Introduction to FATCA

Abstract

This chapter introduces the background, history and general principles of FATCA. The authors note that FATCA, while not an actual Act in the body of US legislation, is based on the HIRE Act (2010) which provides rules for non-US financial firms and also obligations on US persons to report their non-US assets. FATCA is effectively a set of due diligence procedures to be applied by non-US financial institutions to allow them to identify US account holders and, where appropriate, include data about them in a FATCA report to the IRS. This would often cause a legal problem for financial firms subject to domestic data protection laws, so the FATCA model has evolved to include a variety of reporting structures to ensure the data gets to the IRS. This chapter also introduces the concept of the Global Intermediary Identification Number (GIIN) used by most financial firms as evidence that they are compliant with FATCA. The authors estimate that only 20% of firms entitled to obtain a GIIN have actually done so.