Reporting Financial Institution

Two rules require every financial entity to work out what it is: FATCA, and the Common Reporting Standard, or CRS. First, the entity checks if it is a "Financial Institution" at all, or a "Non-Financial Entity". If it is a Financial Institution, there is one more question. Is it a Reporting Financial Institution, or RFI? Or is it a non-reporting one?

A Category III AIF counts as a financial institution. It usually turns out to be an RFI. That means it has agreed to collect and share investor information, under an Inter-Governmental Agreement between India and the United States.

A non-reporting financial institution is not required to register with the US IRS or report financial accounts at all. A Reporting Financial Institution, by contrast, has agreed to obtain and exchange information under the IGA — which for a Category III AIF means registering with the US IRS to obtain a Global Intermediary Identification Number (GIIN), and separately registering with Indian income tax authorities to report personal tax and beneficial owner information for all investors.

The information an RFI collects from investors includes name, address, place and country of birth, nationality, gross annual income, occupation, PAN, and — where the investor is resident of another country — that country and the investor's Tax Identification Number, plus a Social Security Number if applicable. Since January 2016, every Indian and NRI investor in a Category III AIF must file a FATCA self-declaration; FATCA reporting covers investors identified as 'U.S. persons', while CRS reporting covers foreign investors from other participating countries.

Meridian Global Opportunities Fund, a Category III AIF registered with SEBI, registers with the US IRS and obtains a GIIN — establishing itself as a Reporting Financial Institution.

When a US-resident investor subscribes Rs 5 crore to the fund, Meridian collects the investor's name, address, country of birth, PAN (if applicable) and US Social Security Number, and reports this information annually as required under FATCA, because the investor is a "U.S. person".

A separate investor, resident in the UK, is instead reportable under CRS rather than FATCA — Meridian collects that investor's UK Tax Identification Number and country of residence for the CRS exchange instead. If either investor later changes their country of tax residence, they must intimate Meridian within 30 days of the change, since FATCA and CRS obligations run throughout the investment's life, not just at on-boarding.

If an investor refuses to furnish the required information, Meridian, as an RFI, has the right to reject the application or redeem the investor's existing units, in addition to reporting the investor to the regulatory authority.

Chapter 5 (Regulatory Framework), section 5.20 (Foreign Account Tax Compliance Act and Common Reporting Standard), defines Reporting Financial Institution directly, distinguishing it from a non-reporting financial institution, and sets out the GIIN registration and 30-day change-notification requirement. Expect RFI tested against the FATCA-versus-CRS distinction (US persons versus other foreign investors) and the 30-day notification window for a change in an investor's FATCA/CRS status.

• A Category III AIF is a deemed financial institution and typically an RFI — it is not exempt from FATCA/CRS simply because it is a private pooled vehicle rather than a bank.
• FATCA reporting covers "U.S. persons"; CRS reporting covers investors from other CRS-participating countries. These are not interchangeable labels for the same reporting regime.
• The GIIN is obtained from the US IRS specifically, as part of becoming an RFI — separate from the Indian income tax registration the fund also needs for reporting.
• A 30-day window applies to investors intimating a change in FATCA/CRS-relevant information — this is the investor's obligation, distinct from the fund's own annual reporting cycle to the tax authorities.