In accordance with FATCA, Foreign Financial Institutions (FFIs), and Non-Financial Foreign entities (NFFE), must identify U.S account holders, as well as any entities that are under American control. A Foreign Financial Institution (FFI) is any entity, being a financial institution that is not organized and/or created in light of the laws of possession of the U.S.
The definition of an FFI is very broad and essentially, an FFI is a financial institution that:
- accepts deposits as a part of its ordinary course of business, as would a bank or similar business would; or
- deals or appears to be dealing with investing, reinvesting, trading in securities,commodities, partnership interests or otherwise similar business;
- deals with custodian issues (i.e. mutual funds);
- some types of insurance companies that have cash value products or annuities.
Bahamian based banks, custodians, investment and pension funds, insurance and brokerage companies are all examples of FFIs.
Certain entities are excluded, such as those that are classified as “exempt beneficial owners” and “deemed compliant FFIs” under the US Treasury Regulations or described in Annex II of the IGA. These may include pension funds, certain term life insurance contracts and local banks. These vehicles are exempt but they will be required to certify their status to withholding agents when doing business in the U.S.