Bermuda to Sign Model 2 FATCA IGA with U.S.

Bermuda Finance Minister E.T. Richards has announced that Bermuda has opted to negotiate and enter into a Model 2 Intergovernmental Agreement ("IGA") with the United States. Under Model 2, Bermuda will agree to direct and enable all Bermuda financial institutions to agree with the terms of a FATCA agreement with the United States and report, directly to the U.S., IRS information on accounts held at, and equity and debt interests in, such financial institutions as are directly or indirectly owned by U.S. persons. This differs from Model 1, where such information is reported to the local government for automatic submission to the IRS by such government.

According to Mr. Richards, Bermuda's choice to pursue a Model 2 agreement comes after considerable consultation with Bermuda industry stakeholders and lengthy discussions with U.S. Treasury officials. The decision to pursue a Model 2 IGA rather than a Model 1 agreement also seems based on Bermuda's concern over the potential costs of implementation, administration and enforcement which Bermuda might face in acting as middle man under Model 1. Premier Craig Cannonier acknowledged "there's a major concern that [Model 1] could be extremely expensive in setting up."

Finance Minister Richards further announced that Bermuda would also negotiate and enter into a Model 2-type IGA with the U.K. and committed to sign a similar agreement with the G5 countries in Europe.

Bermuda would be only the second country to sign a Model 2 IGA. Switzerland signed such an agreement on February 14, 2013. Japan originally announced the intent to pursue a Model 2 IGA in July 2012, but no such agreement has been announced yet.

Most other countries, including the Cayman Islands, the British Virgin Islands, Ireland, Mexico, Denmark, Germany, Norway, the Isle of Mann and Jersey have elected to pursue Model 1 IGAs, either because they desire reciprocity from the United States with respect to accounts held by their residents in U.S. financial institutions or because of the preference of their industry stakeholders to interact directly with the local governments rather than with the U.S. IRS.

Persons with questions on this item may contact Mark Howe or Dan Mulcahy.See also: Press Release.