Stuart Lipo

November 25, 2016|6 Minutes

Hey Responsible Officer, Are You Compliant?


In a few of our previous blogs we’ve talked about some of the basic responsibilities of the Responsible Officer within a financial institution, all of which help keep them compliant. We briefly covered keeping the company and contact information up to date on the IRS e-services and spoke about keeping up to date on the latest forms, instructions and publications, especially the release of any draft forms issued by the IRS.

However, we are frequently finding that Tier 2 and Tier 3 companies in particular are struggling with resource, fighting multiple fires when it comes to meeting the various regulations. We are currently working closely with a few of our clients to produce a full and detailed QI/FATCA compliance program, and help them understand how to implement it. In its base form, that document is 40 pages long, without even thinking about Notice 2016-42 and the new proposed QI agreements and QDD regime (which is replacing the QSL regime). The process of developing a working and evolving compliance program is essential to ensuring that the company is (and remains) compliant under their QI (or NQI) and FATCA obligations.

Part of this obligation is appointing a Responsible Officer, who under Section 10 of the QI agreement must arrange and manage the compliance to the terms of the initiations QI agreement, and the regulations more generally, in order to certify its compliance to the IRS. In particular, the Responsible Officer:

  1. Organise a triennial Periodic Review (‘PR’)
  2. Submit a ‘Notice of Material Failure’ (even of default) if such conditions are made known to the RO at any time and;
  3. Arrange and implement a formal, written Compliance Program

The compliance program forms a large part of any financial institutions responsibility for being compliant. It not only creates the baseline for how the company will meet its obligations and responsibilities under the QI/NQI and FATCA regulations, but just as importantly it allows the company to offer a higher level of service to its clients. The compliance program should cover all the aspects of the QI agreement and FATCA regulations, which can make it a challenging thing to write.

As we all know this industry moves incredibly quickly, so the compliance program needs to be a “living, working” document that is continually updated with new policies, procedures, processes and regulatory information. That information then needs to be passed on to staff via training, which is an important requirement under the Periodic Review under the QI agreement.

Writing Is Only Half The Battle

compliant report

However, it is all good and well writing a compliance program, but the key to compliance is to ensure that it’s implemented correctly, and that people understand and are aware of their responsibilities. Each employee should recognise the effect what they do has on the business and its ability to remain compliant under FATCA and their QI agreement. During the Periodic Review (after which the responsible officer must certify compliance to the IRS), the compliance program will be checked and verified. This is to make sure that a compliance program actually exists, and the verify that it is being implemented by staff correctly. If the compliance program is not up to date or being implemented, this will classify as a failure. The failure will vary from a Material Fail or an Event of Default Fail, depending on the severity of the failure. In the event of a failure, the responsible officer would be unable to certify their compliance to the IRS, and would instead have to ensure that a remediation plan was put in place and presented to the IRS when reporting the Periodic Review result.

A Material Fail or Event of Default could lead to the loss of your QI status, so there is a lot of pressure to get the compliance right, both as a manual and as an operational document to meet the QI requirements and FATCA regulations. So, for all those compliance departments out there, who are always getting a tough time, rest assured that compliance and training are very much key to a business wanting to become a QI/NQI.

But as we all know, there is more than one way to skin a cat, and that is where TConsult has helped our clients. We offer consultancy and training, usually to compliance and senior management, in order to give them a better understanding of what is expected of them. We work with them and provide options for achieving their duties within their own business structure. The compliance program we write should fit in and around your business, but can and will also impact the development of how your business works to keep that high level of service while fulfilling all your regulatory obligations.

Want to know more about being compliant under the QI/FATCA regime or how to develop a QI/FATCA compliance program? Email [email protected] to pick our brains.

Stuart Lipo

Stuart joined TConsult in 2015 and has risen to the role of senior consultant, taking the lead on complex cases for clients with Qualified Intermediary, FATCA and CRS compliance issues. Stuart co-authored G.A.T.C.A – A Practical Guide to Global Anti-Tax Evasion Frameworks and delivers regular interactive training sessions both internally and externally.

Prior to joining TConsult, Stuart worked in a variety of roles within the financial industry, including team leader, paraplanner, administration, client relations for independent financial advisor companies.