The Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) proposed rules on July 30 requiring US financial institutions to collect “Customer Due Diligence” information. The FinCEN proposed rules are aimed at non-US persons who have not been tax compliant in their home countries and who are using their US financial accounts to hide income from their home governments. The full Treasury announcement can be accessed here and the proposed rules can be accessed here.
The information required under the proposed rules mandates the identification of the true beneficial owners of US financial accounts. One of the main goals for obtaining this information will be so that the USA can comply with the US government’s obligations to any countries with which it has a “reciprocal” Intergovernmental Agreement (IGA) under the Foreign Account Tax Compliance Act (FATCA). A “reciprocal” IGA is a Model 1A IGA. With a “reciprocal” IGA, the US is generally required to exchange information about accounts held in US financial institutions by citizens or residents of the IGA partner countries. The reciprocal IGA also incorporates a policy commitment by the US to implement rules and support legislation that would provide for equivalent levels of information exchange. A full list of countries having IGAs and the type of IGA can be accessed here .
Under current law, US financial institutions are not required to gather as much information about their non-US clients as is required for foreign financial institutions under FATCA who must report about their US clients to the US government. The proposed FinCEN rules are trying to level the playing field and make sure the US can give partner countries the same type of information that the US will be receiving about US customers in foreign financial institutions.
Original Post By: Virginia La Torre Jeker, J.D.
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