FATCA GIIN January 2015 FFI Registration Analysis ... by the numbers

Haydon Perryman contributed this month's FATCA analysis article (with a bit of my modification) as I am at the American Association of Law School's annual congress on academic and legal education pedagogical matters.  

Together with Professor Byrnes I have, for many months, been providing a commentary on the list that the USA provides of “approved FFIs”.

Incidentally, the third edition of Professor Byrnes’ book, LexisNexis® Guide to FATCA Compliance will be published later this month. I have contributed to three chapters so I hope you will pardon the plug.  (free download of Lexis' FATCA chapter 1 download on SSRN - 2nd ed)

The IRS published its first FATCA GIIN list of 2015 (on New Years Day!) a list of “approved FFIs” i.e. a list of those who have registered on the IRS FATCA portal by December 23, 2014.  FATCA's 30% withholding regime on "withholdable payments" for non-IGA countries has applied since July 1, 2014.  But since New Years Day this FATCA (Chapter 4) withholding also applies to IGA countries' FFIs that do not supply a GIIN upon the proper W8 (or 'equivalent') certification documentation.    

FATCA IGA Scenarios	GIINs	Jurisdictions
Model 1A IGA	90,287	95
Model 1B IGA	32,546	3
Model 2 IGA	17,659	14
No IGA	5,691	131
US	796	1
US Territories	64	6
Total	147,043	250

GIIN List (2014/15)          Total Registrations

June                                         77,354

July                                         82,994

August                                    95,239

September                               99,861

October                                   104,344

November                               116,104

December                               122,881

January                                   147,043  

The month’s list is particularly important because those FFIs in IGA Model 1 Countries that are not on this list are now very much on the back-foot.

I say this because as of January 1, 2015, a Model 1 FFI that has no GIIN can no longer be treated as a Participating FFI (of any description). This is the case regardless of the fact that the FFI is located in a IGA jurisdiction. (Model 1 FFIs do not sign a FFI Agreement.)

Those Model 1 FFIs who registered for a GIIN by December 31, 2014, but have not yet been provided with a GIIN, can declare that they have “applied for” a GIIN and hence be afforded a further 90 days grace – provided that the GIIN appears on the IRS list of approved FFIs that will be published on the first day of April 2015. After that the sword of Damocles falls.

This time, next year, the OECD's Automatic Exchange of Information (AEoI) will be ‘live’. Reporting under AEoI begins in September 2017, on all of 2016. At this point in time it would be remiss not to mention the AEoI.

The AEoI and its component, the Common Reporting Standard (CRS), are often refereed to (informally) as “GATCA” (Global FATCA). The Standard and Guidance are now published. 52 jurisdictions have signed up to the AEoI and a further 46 have committed to sign.

Interestingly, the USA is the only member of the OECD neither to have signed, nor committed to sign up to the AEoI. According to the The Tax Justice Network, the USA is the 6^th largest Financial Secrecy jurisdiction. The same source reports that, “The U.S. protects itself from foreign tax havens, while remaining a tax haven for foreigners.”

The USA is the only member of the G20 neither to have signed nor committed to sign up to the AEoI.

The US, according to publication 5118, recognizes 250 jurisdictions for FATCA purposes. (You can see the FATGA IGA Status and the AEoI Status of each in the table below.) Of these 250 jurisdictions, 131 have not entered into a FATCA IGA with the US Treasury.

Whilst only 51 IGAs have been signed, at the time of writing, 112 jurisdictions are treated as having an IGA in place for FATCA purposes. (A full commentary on the IGAs is available here.) This includes 50 IGAs agreed to “in substance” and a further 11 jurisdictions are recognized (for the time being) as a result of announcement 2014-38.

No commentary on the “acceptance” of IGAs would be complete without recognizing that Africa is heavily represented amongst the population of Non IGA jurisdictions, as are parts are Asia. (This is also true of the CRS.) Very few of these countries are secrecy jurisdictions of any description. Moreover, many of the poorest countries in the world are of a Non IGA persuasion. If there truly are victims of FATCA, they are likely to be found in these jurisdictions.

There are now 147,043 FFIs on the approved GIIN list.

• The UK and her Crown Dependencies and Overseas Territories (UKCDOT) represent 45% of the total percentage of approved FFIs.
• 80% of approved FFIs are in either OECD members jurisdictions or members of UKCDOT.

Given the relatively high representation of OECD countries amongst the population of approved FFIs it bares reiterating that the USA has not signed up to the CRS, nor has the USA evidenced a pathway to the reciprocity upon which the FATCA IGAs are predicated.

FATCA has been in the press a great deal in 2014. We can expect to see FATCA reported, even more widely, in 2015, as FATCA begins to bite.

I say this because there will be withholding on, and in, 131 jurisdictions that have no IGA. It may also be harder for FFIs in Non IGA countries, to access capital if they have no GIIN. Again, the 131 Non IGA jurisdictions include many of the world’s poorest countries.

The population of “approved FFIs” from Non IGA countries is less than 5%.

A plausible reason sometimes cited for the lack of IGAs signed with poor countries is their lack of Data Privacy. Ironically, many of these poorer countries have had their financial resources stripped from them by corrupt governments who have expatriated those financial resources to financial secrecy jurisdictions (rich countries). In the world of financial secrecy, the victim is sometimes cast as the villain.

No doubt we will hear, most vociferously, from those FFIs in IGA countries who are about to experience withholding because they have not yet applied for a GIIN.

2015 will be a turbulent year for both FATCA and the CRS. 

• FATCA withholding kicks in in earnest
• Model 1 FFIs without a GIIN will be withheld upon – many of whom are unaware of this
• FFIs in 131 jurisdictions who have not completed the FATCA CDD on “Prima Facie FFIs” are already outside of compliance.
• The CRS goes live in January 1, 2016

Brace yourselves! Oh, by the way: Happy New Year!

You can find out more at:

Website:                    http://haydonperryman.com

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Part 2 GIIN analysis for this post is available via this link