On July 30, 2014, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) proposed rules requiring U.S. financial institutions to collect “Customer Due Diligence” information, including identifying the true beneficial owners of accounts.  The Treasury’s announcement can be located here.  One of the primary uses of the information will be to comply with the U.S. government’s obligations to partner countries under reciprocal Foreign Account Tax Compliance Act (FATCA) Intergovernmental Agreement (IGA’s).  Currently, U.S. financial institutions do not collect as much information about their customers as FATCA requires foreign financial institutions to collect and report to the U.S. government on U.S. customers.

“These proposed rules are aimed at foreigners who have not properly reported their U.S. financial accounts to their home governments,” said Jim Mastracchio, co-chair of BakerHostetler’s Tax Controversy practice and chair of the firm’s Criminal Tax Defense group.  Jay Nanavati, a member of the firm’s Criminal Tax Defense group and a former prosecutor at the Department of Justice Tax Division added, “Customers at U.S. financial institutions who are taxpayers  in IGA partner countries that have not yet signed an IGA, for example India and China, will want to pay close attention to whether their governments enter into reciprocal IGA’s.”