This is a good overview of the recent IRS Notice that was issued on May 2, 2014 that relaxes the time frame for the implementation of FATCA for banks and other FFIs. Note, that it does not apply to individual account holders!
The unanswered question still remains what does “Good Faith Efforts” really mean? Also, when will we see more guidance from the IRS for these financial institutions that define some of the other unanswered questions? There still are many questions to be answered.
In my opinion, this “relaxation” of the time frame for implementation of FATCA was definitely needed because Foreign Financial Institutions (FFIs) are literally scrambling to get into compliance with this law. The law has some very harsh penalties associated with non-compliance.
Due to the complex nature of the law, it is difficult for a FFI to turn their ships around to get into compliance quickly. Implementing FATCA requires FFIs to incur costs and exhaust tremendous effort in terms of changing technology, internal procedures and policies, and obtaining proper legal guidance. The law requires major changes in the way these financial entities conduct their businesses this takes time to implement. Our firm routinely advises banks and financial institutions on how to comply with FATCA and works with consulting/technology firms to implement systems for FFIs. Please contact us if your FFI needs a consultation.
For account holders, this Notice does not provide them with any grace period, however, my guess is that this may just provide them more time to get into compliance. If you do have an undisclosed offshore account (including any foreign bank accounts, retirement accounts, unsegregated gold/precious metal accounts, insurance products, etc.) it might be a good opportunity to take advantage of the Offshore Voluntary Disclosure Program (OVDP) and/or other methods for coming into compliance. We routinely represent clients in disclosures to the IRS. If you need a consultation in this regard, please contact our firm.