How to block FATCA reciprocity for specified insurers

1. Part III – Cash Value Insurance

2. A vital component of the IGA for many countries is
the promise of reciprocity of information exchange.
Model 1 FATCA IGA agrees to exchange the
information that it currently collects from US
financial institutions maintaining non-resident alien
accounts. This is insufficient.
US explicitly agrees, to enhance the information it
would exchange by pursuing the adoption of
regulations and advocating and supporting relevant
legislation to achieve equivalent levels of
information exchange.
FATCA IGA promises
equivalent reciprocity
US specified insurers would report
on their account holders who are
the policyholders resident in IGA
Partner Jurisdictions

3. Obama Treasury Secretary unsuccessfully requested
Republican Congress to legislate FATCA reciprocity

4. Policyholder
Reporting by insurer when FATCA
full reciprocity is legislated
US specified insurer will report to IRS the
owner and financial details of a cash value
policy for automatic exchange to FATCA
IGA Partners’ authorities.

5. How to block FATCA full reciprocal
reporting for Cash Value Insurance
Policyholder sets up a non-
US Special Purpose Vehicle
Custodial Institution to hold
his assets on his behalf
STEP 1
Custodial Institution is an
entity holding assets (incl. a
cash value policy) for someone
else and its income is at least
20% custody-like fees
OECD CRS FAQ : Fees for SPV Custodian: For the
purpose of the gross income test to be applied in the context of
the definition of Custodial Institution, all remuneration for the
relevant activity of an Entity that provides custodial services is
to be taken into account, independent of whether that
remuneration is paid directly to the Entity or the the fees for
such services are paid to another Entity.

6. Policyholder assigns cash value policy to the Custodial
Institution
STEP 2
How to block FATCA full reciprocal
reporting for Cash Value Insurance
Policyholder
(assignor)
Assignor is the
account holder of
the Custodial
Institution
Custodial
Institution
Custodial Institution as a
Financial Institution is a non
reportable person.

7. Custodial Institution is subject to a
non-CRS jurisdiction (outside USA)
Step 3 - Option A
Custodial Institution has no
automatic exchange reporting
obligation as it’s not in a
participating jurisdiction of
FATCA reciprocity or CRS.
How to block FATCA full reciprocal
reporting for Cash Value Insurance
Custodial Institution could be a
untaxed foundation with board
resident in non-CRS
participating jurisdiction.

8. Custodial Institution is subject to the
same jurisdiction as the assignor
Step 3 - Option B
There is nil reporting for automatic
exchange of information because
the account holder is resident in
the same jurisdiction as the
Custodial Institution.
How to block FATCA full reciprocal
reporting for Cash Value Insurance
Custodial Institution could be a
foundation with assignor and /
or family resident in same
jurisdiction as board.

9. Summary
US specified insurer does not have FATCA
reciprocal reporting obligations if the
account holder is a Custodial Institution
which is a Financial Institution, regardless
that it is not resident in USA.
The Custodial Institution does not report
because it is (a) not in a CRS jurisdiction
and hence is not a reporting Financial
Institution, or (b) in the same jurisdiction
as the account holder which is then not a
reportable jurisdiction person.
How to block FATCA full reciprocal
reporting for Cash Value Insurance