The Foreign Account Tax Compliance Act (FATCA) was signed into law in the United States in 2010 as part of an effort to combat tax evasion. One of the key provisions of the law is the requirement for foreign financial institutions (FFIs) to disclose information about their US account holders to the Internal Revenue Service (IRS).

To facilitate this reporting, the US has entered into a series of intergovernmental agreements (IGAs) with other countries that outline how FFIs in those countries should comply with FATCA. These agreements aim to streamline the reporting process, reduce compliance costs for FFIs, and minimize conflicts with local privacy laws.

There are two types of IGAs: Model 1 and Model 2. Model 1 IGAs require FFIs to report information about US account holders to their own governments, who then share that information with the IRS. Model 2 IGAs require FFIs to report directly to the IRS, but provide some flexibility in terms of the types of information that must be reported.

As of 2021, the US has signed IGAs with more than 110 countries, including major financial centers like Switzerland, the United Kingdom, and Singapore. While most IGAs follow the Model 1 framework, a handful of countries (including Japan and Bermuda) have signed Model 2 agreements.

It is important for businesses and individuals with foreign financial accounts to be aware of these agreements and their implications. Non-compliance with FATCA reporting requirements can result in significant penalties, and failure to comply with local privacy laws can also lead to legal trouble.

Copy editors working on content related to FATCA and IGAs should be familiar with the technical terminology and legal requirements involved. Additionally, they should ensure that the article provides a clear and understandable explanation of the implications of these agreements for readers who may not be familiar with the subject matter. By doing so, the article can provide valuable information for businesses, investors, and individuals who need to navigate the complex world of international tax reporting.