Financial Crime World

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Bahamas Pursues Model 1 IGA with US to Comply with FATCA

Nassau, Bahamas - The Bahamian government has announced its decision to pursue a Model 1 International Agreement (IGA) with the United States Treasury Department to comply with the Foreign Account Tax Compliance Act (FATCA).

Advantages of IGA Route

The move is seen as a significant development in the country’s efforts to maintain its financial reputation and avoid being added to a list of non-cooperative jurisdictions. The IGA route offers several advantages to the Bahamian financial services sector, including:

  • Additional time for Financial Institutions (FIs) to register and obtain a Global Intermediary Identification Number
  • Permitted registration on the FATCA registration website as a registered deemed-compliant FFI
  • Designation of branches located within The Bahamas as not being limited branches, eliminating the need for responsible officers or consent/waivers

Key Provisions of IGA

Under the agreement, FIs will be permitted to register on the FATCA registration website as a registered deemed-compliant FFI. Branches located within The Bahamas may also be designated as not being limited branches, eliminating the need for responsible officers or consent/waivers.

Additionally, there will be no exiting of recalcitrants, and all reporting will be done through the government. This approach is expected to bring additional costs to the sector, including:

  • Acquisition of computer hardware and software
  • Manpower and training of personnel

Government Statement

“The decision to pursue a Model 1 IGA with the US Treasury Department is a significant step forward in our efforts to maintain our financial reputation,” said a senior government official. “We believe that this approach will provide numerous benefits to our financial services sector, while also ensuring compliance with international tax standards.”

Sector Response

The Bahamian financial services sector has welcomed the announcement, citing the advantages of the IGA route. The sector is expected to face additional penalties for non-compliance with FATCA regulations, which could have a significant impact on its reputation and profitability.

Deadline for Signing IGA

The deadline for signing an IGA with the US Treasury Department is April 25, 2014, with FIs required to register and obtain a Global Intermediary Identification Number by July 1, 2014. Failure to comply may result in severe penalties, including being added to a list of non-cooperative jurisdictions.

Conclusion

The views expressed are those of the author and do not necessarily reflect the views of KPMG.