Financial Crime World

FAROESE BANKS MUST REPORT U.S. TAXPAYERS’ ACCOUNTS

International Tax Agreements Require Reporting of U.S. Taxpayers’ Accounts

In accordance with international tax agreements, Faroese financial institutions are required to report accounts held by U.S. taxpayers and certain foreign entities.

Who is Affected?

  • Pre-existing entity accounts maintained by Faroese financial institutions
  • Must identify whether the account holder is a U.S. person or a financial institution

Compliance Requirements

  • Review information collected for regulatory or customer relationship purposes, including:
    • Anti-money laundering (AML) procedures
    • Know-your-customer (KYC) procedures
  • Verify the account holder’s Global Intermediary Identification Number on the published IRS FFI list
  • Treat accounts held by U.S. persons or passive non-financial foreign entities with one or more controlling persons who are U.S. citizens or residents as U.S. reportable accounts and submit required reports to the competent authority

Exceptions

  • Payments made to accounts held by Faroese financial institutions or other partner jurisdiction financial institutions treated by the IRS as non-participating must be reported under subparagraph 1(b) of Article 4 of the Agreement

Self-Certifications and Publicly Available Information

  • Faroese financial institutions may rely on self-certifications from account holders and publicly available information to determine whether an account is held by a U.S. person or foreign entity
  • However, if the account holder fails to provide necessary documentation or information, the Faroese financial institution must treat the account as a U.S. reportable account

Purpose of Reporting Requirements

  • Ensure compliance with international tax agreements and prevent tax evasion
  • Failure to comply with these regulations may result in penalties and fines for non-compliance

Recommendations

  • Review AML/KYC procedures and implement necessary measures to ensure accurate identification of U.S. taxpayers’ accounts and submission of required reports to the competent authority