Financial Crime World

FATCA Compliance: Understanding Reporting Requirements for Financial Institutions

In a move to increase transparency and combat tax evasion, the government of St. Kitts and Nevis has implemented the Foreign Account Tax Compliance Act (FATCA) agreement with the United States. As part of this agreement, financial institutions are required to report specific information about their US account holders to the IRS.

Reporting Categories

Financial institutions must categorize accounts into one of six categories:

  • 22222: Preexisting individual accounts with only US indicia being a US place of birth.
  • 33333: New individual accounts that have indicia of a US place of birth, and either:
    • Have undergone a change in circumstances causing the self-certification to be incorrect or unreliable.
    • Were below the reporting threshold at account opening but now exceed it.
  • 44444: Preexisting individual and entity accounts with US indicia other than a US place of birth, and either:
    • Have undergone a change in circumstances causing the self-certification or documentation to be incorrect or unreliable.
    • Were below the reporting threshold at account opening but now exceed it.
  • 55555: New individual and entity accounts with US indicia other than a US place of birth, and either:
    • Have undergone a change in circumstances causing the self-certification or documentation to be incorrect or unreliable.
    • Were below the reporting threshold at account opening but now exceed it.
  • 66666: Preexisting individual and entity accounts with no indicia of a US connection.
  • 77777: New individual and entity accounts that have no indicia of a US connection.

Enrollment and Filing Requirements

Financial institutions must:

  • Enroll with the St. Kitts and Nevis FATCA Portal
  • Obtain a Global Intermediary Identification Number (GIIN) from the IRS before submitting their information.
  • Submit their information in XML-formatted files, as specified by the US XML FATCA Schema.

Additional Requirements

  • Sponsoring entities are required to enroll with the St. Kitts and Nevis FATCA Portal and obtain a GIIN before submitting information on behalf of their sponsored entities.
  • Sponsored entities do not need to enroll separately.
  • Financial institutions can have up to four users, including one primary user and three secondary users.

Deadlines and Penalties

Financial institutions must comply with the reporting requirements to avoid penalties and fines. Failure to comply may result in significant financial consequences.

Conclusion

In conclusion, financial institutions operating in St. Kitts and Nevis must understand their FATCA reporting obligations and adhere to the guidelines outlined above to ensure compliance with the US-St. Kitts and Nevis FATCA agreement.