5 AREAS FFI’s NEED TO BE AWARE OF WHILE DETERMINING THE SCOPE OF FATCA

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1CASH RETENTION IN CREDIT

FFIs may not necessarily realise that they will all fall within the scope of the definition of financial account (depositary account) if cash is retained in credit. This means that FFIs must carry out FATCA due diligence, reporting, and withholding obligations unless they are exempted.

2DEPOSITARY INSTITUTION

FFIs may not recognise that they may be exempt from the definition of Depository provider under the Electronic Money Issuers Regulations 2011, but they still fall under the definition of Depository Institution under FATCA.

3EXEMPTIONS UNDER IGA

The FFI must see if it can benefit from an exemption under the relevant Inter-Govermental Agreement (IGA). The FFI will first need to check Annex II of its country's IGA to see if it can avail itself of three exemptions:  (1) exempt beneficial owners(2) deemed compliant financial institutions (3) exempt products

4CONDITIONS FOR QCP

 If no exemption is available the FFI must check to see if it can fulfil the two conditions required for the 'Qualified Credit Provider' (QCP) registered deemed-compliant exemption under FATCA regulations. These are:

1) that the FFI must be an FFI solely because it is an issuer or servicer of credit cards that accepts deposits on its own behalf (or on behalf of a credit card issuer in the case of a servicer only), only when a customer makes a payment in excess of a balance due with respect to the credit card account and the overpayment is no immediately returned to the customer; and .

2) that the FFI must, on or before the date it registers as a deemed-compliant FFI, implement policies and procedures to either:

(a) prevent a customer deposit in excess of US$50,000; or (b) ensure that any customer deposit in excess of US$50,000 is refunded to the customer within 60 days. It should be noted that a 'customer deposit' does not refer to credit balances to the extent of disputed charges, but will include credit balances resulting from merchandise returns.

CONDITIONS FOR QCP

5REPORTING STRUCTURE

 If no exemption is available the FFI will have to decide whether to(1) elect not to identify or report certain pre-existing and new individual accounts (election 1); or(2) elect to identify or report certain pre-existing and new individual accounts (election 2).

If no exemption is available the FFI will have to decide whether to(1) elect not to identify or report certain pre-existing and new individual accounts (election 1); or(2) elect to identify or report certain pre-existing and new individual accounts (election 2).Election 1 means the FFI is not required to identify or report pre-existing and new individual depository accounts with a balance or value of US$50,000 or less by the relevant date.

Election 2 means the FFI must apply the Aggregation Rules and report on credit card accounts where:  

(1) the balance exceeds US$50,000 (there are no other accounts); and (2) the total aggregated amount of all Depository Accounts (including the credit card account) exceeds US$50,000.

REPORTING STRUCTURE

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