FATCA Responsible Officer Checklist
Under the United States (US) Foreign Account Tax Compliance Act (FATCA) regulatory framework, Foreign Financial Institutions (FFIs) are required to appoint a ‘Responsible Officer’ (RO)[1] to oversee its compliance with the FFI Agreement[2] that it is required to execute with the US Internal Revenue Service (IRS). The RO is personally responsible for supervising a FFI’s FATCA compliance programme and is required to make detailed periodic certifications regarding FATCA compliance to the US IRS. Under FATCA there are two regimes for countries to opt for with regards to reporting requirements.
Under the ‘Model 1 Intergovernmental Agreement (IGA)’ framework FFIs are required to report all FATCA-related information to their own government agencies. Under the ‘Model 2 IGA’ FFIs are required to report information directly to the US IRS. Consequently, Model 1 FFIs are not required to appoint a RO whereas Model 2 FFIs are required to appoint a RO. It should also be noted that the RO’s obligations under FATCA should be taken seriously, as ROs that intentionally fill in IRS tax forms incorrectly can be penalized by the IRS for wilful perjury, with a financial fine of US$250,000, up to three years in jail, or both.
FATCA RO Checklist
By way of brief overview, a FATCA RO should ensure the following:
- That he or she has sufficient seniority in order to effectively oversee the FATCA compliance programme.
- That he or she has sufficient knowledge and professional experience in FATCA areas (i.e. operations, anti-money laundering (AML), know your client (KYC), technology, tax, and compliance).
- That the IRS Form 8957 (FATCA Registration Form) is correctly filled in and submitted to the US IRS in a timely manner.
- That the Chief Compliance Officer (CCO) or another equivalent-level officer of the FFI (e.g. the RO) must certify to the IRS when the FFI has completed FATCA procedures for its pre-existing individual accounts.
- That a FFI’s records and information are kept up-to-date via the FATCA Online Registration System (e.g. timely updates to contact information and Points of Contact).
- That the FFI maintains a library of documentation relating to FATCA regulations in order to sufficiently evidence that the FFI is compliant and meeting its obligations under the FFI Agreement.
- That a review process has been set up to review submitted W-8 Forms for errors, omissions, and duplication of certifications (as these can invalidate tax forms).
- That the RO periodically reviews the sufficiency of the FFI’s compliance programme and its compliance with the FFI Agreement so as to ensure that the RO can make the required periodic certifications (i.e. periodic certification of compliance and certification regarding completion of FATCA due diligence procedures). [3]
- That the RO aims to integrate FATCA compliance programmes with existing AML, KYC, and other customer identification and credit risk systems.
- That the RO stays up-to-date with FATCA and US IRS updates.
- That the RO verifies the participating FFI’s compliance with the FFI Agreement, or the performance of specified procedures by a person (including third party consultants or external auditors) upon request by the IRS.
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[1] A RO means an officer of any participating FFI or Reporting Model 1 FFI in the participating FFI’s Expanded Affiliated Group (EAG), if that officer has sufficient authority to fulfil the duties of a RO, which include the requirement to periodically certify to the US IRS regarding the FFI’s compliance with its FFI Agreement.
[2] An FFI Agreement includes a Qualified Intermediary (QI) Agreement, a Withholding Foreign Partnership (WFP) Agreement, or a Withholding Foreign Trust (WFT) Agreement that is entered into by an FFI and that has an effective date or renewal date on or after 31st December 2013.
[3] The submission deadline for periodic certifications is 1st July 2018 which is now also valid for initial one-time certification (of due diligence for pre-existing accounts) and period certification.