Extension of the Deadline for the Extension of the FFI Agreement, Upcoming Certification of the QI and FATCA Responsible Officers and QI and FATCA Compliance Review

Renewal of the FFI Agreement

The IRS and the Swiss Secretariat for International Financial Matters (SIF) have informed that FFIs that did not renew their FFI Agreements before July 31, 2017, but complied with the other provisions of the FFI Agreement, are allowed to apply for a renewal until October 24, 2017 in order to continue to be treated as participating FFIs. FFIs that fail to renew their FFI Agreements by that date will be no longer included on the FFI list as from November 2017 and will be treated retroactively as Nonparticipating FFIs from January 1, 2017.

Upcoming Certification by the QI and FATCA Responsible Officer

By July 1, 2018, the Responsible Officers of financial institutions with a QI and FFI Agreement in effect since 2014 must certify to the IRS their compliance with the QI and FFI Agreement.

According to the QI Agreement, the QI Responsible Officer is required to perform a Certification of Internal Controls. If there were no material failures during the certification period, the QI must perform an ordinary Certification of Effective Internal Controls. Should the QI Responsible Officer be aware that there were material failures during the certification period, they are required to perform a Qualified Certification and report to the IRS all material failures identified. For QIs not eligible for a waiver that perform a QI Compliance Review for the third calendar year of the certification period, the due date of the certification is December 31, 2018.

The Responsible Officer of Model 2 jurisdiction FFI or participating FFI with an FFI Agreement in effect since June 30, 2014 will be required to perform a Periodic Certification on FFI’s Effective Internal Controls and Compliance with the FFI Agreement. Analogous to the Certification of Internal Controls under the QI Agreement, the FFI is either required to perform an ordinary certification of effective internal controls or a qualified certification, depending on whether or not there were material failures during the certification period.

Additionally, Model 2 jurisdiction FFIs or participating FFIs with an FFI Agreement in effect since June 30, 2014 are required to perform a One-time Certification regarding the FFI’s completion of the due diligence procedures for preexisting accounts and regarding the absence of any formal or informal practices or procedures to assist account holders in the avoidance of chapter 4 regulations. Therefore, we remind all affected FFIs to assure that they have sufficiently documented the results of the FATCA due diligence and anti-avoidance procedures in order to make the upcoming certification with certainty.

QI Compliance Review

In order to successfully perform the Certification of Internal Controls under the QI Agreement, QIs not eligible for a waiver from the periodic QI Compliance Review are required to perform a QI Compliance Review for any year of a 3-year certification period. A QI with a QI Agreement in force since 2014 may select either year 2015, 2016 or 2017 for its compliance review. QIs eligible for a waiver from the QI Compliance Review requirement will request a waiver simultaneously with the certification of internal controls performed by the Responsible Officer by July 1, 2018. 

Should the QI request and obtain a waiver and does not conduct a periodic review, the Responsible Officer must use “the other processes, certifications, or reviews that he or she determines are necessary in order to be able to make the required certification”. Therefore, QIs eligible for a waiver should perform what we call “QI Health Check”, a qualified, informal version of a QI Compliance Review (e.g. as part of a review by an internal auditor or an external reviewer).

FATCA Review

In order to successfully perform the Certification of Internal Controls under the FFI Agreement, a Model 2 jurisdiction FFI or participating FFI must also perform, or have performed on its behalf, a review of its compliance with the agreement for the certification period. The results of the review must be considered by the Responsible Officer in making the periodic certifications. Although less formalized by the agreement compared to a periodic QI Compliance Review, affected FFIs should perform a qualified review of their compliance with the FFI agreement by an internal or external reviewer.