To address concerns that US taxpayers were failing to report income generated in offshore accounts, the US Congress adopted Sections 1471 through 1474 of the Internal Revenue Code, commonly referred to as "FATCA," in early 2010. FATCA constitutes an attempt by the US to recruit the assistance of non-US financial institutions to obtain information on offshore accounts held by US persons. The leverage employed by the US to encourage or compel information sharing with respect to such accounts is a requirement that persons making "withholdable payments" to a foreign financial institution or "FFI" generally withhold 30% of such withholdable payments, unless such FFI enters into an agreement with the IRS to provide information with respect to accounts maintained by US tax residents and by non-US entities that have substantial US ownership.
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