Ministry issues important FATCA clarifications


The Ministry for Financial Services on the Cayman Islands has issued an advisory note in relation to the implementation of FATCA, which includes some clarifications in relation to Cayman financial institutions.

Business leaders have already warned of some of the pitfalls surrounding the implementation and advice financial institutions to seek professional advice.

The note from The Ministry for Financial Services said that, in accordance with IRS Notice 2013-43 and the US FATCA Regulations, withholding agents are not required to verify a global intermediary identification number (GIIN) of a Reporting Model 1 Financial Institution for payments made prior to January 1, 2015.

However, it went onto explain that US FATCA guidelines qualify that position by providing that financial institutions are required to register and obtain a GIIN prior to July 1, 2014 if certain conditions are met.

These include if a financial institution maintains one or more branches (other than a limited branch or US branch) in jurisdiction(s) that are not covered by a Model 1 IGA; if a financial institution is renewing its status as Qualified Intermediary, Withholding Foreign Partnership or Withholding Foreign Trust; or if a financial institution intends to be a Lead financial institutions for one or more member financial institutions that are not established in, and operating exclusively in, other Model 1 IGA jurisdictions.

Accordingly, Cayman Reporting Financial Institutions (CRFIs) that are not in the above categories have time beyond July 1 to register and obtain a GIIN, in order to be included on the IRS List prior to January 1, 2015.

The note advised financial institutions to check the IRS FATCA website for updates regarding the above and seek professional advice.

Mike Mannisto, partner in the Financial Services division of Ernst & Young who represents Cayman Finance, the organisation representing the financial services industry in the Cayman Islands, on the FATCA implementation task force, warned companies to be cautious when choosing a registration date and seek professional advice.

“As stated in the advisory, even though it is expected that most CRFIs have time beyond July 1 to register and obtain a GIIN, it is important to carefully examine a CRFI's facts and circumstances before deciding on an appropriate registration date,” Mannisto said.

“For example, certain funds may have side letters with earlier commitments and some US investment banks may have internal policies to obtain GIIN's from all clients before July 1, 2014. CRFI's are reminded that the first IRS FFI List will be posted by June 2, 2014, and in order to ensure inclusion on that initial list, FFIs must finalise their registration by April 25, 2014. There are also a number of other factors to consider and as stated in the advisory CRFI's may wish to seek professional advice in relation to their particular circumstances.”

Ministry, FATCA

Cayman Funds