Duties and Responsibilities of a FATCA Responsible Officer
A participating foreign financial institution (FFI) is required to appoint a “responsible officer” to oversee its compliance with the FFI agreement that it is required to execute.
Generally, the responsible officer is required to establish and maintain a compliance program that includes policies, procedures and processes that sufficiently comply with all of the FATCA rules and regulations. The responsible officer must periodically review the FFI’s compliance program and its compliance with the FFI agreement in order to make the required periodic certifications. There are two types of certifications required; a periodic certificate of compliance, and a certification regarding completion of due dilligence procedures. The responsible officer must personally make these certifications to the IRS.
The FATCA Responsbile Officer and the IRS
Based upon the information contained in various forms and tax returns, the IRS may request that the responsible officer verify the participating FFI’s compliance with the FFI agreement. This will be done if the IRS suspects that the FFI is not substantially complying with all of the requirements of the FFI agreement.
Penalties and Liability Concerns for the Responsible Officer
The IRS may hold not only the FFI liable for any mistakes, but also the responsible officer. The IRS might overlook a situation in which an operational glitch causes small errors to a handful of accounts, but it will be a different story if the errors are so egregious that the FFI is “non-compliant” or simply doesn’t know what its doing. The FRO can be fined US$250,000 and even spend up to three years in jail, or both, per the IRS code. The first outcome is a far more likely scenario than the second, as it is uncertain just how much the IRS’ legal arm can extend overseas.
Outsourcing FFI Compliance Duties
Many FFI’s use outside sources for help in doing due dilligence work, such as customer onboarding and reviewing existing customer accounts. This is what many FFI’s have done after completing thorough cost-benefit analysis that shows that this is the most prudent option. Freeman Tax Law specializes in helping FFI’s. Please contact us if you have questions, or would like more information about the services we can provide.