By William H. Byrnes and Robert J. Munro *
Swiss banks that elected to participate in the Department of Justice Program for Non-Prosecution Agreements or Non-Target Letters for Swiss banks (the "Program") are required to identify "U.S. Related Accounts," as that term is defined in Section 1.B.9. of the Program. This article suggests a protocol (the "Protocol") for the identification of these accounts. The Protocol is based on the guidance contained in the Program and related authorities and guidance. References in the Program to the Agreement between the United States and Switzerland for Cooperation to Facilitate the Implementation of FATCA are referred to herein as the "Swiss IGA."
… [G]eneral examples of the application of… [aggregation] rules… are merely illustrative of the application of the aggregation rules discussed herein and are not intended to reflect a comprehensive application of the aggregation rules.
Example 1 – Lower Value Account.
An individual holds a number of accounts at the bank and the individual has been assigned a RM. The bank’s Computer Linkage system applies. The bank must apply the Individual and Entity Aggregation Rules and the RM Aggregation Rule. The aggregated balance of Accounts exceeds US$ 50,000 and is less than US$ 250,000. The bank must apply due diligence procedures relevant to lower value accounts, but there is no need for the bank to apply the RM Actual Knowledge Rule or the RM Change in Circumstances Rule as the US$ 250,000 threshold has not been met.
Example 2 – High Value Accounts.
The facts are as in Example 1 above but the aggregate balance exceeds US$ 250,000. As the aggregate balance of all accounts linked by a common data element and held by the individual exceeds US$ 250,000, the bank must make inquiry of any RM assigned to that individual to establish whether the RM(s) know(s) of any additional accounts that are directly or indirectly owned, controlled or established (other than in a fiduciary capacity) by the same person; i.e., the RM Aggregation Rule must be applied. In addition, the RM Actual Knowledge Rule and the RM Change in Circumstances Rule must be applied.
Example 3 – Aggregation Involving Joint Accounts.
Two U.S. Individuals have three accounts between them, one deposit account each and a jointly held deposit account with the following balances. U.S. person A: US$ 35,000; U.S. Person B: US$ 25, 000; Joint Account: US$ 30,000. A data element in the bank’s Computer Linkage allows the joint account to be associated with both A and B. The system shows the individual balances of the accounts; however, it does not show a combined balance. The fact that there is not a combined balance does not prevent the aggregation rules applying. The balance on the joint account is attributable in full to each of the account holders. In this example, the aggregate balance of A would be US$ 65,000 and for B, US$ 55,000. As the amounts after aggregation are in excess of the US$ 50,000 threshold, both Accounts will be U.S. related accounts. If A is not a U.S. person, then only B’s account would be a U.S. related account.
Example 4 – Aggregation of Negative Balances.
Two U.S. persons have three accounts between them, one account each a jointly held account, all with the bank with the following balances: U.S. person A: US$ 53,000; U.S. person B: US$ 49,000; joint account (negative US$ 8,000), treated as zero. The accounts can be linked and therefore must be aggregated, but for the purposes of aggregation, the negative balances should be treated as nil. Therefore, the only U.S. related account after applying these thresholds would be that of A.
* Professor William H. Byrnes is Associate Dean of Texas A&M University School of Law, Fort Worth TX.
Dr. Robert J. Munro is an Adjunct Professor, Texas A&M University School of Law.
Information referenced herein is provided for educational purposes only. For legal advice applicable to the facts of your particular situation, you should obtain the services of a qualified attorney licensed to practice law in your state.
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