The Foreign Account Tax Compliance Act (FATCA) is a United States statute that requires United States persons, including individuals who live outside the United States, to report their financial accounts held outside of the United States, and requires foreign financial institutions (FFIs) to report to the Internal Revenue Service (IRS) about their American clients.

The United States Congress enacted FATCA to make it more difficult for U.S. taxpayers to conceal assets held in offshore accounts and shell corporations and to recoup federal tax revenues. The FATCA is a portion of the 2010 Hiring Incentives to Restore Employment (HIRE) Act. FATCA is designed to increase compliance by U.S. taxpayers rather than to enforce collection from foreigners. It requires foreigners to report information related to the ownership by U.S. persons of assets held overseas. Unlike many other developed countries, the United States levies income taxes on its citizens, regardless of residency, and therefore requires Americans living abroad to pay U.S. taxes on foreign income. Under U.S. tax law, U.S. persons are generally required to report and pay taxes on income from all sources. Taxpayer identification numbers and source withholding are used to enforce foreign tax compliance. For example, mandatory withholding is often required when a U.S. payor cannot confirm the U.S. status of a foreign payee.

The act specifies several circumstances known as indicia where customers can be US persons who should be reported on. These indicia include the following;

• Identification of any account holder as a US resident or US Citizen
• A US address associated with an account holder of the account (whether a residence address or a correspondence address).
• A US place of birth for an account holder of the account
• An “ in care of address”, a hold mail address or a P.O address that is the sole address on file with respect to the account holder
• A power of attorney or signatory authority granted to a person with a US address
• Standing instructions to transfer funds to an account maintained in the US or directions regularly received from a US address

Any accounts to which any of the indicia described above are applicable to must be flagged for possible reporting to the IRS. We already undertake due diligence for Anti –Money Laundering (AML) compliance but to comply with FATCA must now extend the information gathering further to be able to identify persons/entities who are US Taxpayers.

This requires that the relative information sections of our Know Your Customer Forms (KYC) that enquire as to the status of persons with indicia outlined above are fully completed by our customers.