RO Certification

Depending on the responses to the questions in this certification, the Responsible Officer (RO) may be required to provide additional information. For example, if the response to question 3 is "yes” the RO will be required to complete questions (a) and (b) to describe the material failure and provide the approximate date(s) when the failure occurred and to indicate whether corrective actions to remediate the failure were taken or will be taken. If the response to question (b) is “yes”, RO will be required to complete question (c) to provide a brief description of the corrective actions taken or that will be taken to remediate the failure and prevent the failure from reoccurring (including the estimated implementation date of such plan).

If there were any events of default during the certification period, the RO will be required to identify the events of default as well as provide the following information: (a) brief description of the event of default (including approximate date(s) when the event of default occurred), (b) indicate whether appropriate actions will be taken to remediate the event of default and prevent the event from reoccurring, and (c) provide a short description of the proposed plan to remediate the event of default and prevent the event of default from reoccurring. Note that following an event of default known by the IRS or that is disclosed by the entity to the IRS (e.g. as part of the certification), the IRS will deliver the entity a notice of default specifying the event(s) of default.  In the notice the IRS will request that the event of default be remediated within a specified time.  The PFFI will be permitted to remediate an event of default to the extent that it agrees with the IRS on a remediation plan.  If the entity does not provide a response to a notice of default with the time allotted, the IRS may deliver a notice of termination that terminates the entity’s status as a PFFI.

Please note that the responses to the questions will determine the overall result of the certification.

The IRS may follow up with additional inquiries based on the information provided in the certifications.

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.

Events of Default

Participating FFI (PFFI)

An event of default occurs if a PFFI fails to perform material obligations required with respect to the due diligence, verification, withholding, or reporting requirements of the FFI agreement or if the IRS determines that the participating FFI has failed to substantially comply with the requirements of the FFI agreement. An event of default also includes the occurrence of the following:
(i) Failure to obtain, in any case in which foreign law would (but for a waiver) prevent the reporting of U.S. accounts as required, valid and effective waivers from holders of U.S. accounts or failure to otherwise close or transfer such U.S. accounts;
(ii) Failure to significantly reduce, over a period of time, the number of account holders or payees that the participating FFI is required to treat as recalcitrant account holders or nonparticipating FFIs, as a result of the participating FFI failing to comply with the due diligence procedures for the identification and documentation of account holders and payees;
(iii) Failure, in any case in which foreign law prevents or otherwise limits withholding to the extent required, to obtain an authorization from each account holder or payee to withhold, close the account or terminate the obligation, or sell the assets in the account that produce (or could produce) withholdable payments; if such authorization is not obtained within a reasonable period of time, to transfer or block such account or obligation;
(iv) Failure to establish or maintain a compliance program for fulfilling the requirements of the FFI agreement or to perform a periodic review of the participating FFI's compliance;
(v) Failure to take timely corrective actions to remedy a material failure after making a qualified certification for any prior certification period;
(vi) Failure to make the initial certification or to make the periodic certifications required within the specified time period;
(vii) The PFFI made incorrect claims for refund under the collective refund procedures;
(viii) Failure to cooperate with an IRS request for additional information or making any fraudulent statement or misrepresentation of material fact to the IRS;
(ix) The PFFI has entered into or participated in any transaction relating to sponsorship, promotion, or noncustodial distribution for or on behalf of any local FFI that is an investment entity;
(x) The PFFI has failed to inform the IRS within 90 days of an acquisition of all, or substantially all, of the PFFI's assets in any transaction in which the PFFI is not the surviving legal entity;
(xi) The PFFI has failed to inform the IRS within 90 days that the PFFI (other than a reporting Model 2 FFI) maintains a limited branch that cannot fulfill the requirements for PFFI or deemed-compliant FFI status after the expiration of the transitional rule for limited branches, or the PFFI (other than a reporting Model 2 FFI) is a member of an expanded affiliated group that includes a limited FFI after the expiration of the transitional rule for limited FFIs;
(xii) The PFFI has failed to inform the IRS within 90 days of a change in U.S. federal law or policy, or applicable foreign law or policy, that materially affects the PFFI's ability to perform its obligations under the FFI agreement;
(xiii) The PFFI has failed to inform the IRS within 90 days of a significant change in the PFFI’s business practices that materially affects the FFI’s ability to meet its obligations under the FFI agreement; or
(xiv) If the PFFI is a lead FI, the FFI has failed, without reasonable cause, to inform the IRS within 90 days of an acquisition, sale, or change affecting the chapter 4 status of an FFI in the FFI group for which it is acting as lead FI, including that such FFI ceases to comply with (or does not otherwise comply with) the requirements to maintain its status as a participating or registered deemed-compliant FFI.

Sponsoring entities of sponsored FFIs

An event of default occurs if the sponsoring entity fails to perform material obligations required with respect to the due diligence, verification, withholding, or reporting requirements of the FFI agreement or an applicable Model 2 IGA with respect to any sponsored FFI, to establish or maintain a compliance program, or to perform a periodic review as required. An event of default also includes the occurrence of the following:
(i) With respect to any sponsored FFI, failure to obtain, in any case in which foreign law would (but for a waiver) prevent the reporting of U.S. accounts as required, valid and effective waivers from holders of U.S. accounts or failure to otherwise close or transfer such U.S. accounts;
(ii) With respect to any sponsored FFI, failure to significantly reduce, over a period of time, the number of account holders or payees that sponsored FIs are required to treat as recalcitrant account holders or nonparticipating FFIs, as a result of the sponsoring entity failing to comply with the due diligence procedures for the identification and documentation of account holders and payees;
(iii) With respect to any sponsored FFI, failure, in any case in which foreign law prevents or otherwise limits withholding to the extent required, to obtain an authorization from each account holder or payee to withhold, close the account or terminate the obligation, or sell the assets in the account that produce (or could produce) withholdable payments; if such authorization is not obtained within a reasonable period of time, to transfer or block such account or obligation;
(iv) Failure to take timely corrective actions to remedy a material failure after making a qualified certification for any prior certification period;
(v) Failure to make the preexisting account certification or to make the periodic certifications required with respect to any sponsored FFI within the specified time period;
(vi) Making incorrect claims for refund on behalf of any sponsored FFI;
(vii) Failure to cooperate with an IRS request for additional information;
(viii) Making any fraudulent statement or misrepresentation of material fact to the IRS or representing to a withholding agent or the IRS its status as a sponsoring entity for an entity other than an entity for which it acts as a sponsoring entity;
(ix) The sponsoring entity is no longer authorized to perform the requirements of a sponsoring entity with respect to one or more sponsored FFIs; or
(x) Failure to have a written sponsorship agreement in effect with each sponsored FFI.
Following an event of default known by the IRS or that is disclosed by the entity to the IRS, the IRS will deliver the entity a notice of default specifying the event(s) of default and, if applicable, identifying each entity to which the notice relates (e.g. sponsored FI or member FI).  In the notice the IRS will request that the event of default be remediated within a specified time. 
Entities will be permitted to remediate an event of default to the extent that it agrees with the IRS on a remediation plan.  If the entity does not provide a response to a notice of default with the time allotted, the IRS may deliver a notice of termination that terminates the entity’s status as a PFFI, Sponsored FFI, or as Registered deemed-compliant FFI.