Treasury Faces a Labor of Sisyphus to get FATCA Infrastructure in Place....Only 5 !! IGAs are Fully “In Force”

Treasury’s Overall Goal is 195 IGAs
To implement FATCA, Treasury has in principle to negotiate an intergovernmental agreement (IGA) with each of the 195 other countries of the world. Treasury initially proposed a one-size-fits-all model agreement, but that soon evolved into two basic types: Model 1, in which the signatory country itself agrees to transmit the FATCA-required account information to the US (after its own financial institutions have first provided that information to the relevant governmental body), and Model 2, in which the signatory country permits its individual financial institutions to register directly with Treasury (as “foreign financial institutions” – FFIs) for individually transmitting the required data.
IGAs Concluded or Being Negotiated
A look at the Treasury Department website on the status of FATCA agreements as at 1 September 2014 revealed negotiations with 101 other countries.[ii] Well, better than halfway there. But oops! – 59 of those countries “have reached agreement in substance and have consented to be included on this list” – so in fact no IGAs have actually been signed with these countries. Signed IGAs to date: 42.
 “As to the five countries fully in force as of 1 Sept. 2014 (as listed by TIAS), they are: Cayman Islands, Gibraltar, Mexico, Spain and Switzerland … Cayman Islands and Gibraltar agreements don’t have the title of being FATCA agreements, but the texts have that effect.”


The Road from “Signed” to “In Force” is Paved with Good Intentions
But a cursory examination of the 42 signed agreements reveals that there are additional conditions to be fulfilled before the IGA is actually activated (“comes into force”). In 24 cases, the agreement will come into force (usually) on the date on which the other signatory country submits written notification to the US that it has completed the necessary internal procedures for entry into force of the agreement. In another 6 cases, the IGA will come into force once both sides have submitted written notification to the other that they have executed any necessary internal procedures. In 5 cases, the IGA can come into force only after necessary internal procedures AND revision of the existing Tax Information Exchange Agreement (TIEA) or other tax treaty in effect, and in 1 case only after both internal procedures and the finalization of a TIEA. Finally, the “agreement” with Japan is actually a “Statement of Mutual Cooperation and Understanding” without blanket authorization for massive data transmission.
Revision or creation of a TIEA is very important to Treasury in carrying out its huge task to implement FATCA. Some background is required to understand why this is so. Treasury has standing authorization from Congress to negotiate and conclude TIEAs without individual Congressional approval.[iii] Treasury bases its ability to negotiate and conclude the critical IGAs largely on the basis of its standing authorization to conclude TIEAs on its own. Treasury’s greatest concern in creating or revising TIEAs seems to be that these agreements include authorization for “automatic exchange of information”. (See a rather chilling explanation of this term by KPMG.) The excellent article by Prof. Allison Christians, “The Dubious Legal Pedigree of IGAs (And Why It Matters)”, calls into question the US Treasury Department’s ability to finalize IGAs for FATCA implementation without Congressional approval.
Only Five IGAs Fully “In Force”
Deducting all the IGAs not in force for varying reasons, there are only a total of five (5) IGAs actually in force as at 1 September 2014, as listed on TIAS (Texts of International Agreements to which the US is a Party), in which the State Department must, by law, publish all international agreements.
For the remaining 59 countries which have agreed in principle to conclude an IGA – not to mention the other 94 countries not even on the bottom rung of the ladder – there will have to be not only IGAs signed, but quite possibly also TIEAs or protocols to other tax treaties negotiated. TIAS recently published, for example, a TIEA with Colombia that came into force on April 30, 2014, having been originally signed on March 30, 2001!
For many developing countries, or countries in conflict, there is an enormous chasm to be breached before FATCA compliance is possible, all good will notwithstanding. Consider, for example, Mauritius, which was the first African country to sign an IGA. Mauritius will be expected to transmit required data to the US by September 2015. But as the President of the Mauritian Financial Services Commission recently noted [article in French] the financial and banking institutions and the Mauritius Revenue Authority presently lack the equipment at the ISO standards necessary for safe data transmission. They do not have the ability to protect security of the data, assure confidentiality, or ensure that the data required for FATCA compliance will not be mingled with other data.
The folks back in the US Treasury may not regard the task ahead as a work of Sisyphus, since some progress has been made. But simple mathematics shows that Treasury is merely filling the cup with sand, one small grain at a time.
 http://blogs.angloinfo.com/us-tax/2014/09/22/treasury-faces-a-labor-of-sisyphus-to-get-fatca-infrastructure-in-place/