Cayman investment funds are advised to carefully consider their due diligence obligations as the implementation of the US Foreign Account Tax Compliance Act (FATCA) looms, according to Maples.
The Cayman Islands government signed a Model 1B intergovernmental agreement with the US in November 2013, which came into force in April 2014. Cayman legislation supporting the implementation of FATCA is expected to be enacted in early June 2014 with secondary legislation and guidance notes to be implemented in early July 2014.
The law firm notes that all reporting funds will be required to apply the due diligence procedures set out in the agreement to identify not only US reportable accounts but also accounts held by non-participating financial institutions.
It also sets out five action points that funds should consider. These include the implementation of verification procedures to deal with any new investor accounts from July 1, 2014; a review of account balances for pre-existing accounts to ascertain how soon remediation needs to be undertaken and the extent of that remediation; and the use of procedures to identify not just US reportable accounts but also NPFIs and also to address the situation where a reporting fund "knows or has reason to know" information received is unreliable or incorrect.
FATCA, Maples, Regulation