Material Failures During Certification Period

If there were material failures during the certification period, the Responsible Officer (RO) will need to identify those material failures as part of the certification and provide additional information to indicate whether the material failures were corrected prior to the date of the certification or will be corrected, as well as describe the actions taken or to be taken to remediate the failure and prevent the failure from reoccurring (including the estimated implementation date of such plan).

If response to this question is "yes", you will be prompted with a second question to indicate whether the material failure(s) have been corrected prior to the date of the certification.

Material Failures

Participating FFI (PFFI)

A material failure is a failure of the PFFI to fulfill the requirements of the FFI agreement if the failure was the result of a deliberate action on the part of one or more of the employees of the PFFI (its agent, sponsor, or compliance FI) to avoid the requirements of the FFI agreement or was an error attributable to a failure of the FFI to implement internal controls sufficient for the PFFI to be in compliance with its agreement.  A material failure includes the following:
(i) The deliberate or systemic failure of the participating FFI to report accounts that it was required to treat as U.S. accounts; 
(ii) The deliberate or systemic failure to withhold on pass thru payments to the extent require;
(iii)  The deliberate or systemic failure to deposit taxes withheld;
(iv) The deliberate or systemic failure to accurately report recalcitrant account holders (or non-consenting U.S. accounts under an applicable Model 2 IGA) or payees that are nonparticipating FFIs as required; 
(v) A criminal or civil penalty or sanction imposed on the participating FFI (or any branch or office thereof) by a regulator or other governmental authority or agency with oversight over the participating FFI's compliance with the AML due diligence procedures to which it (or any branch or office thereof) is subject and that is imposed based on a failure to properly identify account holders under the requirements of those procedures; and
(vi) A potential future tax liability related to the participating FFI's compliance (or lack thereof) with the FFI agreement for which the FFI establishes, for financial statement purposes, a tax reserve or provision.

A material failure will not constitute an event of default unless such material failure occurs in more than limited circumstances when a PFFI has not substantially complied with the requirements of an FFI agreement.

Sponsoring entities of sponsored FFIs

A material failure is a failure of the sponsoring entity with respect to each sponsored FFI to satisfy the requirements under the regulations or an applicable Model 2 IGA if the failure was the result of a deliberate action on the part of one or more employees of the sponsoring entity or was an error attributable to a failure of the sponsoring entity to implement internal controls sufficient for the sponsoring entity to meet its requirements. A material failure includes the following: 
(i) With respect to any sponsored FFI, the deliberate or systemic failure of the sponsoring entity to report accounts that it was required to treat as U.S. accounts; 
(ii) With respect to any sponsored FFI, the deliberate or systemic failure of the sponsoring entity to withhold on pass thru payments to the extent require;
(iii)  With respect to any sponsored FFI, the deliberate or systemic failure of the sponsoring entity to deposit taxes withheld;
(iv) With respect to any sponsored FFI, the deliberate or systemic failure of the sponsoring entity to accurately report recalcitrant account holders (or non-consenting U.S. accounts under an applicable Model 2 IGA) or payees that are nonparticipating FFIs as required; 
(v) A criminal or civil penalty or sanction imposed on the sponsoring entity or any sponsored FFI (or any branch or office of the sponsoring entity or any sponsored FFI) by a regulator or other governmental authority or agency with oversight over the sponsoring entity's compliance with the AML due diligence procedures to which it (or any branch or office thereof) is subject and that is imposed based on a failure to properly identify account holders under the requirements of those procedures;
(vi) A potential future tax liability of any sponsored FFI related to its compliance (or lack thereof) with the due diligence, withholding and reporting requirements for which such sponsored FFI has established, for financial statement purposes, a tax reserve or provision;
(vii) A potential contractual liability under the sponsorship agreement of the sponsoring entity to any sponsored FFI related to the sponsoring entity’s compliance (or lack thereof) with its requirements as a sponsoring entity for which the sponsoring entity has established, for financial purposes, a reserve or provision; and 
(viii) Failure to register with the IRS as a sponsoring entity or to register each sponsored FFI as required.

A material failure will not constitute an event of default unless such material failure occurs in more than limited circumstances when a sponsoring entity has not substantially complied with its requirements.