FATCA Update: First-ever conviction signals increased enforcement risk

The former CEO of Saint Vincent-based Loyal Bank pleaded guilty and was convicted on 11 September of conspiring to defraud the US by failing to comply with the Foreign Account Tax Compliance Act (FATCA). This is the first conviction obtained by the US Department of Justice (DOJ) since FATCA came into effect in 2014 and was the result of a sting operation. The FBI worked with the US Internal Revenue Service (IRS), the US Securities and Exchange Commission, the City of London Police, the UK Financial Conduct Authority and the Hungarian National Bureau of Investigation. The offender’s sentencing date is yet to be scheduled and he is facing a maximum of five years in prison.

This conviction, on the heels of a US governmental report critical of the IRS’s limited use of FATCA, could mark a more active enforcement environment going forward. Under FATCA, certain foreign financial institutions (FFI) must report US citizens’ account information to the IRS and the US has intergovernmental agreements with Hong Kong and other Asian jurisdictions to facilitate this. The DOJ has indicated that financial institutions in Hong Kong and Singapore are on the US authorities’ priority list in terms of FATCA enforcement. As such, both US citizens and financial institutions in the region should remain cognisant of FATCA’s requirements and ensure compliance. For our full briefing on the conviction, please click here.


Kyle Wombolt
Kyle Wombolt
Head of Global Corporate Crime & Investigations Practice, Hong Kong
+852 2101 4005
Robert Hunt
Robert Hunt
Partner, Hong Kong
+852 2101 4128
Pamela Kiesselbach
Pamela Kiesselbach
Senior Registered Foreign Lawyer (England and Wales), Hong Kong
+852 2101 4032

Jeremy Birch
Jeremy Birch
Senior Associate, Hong Kong
+852 2101 4195

Australian funds, are you FATCA ready?

  • FATCA is United States legislation which is designed to enable the IRS to obtain information about offshore accounts held by US. taxpayers.
  • The Australian government is pursuing an intergovernmental agreement with the U.S. but the scope and implementation date for that agreement remains uncertain.
  • Financial institutions in Australia, including fund managers, should understand the possible impact of FATCA for them and be ready for its implementation. Continue reading

The cost of complying with FATCA – similar initiatives to follow?

HMRC has published draft regulations for compliance with the US Foreign Account Tax Compliance Act (FATCA).  The draft regulations are published alongside guidance notes, a tax information and impact note, and an explanatory webpage.  The regulations are expected to come into force in mid August and will have effect for financial accounts (as defined in the legislation) held at 31 December 2013.

Although the steps taken by the Government, including changes to the original US regulations,  have produced a significant, comparative, reduction in the costs for business in complying with FATCA, and removed the threat of withholding being applied to UK businesses, the cost burden for the UK is not insignificant: HMRC estimates the cost for UK business over the first 5 years to be £1.1bn-£2bn, running thereafter at an annual cost of £50m-£90m.  HMRC’ estimates its own one-off IT and staff project costs at approximately £5m, with ongoing annual costs of £1.4m from 2016. Continue reading

HM Treasury and US Tax Authority release model agreement to implement FATCA in the UK and extend information sharing powers between the US and the UK

HM Treasury (in conjunction with the governments of France, Germany, Italy and Spain – together the ‘FATCA Partners’) have published the terms of a model agreement (the ‘Model Agreement’) which they propose to enter into with the US government (the ‘IRS’) and which is intended to address concerns about FATCA compliance for financial institutions established in the FATCA Partner jurisdictions. Continue reading