Due diligence and reporting requirements under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS)

IMD/ FPIC/CIR/P/2018/53 · 2018-03-21 · SEBI

Summary

This circular mandates Reporting Financial Institutions to implement due diligence and reporting procedures under FATCA and CRS rules. It requires DDPs to obtain valid self-certifications before registering Foreign Portfolio Investors and submit monthly compliance certificates. SEBI will inspect these entities for adherence to the specified documentation and annual certification requirements.

Text

This is in continuation of SEBI circulars No. CIR/MIRSD/2/2015 dated August 26, 2015 and No. CIR/MIRSD/3/2015 dated September 10, 2015 wherein SEBI has informed all intermediaries regarding due diligence and reporting requirements under Rules 114F to 114H of the Income-tax Rules...

In terms of Rule 114G(11), the regulators are required to issue necessary instructions and guidelines from time to time for: a) Incorporating the requirements of reporting and due diligence b) Providing the procedure and manner of maintaining the information by the Reporting financial institution (RFI)... c) Ensuring the availability of the information with the reporting financial institution...

Obtain valid self-certifications/ FATCA and CRS declaration forms with documentary evidence as part of the account opening documentation in relation to FATCA/ CRS as specified in Rule 114H.

Custodians are required to carry out the due diligence on the accounts held by Global Custodian (GC) end-clients. However, for carrying out due diligence, the Custodian may rely on the FATCA/CRS documentation done by GC... Further, it may be clarified that the obligations for due diligence and reporting remain that of the Custodian who should also be able to access all documents...

Create a process/system to capture and validate the information collected through valid FATCA/ CRS declaration forms.

Develop framework for carrying out due diligence procedures and for maintaining reporting information, as provided in Rule 114G and 114H

Furnish the relevant information in Form 61B in respect of the identified reportable accounts as defined in Rule 114F(6) on or before the date prescribed in accordance with sub-rules (7), (8) and (9) of Rule 114G for every calendar year.

Develop a system of audit for compliance with Rules 114F, 114G and 114H of Income-tax rules.

Ensure compliance with updated rules/ circulars/ notifications/ instructions/ / guidance notes issued on the subject by Central Board of Direct Taxes (CBDT) from time to time.

RFIs are required to certify to SEBI on annual basis regarding compliance with the provisions of Rules 114F to 114H of Income-tax rules relating to FATCA / CRS. This certificate would be a part of the audit report on internal controls submitted to SEBI annually.

DDPs should grant registration to a foreign Portfolio Investor (FPI) only after obtaining valid self-certification/FATCA/CRS declaration forms. DDPs shall submit a certificate in respect of new registration(s) granted during every month at the end of the month that all due–diligence procedures, including obtaining of valid self- certification/ FATCA/ CRS declaration, have been followed before granting the said registration to FPI.

During inspection of DDPs/ Custodians, SEBI will examine the compliance with, inter-alia, the requirement of certificate to SEBI regarding self-certification and due-diligence at the time of new registration.

Source: SecMarx — Due diligence and reporting requirements under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.