Dubai Crypto C with offshore bank (FATCA)

[pepemolas]

Dear all,

We are a Proprietary Crypto Trading company recently created under DMCC free-zone in Dubai, just trading our own funds and capital, with no external investors or 3rd party clients.

As you may know, opening a corporate banking account is quite difficult as local banks are not opened to crypto and you have to search for off-shore ones.

We are already in the last step to create our corporate account but our bank is asking us to register as a Financial Institution within the IRS website (FATCA Foreign Financial Institution Registration System | Internal Revenue Service) to obtain a GIIN number in order to declare it in their FATCA/CRS questionnaire. However, our lawyers have commented on the matter that our company should not be a Financial Institution, as we trade our own funds and do not have 3rd party clients, and none of the Directors/Members is from the US but it seems to be a compliance requirement from the bank.

It seems we could select the "Reporting Financial Institution under a Model 1 IGA" but our company does not really match the "Financial Institution" definition, as we trade on our own. We are not familiar with FATCA/IRS as we are from Europe.

Do you guys know if this could have further implications? The registration form seems quite simple and it only asks for data from the shareholders and if it has ties to the US.

Thanks!

 

[Sols]

Try explaining to your bank that you aren't a FI as defined under FATCA. That seems to be the root of all this headache.

 

[pepemolas]

Try explaining to your bank that you aren't a FI as defined under FATCA. That seems to be the root of all this headache.

Thanks for the reply.

The problem is that the bank only enables crypto companies to open their bank account as a FI...

What we want to know is if only registering as an FI could have implications even if we have no ties to the US (none of the shareholders or directors is from the US and we have no business there. Are you familiar with FATCA?

Best

 

[Sols]

The problem is that the bank only enables crypto companies to open their bank account as a FI...

Then I guess it's time to find a new bank.

What we want to know is if only registering as an FI could have implications even if we have no ties to the US (none of the shareholders or directors is from the US and we have no business there. Are you familiar with FATCA?

I am familiar and have experience, but I've never tried to register a non-FI as a FI. What I do know is that the IRS doesn't like false statements, which you'd likely have to provide in order to register yourself. On the other hand, all you'd be doing is providing them data on US persons, so they might not notice/care.

If you desperately need this particular bank if they are so daft that they require you to be a FATCA registered FI without qualifying under FATCA, just go ahead and register. There's a risk the application is declined. Nothing bad happens in that case.

 

[pepemolas]

Then I guess it's time to find a new bank.


I am familiar and have experience, but I've never tried to register a non-FI as a FI. What I do know is that the IRS doesn't like false statements, which you'd likely have to provide in order to register yourself. On the other hand, all you'd be doing is providing them data on US persons, so they might not notice/care.

If you desperately need this particular bank if they are so daft that they require you to be a FATCA registered FI without qualifying under FATCA, just go ahead and register. There's a risk the application is declined. Nothing bad happens in that case.

Thanks a lot for your reply @Sols you seem to have a lot of knowledge in the matter.

Do you also agree that a proprietary crypto trading firm (trading its own capital, not 3rd party clients) would be considered a non-FI?

On the other hand, it seems that the bank is only looking us to provide a GIIN so we only have to fulfill the initial IRS questionnaire (Registration Part 1 here https://www.irs.gov/pub/irs-pdf/p5118.pdf).

Do you happen to offer consulting services on the matter or know someone who could be interested? Seems quite a niche and it's been difficult for us to find someone that provide us more information.

 

[Sols]

Do you also agree that a proprietary crypto trading firm (trading its own capital, not 3rd party clients) would be considered a non-FI?

Hard to say without looking closely at your business plan and operating processes, but generally speaking: I don't see how your business could qualify as a FI. If you're just handling your own money and you don't offer any other financial services (like insurance), your company isn't an FFI.

On the other hand, it seems that the bank is only looking us to provide a GIIN so we only have to fulfill the initial IRS questionnaire (Registration Part 1 here https://www.irs.gov/pub/irs-pdf/p5118.pdf).

Then do that and so long as you don't have any US persons involved, you'll probably never have to deal with the IRS for any reporting.

Do you happen to offer consulting services on the matter or know someone who could be interested? Seems quite a niche and it's been difficult for us to find someone that provide us more information.

I know it's a hard area to get clarity on, but any major international US law firm that does financial services should be able to help.

 

[wellington]

Surely you are a family office?