Understanding FATCA

May 2012
New definitions
New classifications
New rules
New ideas
Understanding FATCA
March 2012

Duncan Edwards

Disclaimers

Circular 230 disclaimer

Any US tax advice contained herein was not intended or written to be used, and cannot
be used, for the purpose of avoiding penalties that may be imposed under the Internal
Revenue Code or applicable state or local tax law provisions.
These slides are for educational purposes only and are not intended, and should not be
relied upon, as accounting advice.
Ernst & Young LLP disclaimers
This presentation is intended to provide only a general outline of the subjects covered.
It should neither be regarded as comprehensive nor sufficient for making decisions, nor
should it be used in place of professional advice. Ernst & Young LLP accepts no
responsibility for any loss arising from any action taken or not taken by anyone using
this material.
This presentation is 2012 Ernst & Young LLP. All rights reserved. No part of this
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presentation or its contents by any third party.
Page 2

Duncan Edwards
Financial Services
Business Risk

Office: (65) 6309 6519

Mobile: (65) 9690 8964
eMail: duncan.edwards@sg.ey.com

Contents

Page 3

FATCA at a glance

Our approach

Impacts of FATCA

Other matters

FATCA at a glance
Before you know how,
You need to know what

FATCA at a glance

Page 4

FATCA at a glance
Overview
What is the
Foreign Account
Tax Compliance
Act (FATCA)?

FATCA is a new US tax law designed to prevent US taxpayers from avoiding US tax on their income by investing in
the US through non-US financial institutions and offshore investment vehicles.

FATCA was enacted on March 18, 2010, and becomes effective July 1, 2013.
FATCA requires reporting to the IRS regarding offshore accounts and investments held by US persons.
Notices 2010-60 (8/2010) and 2011-34 (4/2011) provide guidance on how the IRS will administer FATCA.

FATCA generally requires financial institutions (both US and non-US) to classify all account holders as either US
or non-US and as individuals or entities, which are further broken down as financial and non-financial.

How will FATCA

impact you?

What is the
cost of noncompliance?
What are some
possibly
impacted
business units
and functions?
Chief
Compliance
Officer
Certification
Page 5

Foreign Financial Institutions (FFIs) are asked to enter into agreements with the IRS to identify US accounts
and report certain information about those accounts to the IRS on an annual basis.
USFIs and FFIs must report certain information to the IRS about substantial US owners of non-financial foreign
entities (NFFEs).

30% withholding taxes will apply to all US sourced dividend and interest payments, plus the gross sales proceeds
resulting from the sale of an asset that gives rise to US source income regardless of whether a profit or loss was
made, if they are paid to either a recalcitrant account holder, nonparticipating FFI or an NFFE that has not
disclosed its substantial US owners.
However, USFIs and FFIs will always be liable for any tax that they failed to withhold, plus interest and potential
penalties.

Investment Banking
Private Wealth/Banking
Retail Banking
Custody
Asset management

Insurance
Corporate tax
Tax operations
Compliance (e.g. AML/KYC)
On-boarding and customer data

Information technology (IT)

Finance
Relationship management
Payment processing settlement

Notice 2011-34 requires that the Chief Compliance Officer (or equivalent level individual) of an FFI certify to the
IRS that the FFI has taken the necessary steps to identify its pre-existing individual accounts
The responsible officer will also have to certify that the company (FFI) has not engaged in or have any policies in
place between 9 May 2011 and the effective date of their FFI agreement that direct, encourage or assist
account holders to avoid FATCA

FATCA at a glance
Overview
What is the
Foreign Account
Tax Compliance
Act (FATCA)?

FATCA is a new US tax law designed to prevent US taxpayers from avoiding US tax on their income by investing in
the US through non-US financial institutions and offshore investment vehicles.
FATCA was enacted on March 18, 2010, and becomes effective July 1, 2013.
FATCA requires reporting to the IRS regarding offshore accounts and investments held by US persons.
Notices 2010-60 (8/2010) and 2011-34 (4/2011) provided guidance on how the IRS will administer FATCA.
Proposed Regulations published 8th February 2012
FATCA generally requires financial institutions (both US and non-US) to classify all account holders as either US
or non-US and as individuals or entities, which are further broken down as financial and non-financial.

How will FATCA

impact you?

What is the
cost of noncompliance?
What are some
possibly
impacted
business units
and functions?
Chief
Compliance
Officer
Certification
Page 6

Foreign Financial Institutions (FFIs) are asked to enter into agreements with the IRS to identify US accounts
and report certain information about those accounts to the IRS on an annual basis.
USFIs and FFIs must report certain information to the IRS about substantial US owners of non-financial foreign
entities (NFFEs).

30% withholding taxes will apply to all US sourced dividend and interest payments, plus the gross sales proceeds
resulting from the sale of an asset that gives rise to US source income regardless of whether a profit or loss was
made, if they are paid to either a recalcitrant account holder, nonparticipating FFI or an NFFE that has not
disclosed its substantial US owners.
However, USFIs and FFIs will always be liable for any tax that they failed to withhold, plus interest and potential
penalties.

Investment Banking
Private Wealth/Banking
Retail Banking
Custody
Asset management

Insurance
Corporate tax
Tax operations
Compliance (e.g. AML/KYC)
On-boarding and customer data

Information technology (IT)

Finance
Relationship management
Payment processing settlement

The Chief Compliance Officer responsible officer will also have to certify that the company (FFI) has not engaged
in or have any policies in place between 9 May 2011 and the effective date of their FFI agreement that direct,
encourage or assist account holders to avoid FATCA, and
That they are compliant with the regulations

FATCA at a glance
Overview
What is the
Foreign Account
Tax Compliance
Act (FATCA)?

FATCA is a new US tax law designed to prevent US taxpayers from avoiding US tax on their income by investing in
the US through non-US financial institutions and offshore investment vehicles.
FATCA was enacted on March 18, 2010, and becomes effective July 1, 2013.
FATCA requires reporting to the IRS regarding offshore accounts and investments held by US persons.
Notices 2010-60 (8/2010) and 2011-34 (4/2011) provided guidance on how the IRS will administer FATCA.
Proposed Regulations published 8th February 2012
FATCA generally requires financial institutions (both US and non-US) to classify all account holders as either US
or non-US and as individuals or entities, which are further broken down as financial and non-financial.

How will FATCA

impact you?

What is the
cost of noncompliance?
What are some
possibly
impacted
business units
and functions?
Chief
Compliance
Officer
Certification
Page 7

Foreign Financial Institutions (FFIs) are asked to enter into agreements with the IRS to identify US accounts
and report certain information about those accounts to the IRS on an annual basis.
USFIs and FFIs must report certain information to the IRS about substantial US owners of non-financial foreign
entities (NFFEs).

30% withholding taxes will apply to all US sourced dividend and interest payments, plus the gross sales proceeds
resulting from the sale of an asset that gives rise to US source income regardless of whether a profit or loss was
made, if they are paid to either a recalcitrant account holder, nonparticipating FFI or an NFFE that has not
disclosed its substantial US owners.
However, USFIs and FFIs will always be liable for any tax that they failed to withhold, plus interest and potential
penalties.

Investment Banking
Private Wealth/Banking
Retail Banking
Custody
Asset management

Insurance
Corporate tax
Tax operations
Compliance (e.g. AML/KYC)
On-boarding and customer data

Information technology (IT)

Finance
Relationship management
Payment processing settlement

The Chief Compliance Officer responsible officer will also have to certify that the company (FFI) has not engaged
in or have any policies in place between 9 May 2011 and the effective date of their FFI agreement that direct,
encourage or assist account holders to avoid FATCA, and
That they are compliant with the regulations

FATCA at a glance
Overview
What is the
Foreign Account
Tax Compliance
Act (FATCA)?

FATCA is a new US tax law designed to prevent US taxpayers from avoiding US tax on their income by investing in
the US through non-US financial institutions and offshore investment vehicles.
FATCA was enacted on March 18, 2010, and becomes effective July 1, 2013.
FATCA requires reporting to the IRS regarding offshore accounts and investments held by US persons.
Notices 2010-60 (8/2010) and 2011-34 (4/2011) provided guidance on how the IRS will administer FATCA.
Proposed Regulations published 8th February 2012
FATCA generally requires financial institutions (both US and non-US) to classify all account holders as either US
or non-US and as individuals or entities, which are further broken down as financial and non-financial.

How will FATCA

impact you?

What is the
cost of noncompliance?
What are some
possibly
impacted
business units
and functions?
Chief
Compliance
Officer
Certification
Page 8

Foreign Financial Institutions (FFIs) are asked to enter into agreements with the IRS to identify US accounts
and report certain information about those accounts to the IRS on an annual basis.
USFIs and FFIs must report certain information to the IRS about substantial US owners of non-financial foreign
entities (NFFEs).

30% withholding taxes will apply to all US sourced dividend and interest payments, plus the gross sales proceeds
resulting from the sale of an asset that gives rise to US source income regardless of whether a profit or loss was
made, if they are paid to either a recalcitrant account holder, nonparticipating FFI or an NFFE that has not
disclosed its substantial US owners.
However, USFIs and FFIs will always be liable for any tax that they failed to withhold, plus interest and potential
penalties.

Investment Banking
Private Wealth/Banking
Retail Banking
Custody
Asset management

Insurance
Corporate tax
Tax operations
Compliance (e.g. AML/KYC)
On-boarding and customer data

Information technology (IT)

Finance
Relationship management
Payment processing settlement

The Chief Compliance Officer responsible officer will also have to certify that the company (FFI) has not engaged
in or have any policies in place between 9 May 2011 and the effective date of their FFI agreement that direct,
encourage or assist account holders to avoid FATCA, and
That they are compliant with the regulations

FATCA at a glance
Overview
What is the
Foreign Account
Tax Compliance
Act (FATCA)?

FATCA is a new US tax law designed to prevent US taxpayers from avoiding US tax on their income by investing in
the US through non-US financial institutions and offshore investment vehicles.
FATCA was enacted on March 18, 2010, and becomes effective July 1, 2013.
FATCA requires reporting to the IRS regarding offshore accounts and investments held by US persons.
Notices 2010-60 (8/2010) and 2011-34 (4/2011) provided guidance on how the IRS will administer FATCA.
Proposed Regulations published 8th February 2012
FATCA generally requires financial institutions (both US and non-US) to classify all account holders as either US
or non-US and as individuals or entities, which are further broken down as financial and non-financial.

How will FATCA

impact you?

What is the
cost of noncompliance?
What are some
possibly
impacted
business units
and functions?
Chief
Compliance
Officer
Certification
Page 9

Foreign Financial Institutions (FFIs) are asked to enter into agreements with the IRS to identify US accounts
and report certain information about those accounts to the IRS on an annual basis.
USFIs and FFIs must report certain information to the IRS about substantial US owners of non-financial foreign
entities (NFFEs).

30% withholding taxes will apply to all US sourced dividend and interest payments, plus the gross sales proceeds
resulting from the sale of an asset that gives rise to US source income regardless of whether a profit or loss was
made, if they are paid to either a recalcitrant account holder, nonparticipating FFI or an NFFE that has not
disclosed its substantial US owners.
However, USFIs and FFIs will always be liable for any tax that they failed to withhold, plus interest and potential
penalties.

Investment Banking
Private Wealth/Banking
Retail Banking
Custody
Asset management

Insurance
Corporate tax
Tax operations
Compliance (e.g. AML/KYC)
On-boarding and customer data

Information technology (IT)

Finance
Relationship management
Payment processing settlement

The Chief Compliance Officer responsible officer will also have to certify that the company (FFI) has not engaged
in or have any policies in place between 9 May 2011 and the effective date of their FFI agreement that direct,
encourage or assist account holders to avoid FATCA, and
That they are compliant with the regulations

FATCA at a glance
Overview
What is the
Foreign Account
Tax Compliance
Act (FATCA)?

FATCA is a new US tax law designed to prevent US taxpayers from avoiding US tax on their income by investing in
the US through non-US financial institutions and offshore investment vehicles.
FATCA was enacted on March 18, 2010, and becomes effective July 1, 2013.
FATCA requires reporting to the IRS regarding offshore accounts and investments held by US persons.
Notices 2010-60 (8/2010) and 2011-34 (4/2011) provided guidance on how the IRS will administer FATCA.
Proposed Regulations published 8th February 2012
FATCA generally requires financial institutions (both US and non-US) to classify all account holders as either US
or non-US and as individuals or entities, which are further broken down as financial and non-financial.

How will FATCA

impact you?

What is the
cost of noncompliance?
What are some
possibly
impacted
business units
and functions?
Chief
Compliance
Officer
Certification
Page 10

Foreign Financial Institutions (FFIs) are asked to enter into agreements with the IRS to identify US accounts
and report certain information about those accounts to the IRS on an annual basis.
USFIs and FFIs must report certain information to the IRS about substantial US owners of non-financial foreign
entities (NFFEs).

30% withholding taxes will apply to all US sourced dividend and interest payments, plus the gross sales proceeds
resulting from the sale of an asset that gives rise to US source income regardless of whether a profit or loss was
made, if they are paid to either a recalcitrant account holder, nonparticipating FFI or an NFFE that has not
disclosed its substantial US owners.
However, USFIs and FFIs will always be liable for any tax that they failed to withhold, plus interest and potential
penalties.

Investment Banking
Private Wealth/Banking
Retail Banking
Custody
Asset management

Insurance
Corporate tax
Tax operations
Compliance (e.g. AML/KYC)
On-boarding and customer data

Information technology (IT)

Finance
Relationship management
Payment processing settlement

The Chief Compliance Officer responsible officer will also have to certify that the company (FFI) has not engaged
in or have any policies in place between 9 May 2011 and the effective date of their FFI agreement that direct,
encourage or assist account holders to avoid FATCA, and
That they are compliant with the regulations

FATCA at a glance
Overview
USA

USFI

30% WHT

IRS

US investment income
US investment proceeds
100%

30% WHT

Rest of world
NPFFI
FFI

PFFI
100%
Non US
client

Page 11

100%
US
Client
- reporting

US
Client
- not reporting

FATCA at a glance
How it works in overview - PFFI
1

Expanded
affiliate
group

Participating
FFI

Participating
FFI

Non
Participating
FFI

Compliant
account holder

1. Participating FFI (PFFI)

An FFI that has entered into an agreement with the IRS. No
witholding is required.

2. Non Participating FFI (NPFFI)

An FFI that has not entered into an agreement with the IRS.
An FFI must retain 30% of each "withholdable payment
made to a NPFFI.
Withholdable payment is US sourced income such as
dividends, interest, rents and royalties and the gross sale
proceeds on the sale of assets producing US source
dividends and interest.

= 30% withholding tax

Recalcitrant
account holder

Foreign financial institution (FFI)

An FFI is any foreign entity that:
accepts deposits in the ordinary course of a banking or similar
business (e.g. bank);
as a substantial portion of its business, holds financial assets for
the account of others (e.g. custodian)
is engaged (or holding itself out as being engaged) primarily in the
business of investing, reinvesting, or trading securities, partnership
interests, commodities or any interest (including a future or forward
contract or option) in such securities, partnership interests or
commodities (e.g. broker).

Page 12

3. Compliant account holder

An account holder of a PFFI who agrees to the PFFI
reporting on their investment income to the IRS.

4. Recalcitrant account holder

A recalcitrant account holder is either someone who fails to
provide information regarding their US tax status or refuses
to all a PFFI to report their investment income to the IRS.
All PFFIs must retain 30% of each withholdable payment
attributable to a recalcitrant account holder.
Note:
If a participating FFI fails to withhold tax, the FFI remains
responsible for its payment. Details of the payment process to
the IRS are still to be defined by the IRS.

Proposed Regulations
Key Changes
Timeline No significant changes except for foreign passthrough payments
New account opening processes Reliance on a FFIs existing client onboarding processes
Entity accounts A new US$250,000 de minimis applies for all entity accounts
(US$50,000 de minimis for individual accounts remains)
Insurance contracts A US$250,000 de minimis now in place for pre-existing
accounts. Pure protection products out-of-scope
Enhanced reviews Required for individual accounts with balances greater than
US$1m. Private banking rules removed
Deemed compliance rules Expansion of the deemed compliance rules.
Usefulness of those rules needs to be evaluated as a number of restrictions
remain
Withholding Withholding on foreign passthru payments will not come into force
until 2017 at the earliest
Page 13

On boarding
Proposed Regulations

An FFI can rely on existing customer on-boarding processes, but need

documentary evidence

FFIs are generally no longer required to make significant modifications to the

information collection process if in a FATF country

However, requirement to obtain government issued identification remains

Requirement to review all information collected to determine if an account holder

has US Indicia remains

Page 14

New and Pre-Existing Accounts

US Indicia

The requirement to review customer data for indicia of US status remains, with
one additional criteria:
1.

Identification of the account holder as a US citizen or US resident

2.

US place of birth for the account holder

3.

US address (including a US P.O. Box address)

4.

Standing instructions to transfer funds to a US account

5.

Hold mail or c/o address as the sole address

(pre-existing only US address, new accounts remains global addresses)

6.

Power of attorney or signatory authority granted to someone with a

US address

7.

A US telephone number (new)

If US indicia are found, then additional documentation will be required, including

a W8Ben or W9 forms

Page 15

Pre-Existing Account
De minimis limits

Proposed Regulations
Individual Accounts
Exempted
balance < $50K ($250K for insurance contracts)

Electronic search
between $50K to $1M
( $250K to $1M for insurance contracts)

Electronic + enhanced review

> $1M

Entity Accounts
Exempted
balance < $250,000

Electronic search
between $250K to $1M

Electronic + enhanced review

> $1M

Page 16

Private banking
Proposed Regulations

Private banking requirements removed and replaced by a de minimis of $1m.

However, all accounts over $1m need a enhanced review of:

current customer files and certain other documents, and

is required only to the extent that the electronically searchable files do not contain
sufficient information about the account holder

if a relationship manager exists, then they still need to be questionned

maintain documentation for 6 years (general requirement)

Page 17

Asset/ Fund Management

Proposed Regulations

There remains little that is specific to AM/FM organisations, particularly in the use of 3rd
parties, and further guidance is expected

Deemed compliance may bring some relief from FATCA, but not entirely. A deemedcompliant fund will still have to perform due diligence on direct investors and change how
they do business with their distributors before registering with the IRS. If the distributors
status were to change, the fund will need to take remedial actions

Page 18

Asset/ Fund Management

FFI
Asset
Manager

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Cash Flows

Investment
Advisor

Third Party Relationships

FFI

USFI

FFI

Fund
Accountant

Fund

FFI

US sub custodian

Custodian

Fund
Administrator

Trustee/
Depository

sub -distributor

FFI

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Transfer Agent

FFI
Bank
TPA

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Banks and
Insurance
Companies

Investors and Entities

FFI

FFI

FFI
Platforms

Investors and Entities

Local
Distributors
*

Investors and Entities

IFAs*

Investors

*An IFA or distributors acting in an introductory capacity only may not be an FFI. FFI obligations will depend on the details
on the share register. Further guidance on possibility for local distributors to be deemed FATCA compliant is outstanding.

Page 19

Clearing
Agents

Investors and Entities

ap pearing

Reporting
Proposed Regulations

Phased in timelines for reporting

Election to report on a non-consolidated basis

2014: Name, address, TIN, account

number of account holder and
account balance as 31 Dec 2013 but reported by 30 September 2014

2015: Above requirements plus

income associated with US accounts at calendar year end reported by 31 March

2016: Full reporting at calendar year end reported by 31 March

Reporting can be in the currency of the account or USD

A PFFI may elect to perform 1099 reporting similar to US institutions

Government-to-Government reporting??

Page 20

Withholding US FDAP and gross proceeds

Proposed Regulations

Withholding on US sourced Fixed, Determinable, Annual, Periodic (FDAP) income and

on gross proceeds begins 1 January 2015

Exceptions

payments to prima facie FFIs (1 January 2014)

US FDAP paid by USFIs (1January 2014)

No withholding for exempt payees and grandfathered obligations

Grandfathering deadline moved to 1 January 2013

Page 21

Passthru payments

Page 22

Deemed Compliance
Proposed Regulations

For FFIs that are at low US tax evasion risk, they may be deemed to meeting the FATCA
reporting requirement

Two new sub categories of deemed compliant was introduced as well as a refinement of
those introduced under Notice 2011-34
1) Registered Deemed Compliant
2) Certified Deemed Compliant

Registered Deemed Compliant FFIs will be required to certify and register with the IRS

Certified Deemed Compliant FFIs only required to certify and provide withholding
documentation to withholding agents

Insurance companies not mentioned

Pensions and tax exempt orgs included

98% of accounts local

EU countries can be cross border

Page 23

Expanded Affiliated Group

Proposed Regulations

Each member of an EAG must obtain the status of either a participating FFI or a
registered deemed compliant FFI. There are exceptions to this general rule for limited
branches, limited FFI affiliates and QIs:
Exception

allowed for FFIs that cannot comply with FFI agreement due to local law
restrictions, but only up to 31st December 2015

Must

still undertake identification and due diligence required as if they were

participating

Not

Page 24

allowed to open new U.S. accounts or accounts for non-participating FFIs

Chief Compliance Officer

Prior Notices

Proposed Regulations

The Chief Compliance Officer (CCO) or

another equivalent-level officer (responsible
officer) of an FFI will be required to certify
to the IRS to:
the timely completion of various steps in the
account identification procedure as
prescribed in Notice 2011-34,
the absence of any activity or policy in
place between the publication date of
Notice 2011-34 and the effective date of the
FFI Agreement assisting or encouraging
circumvention of US account identification
procedures and
the existence of written policies and
procedures in place as of the effective date
of the FFI Agreement prohibiting employees
from advising US account holders on how
to avoid having their US accounts identified.

Page 25

As before, plus
Annual sign off by the CCO
Annual internal review of FATCA
compliance
External review if any evidence of
systemic failure

FATCA at a glance
Revised timelines
Identification of pre-existing US accounts
should start by 1st July 2013

On-boarding process for new accounts

must be operational by the effective
date of FFI Agreement (1st July 2013 at
the earliest)

2012

2013

2014

Registration (FFI agreement)

Registration with the IRS (1)
Extended period for full EAG compliance

(2)

Client identification and account classification

Identification procedures should be completed

within 1 year of the effective date of FFI
Agreement for pre-existing accounts of prima
facie FFIs and for pre-existing high-value (>
$1m) individual accounts

Effective
Date

2015

2016

Identification procedures should be

completed within 2 years of the
effective date of the FFI Agreement
for remaining pre-existing entity and
individual accounts

2017
First reporting for
the 2013 calendar
year due by 30
September 2014
on accounts
treated as US
accounts or as
recalcitrant
accounts as of 30
June 2014

03

New accounts (3)

Preexisting individual accounts
High-value accounts > USD 1 million (4)
Remaining accounts USD 1 million (5)
Preexisting entity accounts
Accounts of prima facie FFIs (4)
Remaining accounts (5)

Withholding
Withholding on
foreign passthru
payments is
further delayed
and will not apply
until 2017 at the
earliest

Withholding on US-source FDAP payments

Withholding on gross proceeds
Withholding on foreign passthru payments

Reporting (6)
Reporting of U.S. accounts
identifying info (7) + account balance
+ income paid or credited to account
+ gross proceeds
Aggregated reporting of recalcitrants (8)
Reporting of payments made to NPFFIs (9)

30.09.2014 31.03.2015

31.03.2016

31.03.2017

Withholding on US-source FDAP payments commences

on 1 January 2014
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)

Online process for registering an FFI as a PFFI or a Deemed Compliant FFI will be open no later than January 1, 2013. The effective date of the FFI agreement will be July 1, 2013 or later.
Certain limited branches and limited FFIs that are unable to be fully compliant as a result of local law restrictions may remain nonparticipating until December 31, 2015 without tainting
the other members of the EAG group, although they may be subject to withholding.
Accounts opened on or after the effective date of the FFI agreement.
Within one year of the effective date of the FFI agreementearliest effective date is July 1, 2013.
Within two years of the effective date of the FFI agreementearliest effective date is July 1, 2013.
This slide does not address reporting requirements of withholding agents that are not FFIs.
Name, address, TIN and account number either (i) of the account holder that is a specified U.S. person or (ii) of the U.S. owned foreign entity (TIN if available) and of each substantial U.S.
owner of such entity.
Separate reporting of recalcitrants with U.S. indicia and of dormant accounts (each on an aggregated basis) required.
Payments of foreign reportable amounts (including non-U.S. source FDAP payments) to NPFFIs made in 2015 and 2016 required to be reported.

Page 26

Thereafter, annual
reporting on
accounts generally
due by 31 March
of each year

Our approach
None of us is as
smart as all of us

Our Approach

Page 27

Our approach
A three phased approach
Based upon our experience of some 40 FATCA engagements globally, there is typically a three phased approach: Phase 1
- FATCA impact assessment ie what are the gaps between existing processes, procedures and current understanding
of FATCA requirements and what do you need to do to become compliant?
Phase 2
- Detailed implementation plan, budget and resource requirements.
Phase 3
- Execution of implementation plan.
A Phase 1 overview approach typically two to three months is shown below. In the next pages, we cover our approach in more detail.

Phase 1 - FATCA impact assessment

High-level assessment of a business current processes against FATCA requirements

Tax team
Support regulatory
interpretation,
education and
proactive engagement
with US government
officials developing
implementing
regulations
Provide continuing
support and guidance
to all workstreams and
processes at all levels
US Tax Desks are
located around the
world with FATCAfocused teams

Legal entity and business unit analysis

Assessment of your legal entity structure and identification of where FATCA applies
(e.g., which are FFIs, where income is earned and sourced)

Onboarding
Assessment of your current
onboarding (e.g., account
opening and relationship
management) and KYC
processes and documentation

Customer and
counterparty data

Withholding and
reporting systems

Assessment of current customer

data infrastructure, quality and
rationalisation

Identification of your payment

systems where information
reporting will be required and
withholding may apply

Phase 2 - Planning for implementation

Define and gain consensus around a road map for implementation of FATCA, including strategic options, a defined
scope, budget and resource requirements, design approach and timeline.

Phase 3 Execution of FATCA implementation road map

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FATCA tools and accelerators

BlackRock and
Ernst & Young
Ernst & Young

Work product

Project weeks - Phase 1

Phase 2

Stages

1. Program mobilisation toolkit

A suite of standard Ernst & Young
tools to expedite the mobilisation
of your FATCA program

Global governance and

management structure

10

11

12

9. FATCA assumptions database

Maps FATCA requirements and
assumptions to help manage
changes in the assumptions or
requirements and translates
regulations into business
requirements

1. Program mobilization

FATCA technical advisory

FATCA education

2. FATCA assumptions definition

2. Ernst & Young FATCA microsite and e-room

A ready-to-deploy set of web
pages to accelerate deployment of
an intranet-based FATCA portal to
facilitate internal communication
and education

Regional workstreams

3. FATCA program scope

definition

4. BlackRock legal entity analysis

8. Business scenario product flow

Documents transactions/business
scenarios to facilitate the
identification of potential FATCA
process and systems implication

5. Detailed business review and

data gathering
6. Impact assessment and gap
analysis

7. Planning for implementation

BlackRoc k
Foreign Account Tax Complianc e Act
(FATCA)
Communications Pack

8. Project definition and roadmap

DRAFT For Discuss io n Only

CO N FI DE NT IA L
Jul y2 011

9. Cost/benefit analysis
10. Launch Phase 2

7. FATCA decision tree application

Web-based tool that provides an
interactive way to assess different
FATCA situations across customer,
product and legal entity parameters

R e f:X X 0 0 0

3. FATCA communications
pack
A concise internal briefing pack
that educates stakeholders on
FATCA and what BlackRock are
doing in response

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4. FATCA data classification tool

Provides visualisation and analysis
of client and legal entity data to
enable rapid assessment and
targeted analyses

5. Technology assessment
methodology
Structures our approach to assessing
technology and identifying gaps

6. FATCA impact assessment checklist

Allows for a rapid assessment of the
completeness of work completed during
Phase 1 assessment across a range of
dimensions

29

Impacts of FATCA
FATCA raises many
operational costs
Make sure you have
operational answers

IMPACTS OF FATCA

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Impacts of FATCA
Navigating the Asian landscape
FATCA maturity

Green Cards Many holders of Green Card holders in Asia,

thereby making them potential U.S. persons. Also means US status
can be acquired as well as lost.
Customer consent - Required to waiver banking secrecy in order
to be able to report, But response rate - 3-4%?

Very
experienced

Increasingly
experienced

Rapidly
increasingly
awareness
Low
knowledge/
awareness

Singapore, Hong Kong,

UK, USA

Anti-discrimination laws - May prevent asking a customers

nationality e.g. such discrimination is illegal in Hong Kong
China, Taiwan

Closing accounts May only be possible if the Terms &

Conditions expressly allow e.g. Vietnam. Whilst apparently not
illegal in Korea, unilateral closing of accounts not allowed
Closing accounts - Above could result in the inability to force the
closure of recalcitrant customer

Malaysia, Thailand,
India, Middle East

Legal issues - Wide range exists across many jurisdictions e.g.

data transfer across borders especially to USe.g. Malaysia, India
Insurance - Some Regulators need to approve changes to
application forms e.g. Thailand, Indonesia

Indonesia, Philippines,
Vietnam, Laos, Cambodia,
Pakistan, Brunei,

Source: Ernst & Young

Note: This is illustrative only and does not apply to a specific organisation

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Data Privacy laws new laws expected 2012 in Singapore and

Malaysia

Significant effort - Required to tailor FATCA solutions and

processes by country e.g. translation, update T&Cs, gain customer
consents, regulatory approvals etc
Withholding Tax It is illegal to withhold tax on behalf of a foreign
government in some Asian countries e.g. China
Deemed Compliance Once clarified, could be the solution in
many Asia countries who only market to, and serve, local nationals.

Impacts of FATCA
Points to consider:
If you are not FATCA compliant, will other organisations
(countries) continue to deal with you?
Will you continue to keep US clients?
How many US clients do you have?
How much US investment income do you receive?
How much US sale proceeds do you receive?
Will you change your investment strategy?
Do you have the knowledge, tools and resources to
become FATCA compliant in 15 months?
Do you have the budget?
Have you a sponsor and dedicated team identified?
Page 32

Other matters
From mission impossible
to project manageable

Lessons learned

Page 33

About Ernst & Young

We believe that Ernst & Young is the most experienced FATCA

professional services firm in Asia. We are also the most regionally and
globally connected firm, with dedicated Financial Services teams who
have the requisite skills and experience to deliver this project and who
are eager to work with you.

The best team

Our team is dedicated to financial services, spans Asia and
includes dedicated asset management, tax and process specialists.

Unparalled experience
Our team includes people who have already undertaken FATCA
impact assessments and are, even now, working on the
implementation phase.

Our Asia footprint

Total: 1,151

Japan

Total: 6,355

India
Total: 13,640

Thailand
Total: 1,265
Hong Kong
Total: 1,698
Philippines

Malaysia

Total: 2,503

Total: 2,400

A commitment to Asia
Ernst & Young continues its significant investment in Asia. In 2011
we expect to recruit more than 5,000 new employees.

Across the Asia region, Ernst & Young has a significant presence with nearly 50,000
employees across all Asian locations, and over 2,500 financial services advisory
professionals aligned to the geographic footprint of our clients.

Page 34

Taiwan
Total: 989

Vietnam
Total: 735

Not only have they all worked in Asia, many have global
experience from working with major financial services organisations
in the UK, Europe and US.
Industry and regulatory experience
Our people understand the asset management market dynamics,
drivers and operations with market leading insights and a global
perspective. Explicit knowledge of regulations. legislation, privacy
and data protection processes are a core strength of your team.

Total: 7,400

Mainland China

Our team members have also undertaken QI (Qualified

Intermediary) reviews and who will bring that experience for your
benefit.

South Korea

Singapore
Total: 2,211

Indonesia
Total: 1,676

Ernst & Young

Assurance | Tax | Transactions | Advisory
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our
152,000 people are united by our shared values and an unwavering commitment to quality. We make
a difference by helping our people, our clients and our wider communities achieve their potential.
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guarantee, does not provide services to clients. Ernst & Young LLP is a client-serving member firm
located in the US. For more information about our organization, please visit www.ey.com.
Ernst & Young is a leader in serving the global financial services marketplace
Nearly 35,000 Ernst & Young financial services professionals around the world provide integrated
assurance, tax, transaction and advisory services to our asset management, banking, capital markets
and insurance clients. In the Americas, Ernst & Young is the only public accounting organization with
a separate business unit dedicated to the financial services marketplace. Created in 2000, the
Americas Financial Services Office today includes more than 4,000 professionals at member firms in
over 50 locations throughout the US, the Caribbean and Latin America.
Ernst & Young professionals in our financial services practices worldwide align with key global
industry groups, including
Ernst & Youngs Global Asset Management Center, Global Banking & Capital Markets Center, Global
Insurance Center and Global Private Equity Center, which act as hubs for sharing industry-focused
knowledge on current and emerging trends and regulations in order to help our clients address key
issues. Our practitioners span many disciplines and provide a well-rounded understanding of business
issues and challenges, as well as integrated services to our clients.
With a global presence and industry-focused advice, Ernst & Youngs financial services professionals
provide high-quality assurance, tax, transaction and advisory services, including operations, process
improvement, risk and technology, to financial services companies worldwide.
Its how Ernst & Young makes a difference.
2012 Ernst & Young LLP.
All Rights Reserved.
This publication contains information in summary form and is therefore intended for general
guidance only. It is not intended to be a substitute for detailed research or the exercise of
professional judgment. Neither Ernst & Young LLP nor any other member of the global Ernst &
Young organization can accept any responsibility for loss occasioned to any person acting or
refraining from action as a result of any material in this publication. On any specific matter,
reference should be made to the appropriate advisor.

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