03.02 – Account Holders

To identify the person or entity that is the account holder under the terms of the Agreement, a Financial Institution may need to consider the type of account and the capacity in which it is held.

Trusts and Estates

Where a Trust or Estate is listed as the holder of a Financial Account then they are to be treated as the account holder, rather than any owner or beneficiary (although accounts held by the estate of a deceased person are not Financial Accounts – Section 3.14).

However, when a Trust/Estate is treated as the account holder of a Financial Account, this does not remove the requirement to identify the Controlling Persons where that entity is a Passive NFFE.

In relation to a share register, where an issuer’s share register has been the subject of an acquisition, (for example a takeover by Company A of Company B) and shareholders of Company B have not responded and accepted the offer, they become known as dissenters or dissenting shareholders. On completion of the takeover, the consideration is transferred to a trustee to be held on the dissenters’ behalf until they claim the proceeds, and it is paid to them. In this case, the trustee does not become the account holder. This is because the original shareholdings (equity interests) are not Financial Accounts unless Section 3.8 applies.

Partnerships

Where a Financial Account is held in the name of the partnership that is a Financial Institution, it will be the partnership that is the account holder rather than the partners in the partnership.

Accounts held by persons other than a Financial Institution.

A person, other than a Financial Institution that holds a Financial Account for the benefit of another person, as an

  • agent,
  • custodian,
  • nominee,
  • signatory,
  • investment adviser, or
  • intermediary

is not treated as an account holder with respect to such account for purposes of the Agreement. Where the Financial Account does not meet the conditions relating to Intermediary Accounts (Section 3.15), then the person on whose behalf the account is held is the account holder.

Note: if an account is held for the benefit of another person by a Financial Institution (including an Exempt Beneficial Owner or a Deemed Compliant Financial Institution) such a Custodial Institution, then the Financial Institution will be the account holder and not the person on whose behalf the account is held. It will the account that the person maintains with that Financial Institution where they are the account holder.

Example 1

Where a parent opens an account for a child, the child will be the account holder.

Joint Accounts

Where a Financial Account is jointly held, the balance or value in the account is to be attributed in full to all joint holders of the account. This will apply for both aggregation and reporting purposes.

If an account is jointly held by an individual and an entity, the Financial Institution will need to apply separately both the individual and entity due diligence requirements concerning that account.

Cash Value Insurance Contracts and Annuity Contracts

An Insurance or Annuity Contract is held by each person entitled to access the contract’s value (for example, through a loan, withdrawal, surrender, or otherwise) or with the ability to change a beneficiary under the contract.

Where no person can access the contract’s value or change a beneficiary, the account holders are any person named in the contract as an owner and any person who is entitled to receive future payment under the terms of the contract. When an obligation to pay an amount under the contract becomes fixed, each person entitled to receive payment is an account holder.

Joint life second death Cash Value Insurance Contracts

Joint life second death Cash Value Insurance Contracts are sometimes taken out by spouses. Such policies insure both parties, but do not pay out on the death of the first person. Instead, the policy remains in force until the other person has died or the policy is surrendered.

Where one of the policyholders whose life is assured is a US Person (and the other is not a US person), this will be a Reportable Account, which is reported annually. If the US Person dies during the term of the insurance, it will cease to be a US Reportable Account.

Entity account holders

An entity account may be a US Reportable Account if either the entity is a Specified US Person, or it is a non-US entity who has controlling persons who are Specified US Persons.

The entity itself will be resident where it is a tax resident, the general rules for where an NFFE is held to be resident are the same as those for a Financial Institution (Section 2.2).

In most circumstances, an entity is tax resident where it is incorporated and/or where it is managed and controlled (although this will depend on the domestic legislation).

However, a reportable entity may also be tax transparent (partnerships, trusts, foundations, etc.). For reporting purposes, an entity will be held to be resident, even if the law of that country or jurisdiction does not treat the entity as a taxable person, e.g. a business entity based in the US will be resident in the US, whether or not it has ‘checked the box’ to be treated as a taxable person.