Foreign Account Tax Compliance Act (FATCA)


The Foreign Account Tax Compliance Act (FATCA) was passed in 2010 by the United States government. FATCA’s main goal is to reduce evasion of tax obligations by US citizens who have accounts abroad as well as to generate increased tax revenue for the US. This requires Foreign Financial Institutions (FFIs) be responsible for collecting and reporting data they have not had to previously report. This is the beginning of reporting transparency that impacts the entire landscape of global reporting.

There are three different reporting regimes that govern how FFIs comply with FATCA, depending on the local jurisdiction IGA (Inter-Governmental Agreement), or lack thereof, in place with the United States:

  • IGA Model 1: FFIs submit their data to their local HCTA (Host Country Tax Authority).  The HCTA will then submit the information onto the IRS.
  • IGA Model 2: FFIs submit data directly to the IRS.
  • Non-IGA Jurisdictions: FFIs with a reporting obligation in a jurisdiction without an IGA will submit the data directly to the IRS.

Each participating financial institution is required to register for a Global Intermediary Identification Number (GIIN). The GIIN is used by an FI to identify itself to withholding agents and tax administrations for FATCA reporting.

Under FATCA, FFIs must report accounts of individuals that are US persons that exceed the minimum threshold balance of $50,000 and entity accounts with substantial US ownership that exceeds the minimum threshold of balance $250,000.

Additionally, FATCA includes a dramatic expansion of Non-Resident Alien (NRA) tax reporting and has resulted in IRS Forms 1042 and 1042-S being revamped.

Financial Institution Risks

Non-participating Financial Institutions and non-compliant account holders face a 30% gross proceeds withholding penalty on all US-sourced gross proceeds revenue. This can have extraordinary ramifications as upwards of 70% of an FFIs flow of funds can be impacted. In addition, FATCA requires the identification of a FATCA Responsible Officer (FRO) who can face prison time for inaccurate filings. These stiff penalties are incentive for FFIs and jurisdictions to properly comply and participate in FATCA.


FFIs now have to collect and report data they have never had been responsible for before. This creates substantial hurdles that must be overcome to appropriately Identify, Gather, Transform and Transmit the data to the appropriate authority. FATCA changes the entire global reporting landscape and ushers in a whole new set of rules and compliance factors FFIs have not had to contend with until now.

Organizations with a presence in multiple jurisdictions will be presented with numerous challenges, especially as reporting requirements specific to each jurisdiction continually change. Each Model 1 IGA jurisdiction may have a specific way the data must be formatted and sent in, their own reporting deadline and what data is required may include fields and information that is beyond what FATCA requires.

FATCA introduces new reporting obligations and obstacles for FFIs, and these challenges will continue to grow in scope and complexity as CDOT and CRS expand organizations global reporting obligations.

Timeline for FATCA Reporting and Compliance


  • Who to report – New US individuals and accounts opened in FFIs after July 1, 2014 must be reported.
  • What to report – FFIs must provide the name, address, account number and balance.


  • Who to report – All accounts that were reported in 2015 AND new US entities, pre-existing US financial institution accounts, PLUS pre-existing high net worth individuals.
  • What to report – Name, address, account number and balance as well as gross payments such as interest, dividends, etc. must be provided when reporting.

2017 and after:

  • Who to report – All accounts that were required to be reported in 2016 as well as any and all other pre-existing US individuals and entities not previously reported.
  • What to report – Must include name, address, account number and balance as well as gross payments such as interest, dividends, etc. AND gross proceeds such as sale of stock.