FATCA: U.S. Foreign Account Tax Compliance Act requiring Canadian dealers to identify and report U.S.-person accounts to CRA.

FATCA

U.S. Foreign Account Tax Compliance Act requiring Canadian dealers to identify and report U.S.-person accounts to CRA.

Definition

FATCA is U.S. federal law enacted in 2010. It requires foreign financial institutions to identify accounts held by U.S. persons and report them to the IRS or face a 30% withholding tax on U.S.-source payments. Canada and the U.S. signed an Intergovernmental Agreement (IGA) in 2014 under which Canadian dealers report U.S.-person accounts to CRA, which then forwards the information to the IRS. Canadian dealers must collect self-certifications from new clients to determine U.S. status (citizenship, birth, TIN). Compliance is embedded in the account-opening KYC process under NI 31-103 and the Income Tax Act.

Source

Canada-U.S. Enhanced FATCA IGA (2014); Income Tax Act Part XVIII

Where this shows up on the CIRE

Outcome 6.2

Test yourself

Two real CIRE-bank questions on this exact outcome. Click to reveal the answer and the rule citation.

1
A compliance officer at a dealer member reviews a client's account and notices a series of deposits just below $10,000 made on consecutive days, followed by a wire transfer abroad to a jurisdiction with limited AML oversight. Which PCMLTFA concept best describes this pattern?
Outcome 6.2 · click for answer
A.A large cash transaction, because the aggregate of the deposits exceeds $10,000.
B.Structuring, also known as smurfing, which is the deliberate fragmentation of transactions to avoid triggering mandatory reporting thresholds, and is itself a criminal offence under the PCMLTFA.Correct
C.A legitimate use of multiple banking relationships that does not trigger any AML obligation.
D.A politically exposed person transaction requiring enhanced due diligence only.
Structuring refers to the deliberate practice of breaking up transactions that would otherwise meet or exceed reporting thresholds to avoid those reports. Under the PCMLTFA, structuring is itself a criminal offence, not merely a reporting trigger. The pattern described, sub-threshold deposits on consecutive days followed by international wire transfers, is a textbook indicator of structuring and layering in a classic money laundering typology. The compliance officer would be obligated to assess whether a Suspicious Transaction Report is warranted.
2
An employee of a CIRO dealer member believes that activity in a client account may constitute a violation of UMIR 2.2. Under UMIR 10.16, what is the threshold that triggers the employee's obligation to report?
Outcome 6.2 · click for answer
A.The employee must be certain a violation has occurred; a suspicion is insufficient.
B.The employee must believe the activity 'may be a violation'; a low threshold that does not require certainty; the report must be made forthwith to a supervisor or the compliance department.Correct
C.Only officers and directors are subject to the gatekeeper obligation; front-line employees have no reporting duty.
D.The obligation is triggered only after a formal complaint is received from another marketplace participant.
UMIR 10.16(1) applies to all officers, directors, partners, and employees of a Participant. The reporting threshold is intentionally low; belief that activity 'may be a violation.' The employee does not need to determine that a violation has definitely occurred; a reasonable belief that one may have occurred is sufficient. The report must be made 'forthwith'; without delay. Requiring certainty before reporting would undermine the gatekeeper framework, since employees rarely have all information needed for a definitive conclusion.

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