FATCA FFI Registrations as of July 2014

* by Prof. William H. Byrnes IV and Haydon Perryman

FATCA [the Foreign Account Tax Compliance Act] requires that foreign financial institutions [FFIs] make regular certifications to the IRS, as well as annually disclose taxpayer and account information for U.S. persons, unless an intergovernmental agreement allows for indirect reporting to the IRS via a foreign government.

How Many FFIs Must Register Globally?

... The IRS estimates it will be less than 500,000. But the UK HMRC estimates that from the UK alone, 75,000 entities may be considered financial institutions requiring registration...

...

... If the UK has 75,000 or even just half that many entities requiring FFI registration, then extrapolated among other large and sophisticated financial service economies like Japan, China, Germany etc. -- clearly, more than 500,000 entities will need to inevitably register...

What Is the Definition of Financial Institution?

The definition of "financial institution" is very broad...

FFIs are primarily banking and financial institutions, as well as certain investment entities, which are defined by FATCA and separated into three broad categories:

1.  primarily traditional banks that accept deposits and perform related banking services in their ordinary course of business;

2. entities a substantial part of the business of which involves holding financial assets for others; and

3. entities engaged in the business of investing, reinvesting, and trading in securities, partnership interests, commodities, derivatives, and other passive financial assets.

The first category of FFI describes traditional banks. This FFI is defined as a financial institution that accepts deposits in the ordinary course of a banking or similar business...

The second category of FFI captures "asset holding" companies. This type of FFI holds financial assets for the account of others as a "substantial" portion of its business...

The final category of FFI captures "investment funds", and is broadly defined. Thus, this category includes certain securitization vehicles, certain pension funds, and can potentially include certain other private structures that hold investments such as trusts and underlying holding companies. This category of FFI is primarily engaged in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including futures or forward contracts or options). An investment entity is primarily engaged in one or more of the following activities:

1. trading in money market instruments, foreign currency, foreign exchange, interest rates, index instruments, transferable securities, or commodity futures;
2. managing individual or collective portfolios;
3. investing, administering or managing funds, money, or financial assets on behalf of others; or
4. functioning as a collective investment vehicle, mutual fund, exchange traded fund, private equity fund, hedge fund, venture capital fund, leveraged buyout fund, or any similar investment vehicle.

...

An entity is primarily engaged in these activities if more than 50% of its gross income is from such activities during a three-year period.

Information referenced herein is provided for educational purposes only. For legal advice applicable to the facts of your particular situation, you should obtain the services of a qualified attorney licensed to practice law in your state.

* Prof. William H. Byrnes, IV is the Associate Dean of the Walter H. & Dorothy B. Diamond International Tax & Financial Services Graduate Program. He has achieved authoritative prominence with more than 38 book and compendium volumes, 93 book, treatise and supplement chapters, and 800 articles. Professionally, William Byrnes left Coopers and Lybrand as an Associate Director to full time academia wherein he pioneered online legal education in 1995, thereafter creating the first online LL.M. offered by an ABA accredited law school. He trains and supervises more than 200 professional and government LLM and JSD candidates annually for international tax and money laundering compliance.


Haydon Perryman is a FATCA compliance expert at Strevus (http://www.strevus.com/).

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LEXIS users can view the complete commentary HERE. Additional fees may apply. (Approx. 63 pages)

Complying with FATCA?

The LexisNexis Guide to FATCA Compliance (2nd Edition), available at the LexisNexis® Store, comprises 34 Chapters by 50 industry experts grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of Intergovernmental Agreements (IGAs) and local law compliance challenges (Chapters 17–34).

RELATED LINKS: For more on FATCA and its requirements, see:

• "FATCA Imposes Burdens on NFFEs," by Lawrence A. Kogan, Esq.

• "IRS' FATCA Registration System," by Prof. William H. Byrnes, IV

• "FATCA Compliance Programs," by Prof. William H. Byrnes and Dr. Robert J. Munro

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