102640 – Due Diligence: Pre-Existing Individual Accounts

Pre-existing accounts are those in existence at the point that the various automatic exchange of information regimes ‘switch on’ under the timelines for due diligence and reporting.

Pre-existing individual accounts are accounts held by a Reportable Person, who is an individual. These are split between High Value Accounts and Lower Value Accounts, and there are different due diligence procedures for each type. High value pre-existing individual accounts are defined as accounts with an aggregate balance or value that exceeds an amount equivalent to US $1 million as at the end of the calendar year that is the subject of the report. Thus for reporting in 2017 under the DAC/CRS the accounts in scope are those Reportable Accounts in existence as at 31 December 2015.

Lower value pre-existing individual accounts are those with an account balance or value that does not exceed an amount equivalent to US $1 million at the end of the calendar year.

As well as differences of due diligence required for the two types of pre-existing individual account, financial institutions have longer to carry out their due diligence on Lower Value Accounts compared to High Value Accounts. However, to the extent that Lower Value Accounts are identified as Reportable Accounts in a calendar year, they are reportable for that calendar year. Under the DAC/CRS financial institutions have until 31 December 2017 to carry out due diligence on Lower Value Accounts in existence at 31 December 2015 thus all such accounts must be reported no later than 2018 but if any Reportable Accounts are identified on or before 31 December 2016 they must be reported in 2017.

It is expected that more jurisdictions will become Reportable Jurisdictions over time. Under the wider approach, Financial Institutions will have identified the territory of tax residence of all preexisting Account Holders as at 31 December 2015 and will be capturing information for all new accounts opened from 1 January 2016. Any changes of tax residence as a result of a change of circumstances after that will be captured when the change is recognised by the Financial Institution. Where new Reportable Jurisdictions are added to the list, Financial Institutions will already have identified tax residents of those jurisdictions. Financial Institutions will, therefore, be able to contact relevant Account Holders to acquire any further information they may need for reporting purposes, for example, a Tax Identification Number or Date of Birth following the process detailed at.

For FATCA and CDOT reporting financial institutions have the option to apply a threshold exemption to Lower Value Accounts that take them out of the scope for carrying out due diligence processes.

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