CRS and FATCA expert

Time to Renew the FFI Agreements

Peter Cotorceanu Blog, FATCA, FATCA Entity Classification

Upon registration for a GIIN via the IRS FATCA Registration Portal, certain FIs (i) subject to a Model 2 IGA, or (ii) not subject to any IGA automatically entered into a contract with the IRS known as the FFI Agreement. The FFI Agreement sets forth the FI’s rights and responsibilities (with responsibilities outnumbering rights heavily). In the scrum of FATCA registration and preparation in late spring 2014, one item in the FFI Agreement may have been overlooked: Its expiration date. Per Section 12.01 of the 2014 FFI Agreement, all FFI Agreements expired on 31 December 2016. As such, it is well past time to renew the agreement and the deadline to do so is set for 31 July 2017, less than three weeks away. The updated 2017 FFI Agreement is included in Rev. Proc. 2017-16, available here.

The renewal process is straightforward for those registered FIs that need to renew, but confusing for those that do not. The IRS amended the homepage for all registered FIs on the IRS FATCA Registration Portal to include a “Renew FFI Agreement” link under Available Account Options. By clicking though, renewing FIs can affirm their wish to submit their renewal. Prior to the submission of the renewal, renewing FIs may review and edit their original registration information, as warranted. Once submitted, the Responsible Officer (RO) should receive confirmation of the submission and, ultimately, the FFI Agreement’s renewal status on the homepage will reflect the IRS’s approval of the agreement’s renewal. Failure to satisfy the FFI Agreement renewal requirement by the 31 July deadline will result in the termination of the FFI Agreement (retroactive to 1 January 2017) and removal of the FI from subsequent FATCA GIIN Lists.

The appearance of the “Renew FFI Agreement” link on an FI’s homepage, however, does not necessarily mean that the FI must renew an agreement. Primarily, Participating FFIs and Reporting Model 2 FIs are subject to renewal obligations. The rest, including critically Reporting Model 1 FIs (unless they operate branches in non-IGA or Model 2 IGA jurisdictions) and sponsoring entities/trustees of trustee-documented trusts (acting in those roles), are exempt from the renewal obligation. Irrespective of the renewal requirement though, all registered FIs will find the “Renew FFI Agreement” link on their homepage (note: Sponsoring entities/trustees of trustee-documented trusts should not even have such a link). However pursuant to an FAQ released on 3 July (available here), a registered FI without a renewal obligation will not be penalized if it neglects to click through the link in order to affirm that it does not need to renew.

Below please find a table of the FATCA statuses most relevant to fiduciaries and the corresponding FFI Agreement renewal requirement:

FATCA Entity ClassificationJurisdiction TypeRenewal Requirement?
Particiapting FFINon-IGAYes
Reporting Model 2 FIIGA Model 2Yes
Reporting Model 1 FI (with no branches in any non-IGA jurisdictions)IGA Model 1No
Reporting Model 1 FI (with branches in any non-IGA jurisdiction)IGA Model 1Yes
Sponsored Investment Entity (SIE)AllNo
Sponsored, Closely Held Investment Vehicle (SCHIV)AllNo
Trustee-documented Trust (TDT)
(Note: TDTs are not available for trusts not covered  by an IGA)
IGA Models 1 and 2No
Owner-documented FFI (ODFFI)AllNo
Passive NFFEAllNo
Active NFFEAllNo
Sponsoring Entity (as sponsor)AllNo
Trustee documenting TDT (as documenting trustee)AllNo

Although the IRS proactively notified ROs via e-mail of the renewal requirement (and intends to send a reminder message ten days prior to the due date), this notification is oddly unspecific, ordering the RO to log-in to the FI’s portal account without further elaboration as to the purpose or deadline. Accordingly, some ROs may defer the activity until too late and needlessly endanger their compliant FI status. There is no benefit to a delay (especially with summer holidays increasingly governing many minds). We advise all registered FIs with renewal obligations to log into their account promptly, click the “Renew FFI Agreement” link under Available Account Options and proceed accordingly.

In closing, an early reminder for those who renew their agreement: The 2017 FFI Agreement expires automatically on 31 December of next year and it too will need to be renewed.