TMI BlogDUE DILIGENCE OBLIGATIONS FOR IDENTIFYING AND REPORTING ON U.S. REPORTABLE ACCOUNTS AND ON PAYMENTS TO CERTAIN NONPARTICIPATING FINANCIAL INSTITUTIONSX X X X Extracts X X X X X X X X Extracts X X X X ..... of that day or the last day of the reporting period ending immediately before June 30, 2014, and where a balance or value threshold is to be determined as of the last day of a calendar year under this Annex I, the relevant balance or value shall be determined as of the last day of the calendar year or other appropriate reporting period. 4. Subject to subparagraph E(1) of section II of this Annex I, an account shall be treated as a U.S. Reportable Account beginning as of the date it is identified as such pursuant to the due diligence procedures in this Annex I. 5. Unless otherwise provided, information with respect to a U.S. Reportable Account shall be reported annually in the calendar year following the year to which the information relates. II. Preexisting Individual Accounts. The following rules and procedures apply for purposes of identifying U.S. Reportable Accounts among Preexisting Accounts held by individuals ( Preexisting Individual Accounts ). A. Accounts Not Required to Be Reviewed, Identified, or Reported. Unless the Reporting Indian Financial Institution elects otherwise, either with respect to all Preexisting Individual Accounts or, separately, with resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss shall not be treated as U.S. indicia. 2. If none of the U.S. indicia listed in subparagraph B(1) of this section are discovered in the electronic search, then no further action is required until there is a change in circumstances that results in one or more U.S. indicia being associated with the account, or the account becomes a High Value Account described in paragraph D of this section. 3. If any of the U.S. indicia listed in subparagraph B(1) of this section are discovered in the electronic search, or if there is a change in circumstances that results in one or more U.S. indicia being associated with the account, then the Reporting Indian Financial Institution must treat the account as a U.S. Reportable Account unless it elects to apply subparagraph B(4) of this section and one of the exceptions in such subparagraph applies with respect to that account. 4. Notwithstanding a finding of U.S. indicia under subparagraph B(1) of this section, a Reporting Indian Financial Institution is not required to treat an account as a U.S. Reportable Account if: a) Where the Account Holder information unambiguously indicates a U.S. place of birth, the Reporting Indian Financial In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intains a record of: (1) A self-certification that the Account Holder is neither a U.S. citizen nor a U.S. resident for tax purposes (which may be on an IRS Form W-8 or other similar agreed form); or (2) Documentary evidence, as defined in paragraph D of section VI of this Annex I, establishing the Account Holder s non-U.S. status. C. Additional Procedures Applicable to Preexisting Individual Accounts That Are Lower Value Accounts. 1. Review of Preexisting Individual Accounts that are Lower Value Accounts for U.S. indicia must be completed by June 30, 2016. 2. If there is a change of circumstances with respect to a Preexisting Individual Account that is a Lower Value Account that results in one or more U.S. indicia described in subparagraph B(1) of this section being associated with the account, then the Reporting Indian Financial Institution must treat the account as a U.S. Reportable Account unless subparagraph B(4) of this section applies. 3. Except for Depository Accounts described in subparagraph A(4) of this section, any Preexisting Individual Account that has been identified as a U.S. Reportable Account under this section shall be treated as a U.S. Report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution; d) Whether there are standing instructions to transfer funds in the account to another account (including an account at another branch of the Reporting Indian Financial Institution or another Financial Institution); e) Whether there is a current in-care-of address or hold mail address for the Account Holder; and f) Whether there is any power of attorney or signatory authority for the account. 4. Relationship Manager Inquiry for Actual Knowledge. In addition to the electronic and paper record searches described above, the Reporting Indian Financial Institution must treat as a U.S. Reportable Account any High Value Account assigned to a relationship manager (including any Financial Accounts aggregated with such High Value Account) if the relationship manager has actual knowledge that the Account Holder is a Specified U.S. Person. 5. Effect of Finding U.S. Indicia. a) If none of the U.S. indicia listed in subparagraph B(1) of this section are discovered in the enhanced review of High Value Accounts described above, and the account is not identified as held by a Specified U.S. Person in subparagraph D(4) of this section, then no further action is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew such account is identified as a U.S. Reportable Account, the Reporting Indian Financial Institution must report the required information about such account with respect to the year in which it is identified as a U.S. Reportable Account and subsequent years on an annual basis, unless the Account Holder ceases to be a Specified U.S. Person. 3. Once a Reporting Indian Financial Institution applies the enhanced review procedures described in paragraph D of this section to a High Value Account, the Reporting Indian Financial Institution is not required to re-apply such procedures, other than the relationship manager inquiry described in subparagraph D(4) of this section, to the same High Value Account in any subsequent year. 4. If there is a change of circumstances with respect to a High Value Account that results in one or more U.S. indicia described in subparagraph B(1) of this section being associated with the account, then the Reporting Indian Financial Institution must treat the account as a U.S. Reportable Account unless it elects to apply subparagraph B(4) of this section and one of the exceptions in such subparagraph applies with respect to that account. 5. A Report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin 90 days after the end of the calendar year in which the account ceases to be described in paragraph A of this section), the Reporting Indian Financial Institution must obtain a self-certification, which may be part of the account opening documentation, that allows the Reporting Indian Financial Institution to determine whether the Account Holder is resident in the United States for tax purposes (for this purpose, a U.S. citizen is considered to be resident in the United States for tax purposes, even if the Account Holder is also a tax resident of another jurisdiction) and confirm the reasonableness of such selfcertification based on the information obtained by the Reporting Indian Financial Institution in connection with the opening of the account, including any documentation collected pursuant to AML/KYC Procedures. 1. If the self-certification establishes that the Account Holder is resident in the United States for tax purposes, the Reporting Indian Financial Institution must treat the account as a U.S. Reportable Account and obtain a self-certification that includes the Account Holder s U.S. TIN (which may be an IRS Form W-9 or other similar agreed form). 2. If there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitutions shall be treated as accounts for which aggregate payments as described in subparagraph 1(b) of Article 4 of the Agreement are reported to the Indian Competent Authority. D. Review Procedures for Identifying Entity Accounts With Respect to Which Reporting is Required. For Preexisting Entity Accounts described in paragraph B of this section, the Reporting Indian Financial Institution must apply the following review procedures to determine whether the account is held by one or more Specified U.S. Persons, by Passive NFFEs with one or more Controlling Persons who are U.S. citizens or residents, or by Nonparticipating Financial Institutions: 1. Determine Whether the Entity Is a Specified U.S. Person. a) Review information maintained for regulatory or customer relationship purposes (including information collected pursuant to AML/KYC Procedures) to determine whether the information indicates that the Account Holder is a U.S. Person. For this purpose, information indicating that the Account Holder is a U.S. Person includes a U.S. place of incorporation or organization, or a U.S. address. b) If the information indicates that the Account Holder is a U.S. Person, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Holder as a Nonparticipating Financial Institution payments to which are reportable under subparagraph 1(b) of Article 4 of the Agreement, unless the Reporting Indian Financial Institution: (1) Obtains a self-certification (which may be on an IRS Form W-8 or similar agreed form) from the Account Holder that it is a certified deemed-compliant FFI, or an exempt beneficial owner, as those terms are defined in relevant U.S. Treasury Regulations; or (2) In the case of a participating FFI or registered deemed-compliant FFI, verifies the Account Holder s Global Intermediary Identification Number on the published IRS FFI list. 4. Determine Whether an Account Held by an NFFE is a U.S. Reportable Account . With respect to an Account Holder of a Preexisting Entity Account that is not identified as either a U.S. Person or a Financial Institution, the Reporting Indian Financial Institution must identify (i) whether the Account Holder has Controlling Persons, (ii) whether the Account Holder is a Passive NFFE, and (iii) whether any of the Controlling Persons of the Account Holder is a U.S. citizen or resident. In making these determinations the Reporting Indian Financial Institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion associated with an account is incorrect or unreliable, the Reporting Indian Financial Institution must redetermine the status of the account in accordance with the procedures set forth in paragraph D of this section. V. New Entity Accounts . The following rules and procedures apply for purposes of identifying U.S. Reportable Accounts and accounts held by Nonparticipating Financial Institutions among Financial Accounts held by Entities and opened on or after July 1, 2014 ( New Entity Accounts ). A. Entity Accounts Not Required to Be Reviewed, Identified or Reported. Unless the Reporting Indian Financial Institution elects otherwise, either with respect to all New Entity Accounts or, separately, with respect to any clearly identified group of such accounts, where the implementing rules in India provide for such election, a credit card account or a revolving credit facility treated as a New Entity Account is not required to be reviewed, identified, or reported, provided that the Reporting Indian Financial Institution maintaining such account implements policies and procedures to prevent an account balance owed to the Account Holder that exceeds $50,000. B. Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial Institution or other Partner Jurisdiction Financial Institution; (iii) a participating FFI, a deemed-compliant FFI, or an exempt beneficial owner, as those terms are defined in relevant U.S. Treasury Regulations; (iv) an Active NFFE; or (v) a Passive NFFE none of the Controlling Persons of which is a U.S. citizen or resident, then the account is not a U.S. Reportable Account, and no reporting is required with respect to the account. d) If the Account Holder is a Nonparticipating Financial Institution (including an Indian Financial Institution or other Partner Jurisdiction Financial Institution treated by the IRS as a Nonparticipating Financial Institution), then the account is not a U.S. Reportable Account, but payments to the Account Holder must be reported as contemplated in subparagraph 1(b) of Article 4 of the Agreement. VI. Special Rules and Definitions. The following additional rules and definitions apply in implementing the due diligence procedures described above: A. Reliance on Self-Certifications and Documentary Evidence . A Reporting Indian Financial Institution may not rely on a self-certification or documentary evidence if the Reporting Indian Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices to, one or more subsidiaries that engage in trades or businesses other than the business of a Financial Institution, except that an entity shall not qualify for NFFE status if the entity functions (or holds itself out) as an investment fund, such as a private equity fund, venture capital fund, leveraged buyout fund, or any investment vehicle whose purpose is to acquire or fund companies and then hold interests in those companies as capital assets for investment purposes; f) The NFFE is not yet operating a business and has no prior operating history, but is investing capital into assets with the intent to operate a business other than that of a Financial Institution, provided that the NFFE shall not qualify for this exception after the date that is 24 months after the date of the initial organization of the NFFE; g) The NFFE was not a Financial Institution in the past five years, and is in the process of liquidating its assets or is reorganizing with the intent to continue or recommence operations in a business other than that of a Financial Institution; h) The NFFE primarily engages in financing and hedging transactions with, or for, Related Entities that are not Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or by a Related Entity, but only to the extent that the Reporting Indian Financial Institution s computerized systems link the Financial Accounts by reference to a data element such as client number or taxpayer identification number, and allow account balances or values to be aggregated. Each holder of a jointly held Financial Account shall be attributed the entire balance or value of the jointly held Financial Account for purposes of applying the aggregation requirements described in this paragraph 1. 2. Aggregation of Entity Accounts. For purposes of determining the aggregate balance or value of Financial Accounts held by an Entity, a Reporting Indian Financial Institution is required to take into account all Financial Accounts that are maintained by the Reporting Indian Financial Institution, or by a Related Entity, but only to the extent that the Reporting Indian Financial Institution s computerized systems link the Financial Accounts by reference to a data element such as client number or taxpayer identification number, and allow account balances or values to be aggregated. 3. Special Aggregation Rule Applicable to Relationship Managers . For purposes of determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and Exchange Commission report. E. Alternative Procedures for Financial Accounts Held by Individual Beneficiaries of a Cash Value Insurance Contract. A Reporting Indian Financial Institution may presume that an individual beneficiary (other than the owner) of a Cash Value Insurance Contract receiving a death benefit is not a Specified U.S. Person and may treat such Financial Account as other than a U.S. Reportable Account unless the Reporting Indian Financial Institution has actual knowledge, or reason to know, that the beneficiary is a Specified U.S. Person. A Reporting Indian Financial Institution has reason to know that a beneficiary of a Cash Value Insurance Contract is a Specified U.S. Person if the information collected by the Reporting Indian Financial Institution and associated with the beneficiary contains U.S. indicia as described in subparagraph B(1) of section II of this Annex I. If a Reporting Indian Financial Institution has actual knowledge, or reason to know, that the beneficiary is a Specified U.S. Person, the Reporting Indian Financial Institution must follow the procedures in subparagraph B(3) of section II of this Annex I. F. Reliance on Third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) Within one year after the date of entry into force of this Agreement, Reporting Indian Financial Institutions must: (i) with respect to a New Individual Account described in subparagraph G(1) of this section, request the self-certification specified in section III of this Annex I and confirm the reasonableness of such self-certification consistent with the procedures described in section III of this Annex I, and (ii) with respect to a New Entity Account described in subparagraph G(1) of this section, perform the due diligence procedures specified in section V of this Annex I and request information as necessary to document the account, including any self-certification, required by section V of this Annex I. b) India must report on any New Account that is identified pursuant to subparagraph G(2)(a) of this section as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable, by the date that is the later of: (i) September 30 next following the date that the account is identified as a U.S. Reportable Account or as an account held by a Nonparticipating Financial Institution, as applicable, or (ii) 90 days after the account is i ..... 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