The For­eign Ac­count Tax Com­pli­ant Act (FAT­CA), which was en­act­ed by the Unit­ed States Gov­ern­ment in March 2010, re­quires for­eign fi­nan­cial in­sti­tu­tions to re­port di­rect­ly to the US In­ter­nal Rev­enue Ser­vice (IRS) all clients who are US cit­i­zens, green card hold­ers liv­ing in the US or abroad, or for­eign en­ti­ties in which US tax­pay­ers hold a sub­stan­tial own­er­ship in­ter­est.

FAT­CA re­quires US cit­i­zens and green card hold­ers with fi­nan­cial as­sets out­side of the US ex­ceed­ing US$500,000 to re­port these as­sets to the IRS.

The leg­is­la­tion is struc­tured so that all ac­counts will be deemed non-com­pli­ant or re­cal­ci­trant un­less the in­sti­tu­tion can demon­strate it un­der­took a rig­or­ous due dili­gence process to prove it has no US ac­count hold­ers.

A par­tic­i­pat­ing for­eign fi­nan­cial in­sti­tu­tion will be ob­lig­at­ed to:

�2 Ob­tain in­for­ma­tion to de­ter­mine which ac­count hold­ers are US per­sons

�2 Com­ply with ver­i­fi­ca­tion and due dili­gence pro­ce­dures on such ac­count hold­ers as re­quired by the IRS

�2 Re­port an­nu­al­ly to the IRS on the name and ad­dress of each US client.

Cor­re­spon­dent banks every­where may refuse to deal with a fi­nan­cial in­sti­tu­tion un­less that in­sti­tu­tion can show it is FAT­CA com­pli­ant.

For­eign fi­nan­cial in­sti­tu­tions in­clude every mem­ber of the in­vest­ment com­mu­ni­ty–banks, cred­it unions,as­set man­agers, in­vest­ment funds and pen­sion fund schemes, bro­kers and in­sur­ance com­pa­nies.??