FATCA

The Foreign Account Tax Compliance Act (FATCA), enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010 (Pub. L. 111-147) and codified primarily at IRC Sections 1471-1474, requires foreign financial institutions (FFIs) to identify accounts held by US persons or US-owned foreign entities, and to report those accounts' balances, income, and gross proceeds annually to the IRS. FFIs that do not comply face a 30% withholding tax on certain US-source payments. Most FFIs comply through Intergovernmental Agreements (IGAs) — either Model 1 IGAs (where FFIs report to their domestic tax authority, which then exchanges with the IRS) or Model 2 IGAs (where FFIs report directly to the IRS under a modified FATCA agreement). US financial institutions (USFIs) have their own FATCA obligations: withholding and reporting on withholdable payments to non-compliant FFIs and recalcitrant account holders. FFIs must register with the IRS through the FATCA Registration System and obtain a Global Intermediary Identification Number (GIIN).

FATCA creates substantial engineering obligations for financial institutions' customer data management and reporting infrastructure. Customer due diligence (CDD) processes must capture sufficient information to make US indicia determinations: US citizenship or residency, US place of birth, US address or phone number as the only contact, standing instructions to transfer funds to US accounts, or power of attorney granted to a person with a US address. These indicia must be evaluated against documentary evidence (W-9 for US persons, W-8 series for non-US persons) with ongoing monitoring for changes in circumstances that create new indicia. FATCA reporting to the IRS uses Form 8966 (FATCA Report) in XML format following the FATCA XML Schema published by the IRS, submitted through the IRS IDES (International Data Exchange Service) platform using digital certificates. Data aggregation for reporting requires joining customer account, balance, income, and transaction data across potentially multiple legacy systems.

FATCA creates significant data management complexity when combined with CRS (Common Reporting Standard) — the OECD's multilateral equivalent, now implemented in 110+ jurisdictions. Many financial institutions run FATCA and CRS reporting from a single unified tax information exchange (TIX) platform, but the standards have important technical differences: the FATCA XML Schema is IRS-specific while CRS uses the OECD's Common Reporting Standard XML schema v2.0; residency determination rules differ; and the treatment of passive non-financial entities (NFEs) and controlling persons has subtle variations between FATCA and CRS. For FFIs in multiple CRS-participating countries, the interaction of FATCA IGAs, domestic CRS legislation, and bilateral competent authority agreements creates a matrix of potentially inconsistent reporting obligations that must be resolved at the data model level before reporting logic is implemented.

We implement FATCA compliance infrastructure using a unified tax information exchange data model that supports both FATCA and CRS reporting from a single customer data store, reducing the risk of inconsistent US indicia determinations between the two frameworks. Our FATCA XML generation engines produce IRS IDES-ready Form 8966 submissions validated against the current IRS FATCA XML Schema before submission, with GIIN validation, TIN format checking, and account balance aggregation logic. We build US indicia detection workflows that evaluate customer records continuously, not just at account opening, triggering remediation workflows when new indicia arise.

Compliance-Native Architecture Guide

Design principles and a structured checklist for building software that is compliant by default — not compliant by retrofit. Covers data architecture, access controls, audit trails, and vendor due diligence.