFI, including cases of suspected patterns of compliance failures, the IRS may verify the participating FFI‘s compliance with the FFI agreement through an audit, performed by an external auditor approved by the IRS, of one or more issues selected by the IRS. The FFI agreement will not, however, require that the participating FFI arrange for periodic external audits on a predetermined basis and will not require external audits of a participating FFI on a random basis. Thus, the responsible officer certifications will be the primary verification method.

In addition to periodic responsible officer certifications to verify compliance, a certification would be required to confirm, with respect to the preexisting accounts of the FFI that are high-value accounts, that within one year of the effective date of the FFI agreement it has completed the required review and to the best of the responsible officer’s knowledge, after conducting a reasonable inquiry, the participating FFI did not have any formal or informal practices or procedures in place at any time from August 6, 2011 (120 days from the release of Notice 2011-34 to the public) through the date of such certification to assist account holders in the avoidance of chapter 4.

The responsible officer is also required to certify that, with respect to all of the preexisting accounts of the FFI, that within two years of the effective date of its FFI agreement the participating FFI has completed the account identification procedures and documentation requirements or, if it has not obtained the documentation required to be obtained with respect to an account, the participating FFI treats the account holder of such an account as a recalcitrant account holder or nonparticipating FFI.

Section 7206

Sections 7206(1) and (2) address false or fraudulent statements made to the IRS by any person, and those who aid or assist in making such statements. This section does not require the existence or proof of a tax deficiency.

Section 7206(1) – Declaration under the Penalties of Perjury

Elements of the Offense

•  Making and subscribing a return, statement, or other document which was false as to a material matter;

• The return, statement, or other document contained a written declaration that it was made under the penalties of perjury;

• The maker did not believe the return, statement, or other document to be true and correct as to every material matter; and,

• The maker falsely subscribed to the return, statement, or other document willfully, with the specific intent to violate the law.

Makes any Return, Statement or Document

Section 7206(1) expressly applies to “any return, statement, or other document” signed under penalties of perjury. The most common prosecutions under this section involve income tax returns. Examples of prosecutions based on false statements include:

• Financial information statement submitted to the IRS for settlement purposes.

• Application for extension of time to file a return.

• Schedule B, questions concerning foreign bank accounts – Courts have held that providing false answers to the questions at the bottom of Form 1040, Schedule B, concerning interest in foreign financial accounts or foreign trusts violates section 7206(1).

• Form W-2 – For example, a defendant withheld federal income and FICA taxes from his employees and filed a Form 1040 stating the amount of federal income tax withheld but did not submit payment, his contention that his responses on his Form 1040 were literally true was rejected since the Forms W-2 he filed were false.

Signed Under Penalties of Perjury

While the government is required to authenticate the taxpayer’s signature on the return, statement, or other document in question, section 6064 creates a rebuttable presumption that the taxpayer actually signed the document, i.e., the fact that an individual’s name is signed to a return is prima facie evidence that the return was actually signed by him. It is not essential that the person personally subscribe the return as long as the person who did subscribe his name was authorized by him to do so. A corporation may be charged under section 7206(1) based on the subscription of a corporate officer.

Did Not Believe the Document to be True and Correct

This element is proven by evidence of willfulness, i.e., evidence that the maker of the return acted with knowledge that his conduct was unlawful and with the intent to do something the law forbids. This element is not met if the maker’s conduct was due to negligence, inadvertence, or mistake or if it was a result of good faith misunderstanding of the requirements of the law.


The Government is not required to show that a false statement was substantial; instead, it must only show that is was “material” which does not require there to be a tax deficiency. A test of whether the falsely reported item was material is whether that item would have a tendency to influence or affect the IRS in its ability to audit or verify the accuracy of a return or related information.


Section 7206(1) is a specific intent crime requiring a showing of willfulness. “Willfulness” is “a voluntary, intentional violation of a known legal duty.” Proof of this element is essential, and neither a showing of careless disregard nor gross negligence in signing a tax return will suffice. In addition, if knowingly false statements are made for the purpose of inducing the Government’s reliance thereon, it is not necessary that there be actual reliance.

Inference of Willfulness.

• A taxpayer’s knowledge of the contents of the return may be inferred from circumstantial evidence.

• A taxpayer’s signature at the bottom of the return is prima facie evidence that the signer knows the contents thereof.

• The defendant’s filing of an amended return after filing a false return cannot provide the sole basis for an inference of willfulness.

Note that reliance on a qualified tax preparer is an affirmative defense to a charge of willful filing of a false tax return if the defendant can show that he provided the preparer with complete information and then filed the return without any reason to believe it was false.

Section 7206(2) – Aiding or Assisting the Preparation of a False or Fraudulent Document

Elements of the Offense:

•  The defendant aided or assisted in, or procured, counseled, or advised the preparation or presentation of a return, affidavit, claim, or other document which involved a matter arising under the Internal Revenue laws.

•  The return, claim, affidavit or other document was fraudulent or false as to a material matter.

•  Willfulness.

Sometimes referred to as the aiding and abetting statute, section 7206(2) applies to all knowing participants in the fraud. It applies whether or not the falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim or document. Moreover, there is no requirement that the document be signed under penalty of perjury, and a tax deficiency is not a legal prerequisite under section 7206(2).

Aiding and Assisting

Section 7206(2) is frequently used to prosecute the aider or adviser of the preparation or presentation of a false document, e.g., tax return preparers. Section 7206(2) applies not only to preparers but also to anyone who causes a false return to be filed. For example:

•  Corporate officers.

•  Corporate tax form preparers.

•  Tax shelter promoters and those who provide a document or advice knowing it will be used for tax return preparation, and

•  Promoters of not filing tax returns.

Actual preparation of the false return is not necessary to sustain a conviction; supplying false information may be sufficient.

Return, Affidavit, Claim, or Other Document

Among the documents upon which prosecution has been sustained under section 7206(2) are:

•  Income tax returns and partnership information returns.

•  Form 1099 Information Returns

While the offense generally is predicated on the filing of a tax return or other document, courts have reached different conclusions as to whether an actual filing is a required element of the offense. The filing requirement may not apply where the taxpayer is required to provide information to an intermediary, who in turn, is required to file a form with the IRS. In such cases, the offense is completed when the document or information has been presented to the entity required by law to transmit the information to the Service. For example, a defendant provided false information to a stock brokerage firm which caused the firm to file Forms 1099-B containing false statements.


The same principles of “materiality” under section 7206(1), also apply to the issue under section 7206(2).


In general, willfulness has the same meaning in section 7206(2) as it does in other criminal tax violations, i.e., a voluntary, intentional violation of a known legal duty. Proof of a pattern of falsity supports an inference of willfulness.


Jim Calvin, Deloitte & Touche LLP (Singapore). Jim is the Deloitte Touche Tohmatsu Limited (DTTL) Asia-Pacific Tax Leader for the Financial Services Industry Practice, and currently based in Singapore. Also is DTTL’s Asia-Pacific regional leader for FATCA. Before relocating and joining the Singapore firm of Deloitte & Touche LLP, he had been the Deloitte asset management tax leader for the U.S. member firm, and, until 2002, was the hedge fund practice leader.