Top 20 FATCA facts

1. The Foreign Account Tax Compliance Act (FATCA) was introduced under the Hiring Incentives to Restore Employment (HIRE) Act
2. In South Africa, the first FATCA reports are due end-June 2015 and at the end of May for subsequent years.
3. Reporting will be phased in – initially it includes only demographic data and balances, but this will extend to cover account movements as well as other information over time.
4. The IRS will maintain a (searchable) list of Non-participating Financial Institutions (NPFIs) to encourage compliance.
5. Since its introduction, there has been widespread opposition to FATCA, including motions by the Republican Party to repeal the Act.  However, the wheels are in motion (with a lot of momentum worldwide) and a reversal at this stage is highly unlikely.
6. FATCA was at first met with resistance and animosity from all corners. Subsequently, however, some jurisdictions have adopted an ‘if you can’t beat them, join them’ attitude. Inspired by FATCA, the Organisation for Economic Co-operation and Development (OECD) endorsed Common Reporting Standards (CRS) for Automatic Exchange Of (tax) Information (AEOI) in early 2014.
7. Over 100 countries have signed Intergovernmental Agreements (IGAs) or are treated as having an IGA in effect. The vast majority are Model 1 IGAs (as opposed to Model 2).
8. The advantage of being a foreign financial institution (FFI) in a jurisdiction with an IGA is that they can avoid having to perform passthru withholding and close recalcitrant accounts.
9. Responsibility for FATCA can be delegated by financial institutions, but the legal and regulatory obligation remains with the FFI in question.
10. The individual(s) responsible for FATCA within an organisation (compliance officer(s)) can be held accountable in their personal capacity should non-compliance be determined.
11. The first indictments related to FATCA avoidance were issued in September 2014. These were against three brokerage firms in Belize that assisted clients to hide ownership interests in US publicly traded companies.
12. FATCA IGA agreements are typically bilateral.  The country entering into the IGA will provide the IRS with information as required, but the IRS will also reciprocate. [SP1]
13. America is the only large economy to tax its citizens on everything they earn anywhere in the world.
14. According to World Bank estimates, tax evasion costs the US more than $300bn per year – this is one of the driving forces behind FATCA.
15. The Association of Certified Financial Crime Specialists (ACFCS) claims FATCA is expected to raise revenues of approximately US$800 million per year.
16. The global cost to financial institutions to implement FATCA is estimated to be more than $200 billion dollars (extrapolated from estimated costs in some participating countries).
17. The cost to comply will far outweigh potential revenue, by an order of magnitude, but the FATCA implementation model means that this cost is distributed worldwide, as opposed to being borne by US banks and/or the IRS.
18. There has been a significant increase in the renunciation of US citizenship since FATCA was first announced (roughly six to seven times the rate prior to its announcement). 2999 people renounced their citizenship in 2013, and the preliminary 2014 numbers show a similar pattern. Forbes reported 5.5 million Americans were considering going this route. Those that have already renounced US citizenship include Anna Mae Bullock (better known as Tina Turner) and Eduardo Saverin (one of the co-founders of Facebook).
19. There are reports of American citizens being discriminated against in certain parts of the world by FFIs that refuse to allow them to open accounts (or even close existing accounts) because of the FATCA burden associated with US accounts. Other forms of victimisation, such as being refused promotion or partnership, have also been reported.
20. A number of FATCA scams have already emerged and cases of Phishing have been reported. The typical modus operandi involves a scammer calling the FFI, claiming to be from the IRS and demanding confidential information on US accounts as part of a FATCA investigation.