Foreign Account Tax

Compliance Act (FATCA)

E-Learning Course
Course Objective

 The aim of this module is to bring awareness in UBL staff about FATCA requirements

 To familiarize staff with FATCA and its implication

 Advise staff for their roles and responsibilities with regards to Due Diligence requirements

 Identification of US Persons based on US Indicia/(evidence)

 Remediation Process

 Dealing with Recalcitrant Customers

Orientation to FATCA

The Foreign Account Tax Compliance The act obliged Financial Institutions/Banks
FATCA is intended to prevent
Act (FATCA) is a U.S. efforts to improve to enter into an agreement with the Internal
"U.S. persons" from evading
tax compliance involving foreign Revenue Service(IRS)(a US tax authority) and
U.S. tax using financial
financial assets and offshore accounts. report all their US clients.
accounts held outside of the
Legislation signed into law on March UBL is registered with IRS as a Participating
United States.
18, 2010 Bank.

All new customers will have to be

on-boarded as per FATCA
All existing accounts to be searched to
requirements. It means that their
establish FATCA status of the customer.
FATCA status need to be determine
at the time of opening account.

FATCA Compliance:

• Identify US Person (account holder, joint account holder, mandate holder or beneficial owner, substantial US owners i.e.
more than 10% in voting and value of shares collectively or singly);
• Complete documentation and inform Compliance Group HO; and
• Do not help customers to avoid FATCA requirements.
Key Terms

Internal Revenue Service (IRS)

The Internal Revenue Service (IRS) is the U.S. government agency responsible for tax collection and tax law enforcement.
Participating FI
As per FATCA requirements Banks/FI that has agreed to comply with requirements of an FI agreement. All Pakistani banks, including
UBL, are Participating FIs in terms of SBP directives. An IGA (Intergovernmental Agreement) will be signed in future.

Financial Account
Any depository or custodial account or equity/debt interest in a financial institution/banks.

New account (For FATCA purpose)

• Individual or Sole Proprietorship Accounts opened on or after July 1, 2014. Legislation effective from 30 th June 2014.
• Entity accounts opened on or after Jan 1, 2015
Financial Institution (FI)
Any entity that (i) accepts deposits in the ordinary course of a banking or similar business; (ii) holds as a substantial portion of its
business financial assets for the account of others; or (iii) is engaged (or holding itself out as being engaged) primarily in the business
of investing, reinvesting, or trading in securities, partnership interests, commodities or any interest (including a futures or forward
contract or option) in such securities, partnership interests, or commodities.

Indicia
A U.S. legal term meaning indication. In the context of FATCA, indicia refer to evidence or indications that an account holder might be a
U.S. person.
Key Terms

U.S. Indicia
U.S. citizen or resident;
A U.S. place of birth;
A current U.S. residence address or U.S. mailing address;
A current U.S. telephone number
Standing instructions to pay amounts from the account to an account maintained in the United States;
A current power of attorney or signatory authority granted to a person with a U.S. address; or
 An “in-care-of” address or a “hold mail” address that is the sole address the FFI/bank has identified for the account holder.

Potential US person
Potential US Person is an individual having account with documentation containing any US Indicia which indicates that person might
have a link to US. In this scenario, additional documents (US Tax Forms) must be obtained from customer.
U.S. person
1. US Citizens (including dual citizen)
2. US residents
3. US Green Card holders
U.S. account
U.S. Account is any financial account maintained by a bank that is held by one or more U.S. persons, U.S. entities or Passive NFFEs
with a U.S. substantial owner.
Key Terms

Recalcitrant account holder

Any account holder that fails to comply with requests by the Participating Financial Institution (PFI)/bank for the documentation or
information that is required for determining the status of such account as a U.S. account or other than a U.S. account or if foreign law
would prevent reporting by the PFI on information with respect to such account, the account holder fails to provide a valid and
effective waiver of such law to permit such reporting.
Beneficial Owner (BO)
The person who is the owner of the income for tax purposes and who beneficially owns that income. Thus, a person receiving income
in a capacity as a nominee, agent or custodian for another person is not the beneficial owner of the income. Next of Kin should not be
considered as Beneficial Owner (BO).
Active NFFE
The term 'Active NFFE' generally refers to an entity that operates an active trade or business other than that of a financial business.
Less than 50 percent of its gross income for the preceding calendar year is passive income and less than 50 percent of the assets held
by the NFE produced or held for the production of passive income.
Pre-existing account (For FATCA Purpose)
•Individual or Sole Proprietorship Accounts held as on 30 th June 2014
• Entity accounts held as on 31st December 2014
FATCA Requirements for Individual or Sole Proprietorship Customer

Form W9 is mandatory to be obtained from customer if:

• Customer holds U.S. Permanent Resident Card (Green Card);
• Customer`s current country of residence is United States; or
• Customer is a U.S. National.

Form W8-BEN is acceptable if:

• Customer has withheld/(withdraw) the U.S. nationality or residency. In this case, along with W8-BEN form, it is
mandatory to obtain Certificate of loss of nationality i.e. DS-4083 or Certificate of loss of residency i.e.
I-4097(whichever is applicable) from customer.

• In the case where customer has provided U.S. address or contact number and claimed that he is not a U.S.
Person, he should submit W8-BEN form along with the documentary evidence i.e. Government issued identity
document evidencing non-US nationality (for e.g. CNIC etc.).

The above information must be screened for each holder of an account in-case of Joint Account, beneficial owner if
other than the customer and mandate holder of an account.

If customer refuses to provide required document or information, as per approved FATCA Policy,
NO relationship will be initiated with that customer.
FATCA Requirements for Non-Individual Customer

Financial Institutions Account

If customer is a ‘Financial Institution’, (Bank/NBFC/DFI/Leasing Companies/ Modaraba Companies) at the time of
account opening, completely filled, signed and dated W8-BEN-E Form must be obtained from customer along with
AOF and other required documents.

If customer refuses to provide required document/information or is a Non-Participating FI as per provided W8-BEN-

E Form, NO relationship will be initiated with that customer as per FATCA policy.

Non-Financial Entity (NFE) Account

If customer is not a Financial Institution, branch staff to ensure that ‘FATCA Form for NFE’ and other required
documents (as mentioned in the form) must be obtained by the customer. Branch should also ensure that all
documents and forms must be correctly filled, signed and dated by customer and submitted to the branch along with
AOF.
Branch to ensure following:

• If an entity is a publicly listed Company or an affiliate of a publicly listed Company, name of Exchange on which the
company is listed must be provided.
• If an entity is one of the following, provided documentary evidence should support the claimed status.
o Government owned;
o A tax exempt Retirement Fund or Trust; or
o A tax exempt Not for Profit entity (Charity)
FATCA Requirements for Non-Individual Customer –
Contd.

• If an entity or a parent company is incorporated in United States, completely filled, signed and dated W9 Form
must be submitted at branch by the customer.

• If an entity is a ‘Passive Entity’, completely filled, signed and dated W8-BEN-E Form must be submitted at branch
by the customer. Following information should be provided on W8-BEN-E Form by Passive Entity:

• Part I;
• Part XXVI;
• Part XXIX (if there is substantial U.S. owner or, if applicable, controlling U.S. person) ; and
• Part XXX (where applicable).

For the purpose of due diligence, branch staff should match the information provided in Part XXVI with the
identification document submitted regarding Owners/Shareholders for their association with United States. If
information mismatches, customer should be asked to provide correct details.

If customer refuses to provide required documents or information, as per approved FATCA Policy, NO relationship
will be initiated with that customer.
Remediation Process

 Existing customer who is not a US Person, becomes a US Person due to changes in his/her KYC
 The customer does not have any US Indicia is now identified as US person
 Customer has changed his/her KYC details due to which he is now identified as a US Person or a Non US
Person having US Indicia

Required Action by Branch in above cases:

 Branch Managers / RMs are responsible for the collection of required documentation from the customer.
 Based on the revised documentation, status should be updated in system as applicable.
Recalcitrant Customer

 Fails to comply with request by the Bank for the documentation or information necessary to determine US or non
US status.

 Fails to provide correct name and Taxpayer Identification Number (TIN) combination upon request when the
FFI/bank has received notice from the IRS that the name and Taxpayer Identification Number(TIN) combination for
the account holder is incorrect.

 As a matter of Policy, the Bank will not deal with any recalcitrant customer who does not wish to comply with the
published FATCA regulations and the defined FATCA procedures of the Bank.
Implications of FATCA Non-Compliance

 Reputational damage;
 Loss of customers;
 Loss of correspondent relationships; and
 Financial losses in the form of 30% with-holding tax on the US-based source income.
 Congratulations !
You have completed the module, kindly attempt the assessment in order to complete the course.