FATCA (Foreign Account Tax Compliance Act)

The Foreign Account Tax Compliance Act (FATCA) is a U.S. law aimed at preventing tax evasion by American citizens holding accounts abroad. It requires foreign financial institutions to report information about American account holders to the IRS. This means banks and investment firms outside the U.S. must disclose details about U.S. citizens’ accounts, such as balances and transactions. FATCA aims to enhance tax compliance and increase transparency in global financial systems, ensuring that U.S. citizens pay taxes on their foreign income. Non-compliance can lead to significant penalties for foreign institutions.