International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, October 1, 2014

Is FATCA failing? What do the October 1st numbers say?

Haydon Perryman of Strevus and myself I have had long running discussions about different aspects of FATCA.  I think that I bring an academic, albeit American, perspective.  He certainly brings the practical, Tier 1, institution perspective.  


The two most interesting debates that we hold are regarding documentation (the W8s and acceptable equivalents by IGA) and the pool of FFIs (including EAG members) that should register to acquire a GIIN.  Last month, the GIIN list included 99,861 FFIs (mind you that a substantial number of these registrations are not unique, but instead represent affiliates within EAGs) - see our previous analysis links below.  It is October and only 104,344 are now registered, less than 5,000 these past thirty days. 

Non-IGA Countries = 149

Only 5,257 (5%) of these 104,344 registrations are from the 149 countries that have not had an IGA announced with the US.  That means that these 149 countries are already having a 30% FATCA chapter 4 withholding imposed by US withholding agents on most of their US financial investments. Chapter 4 withholding is on more types of income/payments than Chapter 3 withholding (albeit the harshest gross proceeds withholding is not yet imposed).

But at least Bonaire, Sint Eustatius and Saba registration is up almost 100%! (well, 12 to 22 is a less exciting number to report).

IGA Countries = 101

Which country had the most movement?  The United Kingdom.  An additional 602 FFIs registered, raising its total to 8,463 from 7,861. Gibraltar reached 307 more GIINs (1,553 from 1,156).  Example of the incremental registration increases include the BVI which broke 3,000 (3,060 from 2,862) and Caymans which broke 20,000 (from 19,216 to 20,070).  

But readers want to know where the BRICs stand?  Brazil still leads the pack 2,498 but that's barely a change from 2,451.  Russia, coming in second (which is ironic given the tit for tat sanctions). yet far behind Brazil, now has 926 up from 897.  China increased by 22 registration to 599 from 577.  

Neither of our neighbors could be much bothered with FATCA registration.  Mexico renegotiated its IGA yet its FFI registration 

85 Canadian FFIs signed up bringing its total to 2,900 from 2,815, whereas only four Mexican FFIs did which sits at 516.

No additional Indian FFI bothered registering in India, leaving it with 391 GIINs.  In fact, most countries had no movement.  


Does this mean that their FFIs have given up on US investments?  If that is true, then why has not inward FDI for the US contracted considerably?  

Is it that their governments think the OECD CRS will have a widely divergent system that will somehow trump FATCA (it won't)?  

Are so many FFIs qualifying for non-registration. Haydon and I debate on whether the GIIN is necessary regardless of this self certifying non-registration status.  

Are so many FFIs being sponsored?  Are there just much fewer FFIs than the lowest estimate? Perhaps to the first, and doubtful to the second.

Are the smaller FFIs simply overwhelmed?  We just don't know the answers yet.... industry has several explanations that we will report about. 

Why isn't Treasury doing more to drive IGAs and GIIN registrations?

TIGTA reported today that the IRS’s appropriated budget decreased 7.4 percent between Fiscal Years (FY) 2010 and 2013, from $12.1 billion to $11.2 billion after sequestration.  TIGTA stated that the budget cuts resulted in reductions in the number of full-time equivalents by nearly 9 percent, from 94,618 at the end of FY 2010 to 86,310 at the end of FY 2013, including a 4 percent reduction between FYs 2012 and 2013.  The number of enforcement personnel decreased by more than 1,000 employees during FY 2013.  Don't blame the IRS and Treasury - fewer persons are charged with more responsibilities, by example enforcement of health care enrollment and BSA anti money laundering audits.   Other than normal civil libertarian complaints about taxpayer rights and it needing to be a more transparent settlement-based organization with taxpayers, the IRS is doing as good as can be expected given its resources for responsibilities.  

download for free –> LexisNexis® Guide to FATCA Compliance

Past FATCA, GIIN, and EAG analysis by Haydon Perryman and William Byrnes 

September analysis

August analysis

EAG July analysis

June analysis

Analysis of whom is an FFI required to register

Analysis of Soft FATCA Registration

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