Section 3. DUE DILIGENCE

REQUIREMENTS FOR DOCUMENTATION AND IDENTIFICATION OF ACCOUNT HOLDERS AND NONPARTICIPATING FFI PAYEES

.01 In General. The due diligence procedures described in this section 3 generally apply to a participating FFI (other than a U.S. branch treated as a U.S. person). The participating FFI must perform the due diligence procedures described in this section 3 to determine which of the accounts that it maintains are (i) U.S. accounts, (ii) accounts held by recalcitrant account holders, or (iii) accounts held by nonparticipating FFIs. If the participating FFI makes a withholdable payment to a payee other than an account holder, the participating FFI must also perform due diligence procedures to determine if withholding is required under section 4 of this agreement.

(A) Reporting Model 2 FFIs. A reporting Model 2 FFI must apply the due diligence procedures described in Annex I of the applicable Model 2 IGA with respect to all accounts that such reporting Model 2 FFI maintains within the Model 2 IGA jurisdiction unless the Model 2 IGA jurisdiction permits the reporting Model 2 FFI to apply the due diligence procedures of this agreement, as described in this section 3. A reporting Model 2 FFI may apply the due diligence procedures described in section 3.02 of this agreement separately for each section of Annex I (for example, preexisting entity accounts) with respect to all accounts or with respect to any clearly identified group of accounts (such as by line of business or the location where the account is maintained). A reporting Model 2 FFI that applies the due diligence procedures of section 3.02 of this agreement must continue to apply these procedures consistently in all subsequent years unless there has been a material modification to section 3.02 of this agreement or §1.1471–4(c). A reporting Model 2 FFI must apply the due diligence procedures of section 3.02(B) of this agreement with respect to an entity payee that is not an account holder and that is receiving a withholdable payment.

(B) U.S. Branch of a Participating FFI treated as a U.S. Person. A U.S. branch of a participating FFI that is

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treated as a U.S. person is required to apply the due diligence requirements described in §1.1471–3 to determine the chapter 4 status of account holders and entity payees and must apply the due diligence requirements of chapter 3 or chapter 61 (as applicable) with respect to individual account holders. See section 4.02(C) of this agreement for special withholding rules and section 6 of this agreement for special reporting rules applicable to such U.S. branches. .02 Due Diligence Procedures.

(A) Identification and Documenta- tion of Account Holders . A participating FFI is required to determine the chapter 4 status of each holder of an account maintained by the participating FFI and to identify each account that is a U.S. account, non-U.S. account, account held by a recalcitrant account holder, or account held by a nonparticipating FFI. For this purpose, the participating FFI is required to apply the due diligence procedures for accounts to the extent, and in the manner, required under §1.1471–4(c) within the applicable time periods described in §1.1471–4(c)(3), (c)(4), and (c)(5). A participating FFI that is unable to reliably associate valid documentation with an account holder to determine the chapter 4 status of such account holder must apply the presumption rules of section 3.04 of this agreement. See §1.1471–4(d)(2) for other account holders to which a participating FFI’s due diligence requirements apply.

(B) Identification and Documenta- tion of Certain Payees other than Ac- count Holders. For determining when withholding is required under section 4 of this agreement, the participating FFI is required to reliably associate the payment with documentation that meets the requirements of section 3.03(B) of this agreement when making a withholdable payment to an entity payee with respect to an obligation that is not an account. If an account holder receives a withholdable payment and is not treated as the payee of the payment, in addition to documenting the chapter 4 status of the account holder, the participating FFI is also required to establish the chapter 4 status of the payee or payees to determine whether withholding is required. See, however, §1.1471– 3(e)(4)(vi) for when the participating FFI

may rely on the chapter 4 status determination of a payee provided by a participating FFI or registered deemedcompliant FFI that is acting as an intermediary or that is a flow-through entity. A participating FFI must apply the presumption rules of section 3.04 of this agreement to determine the chapter 4 status of a payee if, prior to the time of payment, it cannot reliably associate the payment with documentation meeting the requirements of section 3.03(B) of this agreement. See, however, §1.1471– 3(c)(7) for requirements that apply for documentation received after the date of a payment. With respect to a preexisting account, a participating FFI must, to the extent required under §1.1471–4(c), determine the chapter 4 status of the payee within the applicable time period described in §1.1471–4(c)(3) or, if unable to do so, must apply the presumption rules of section 3.04 of this agreement to determine the chapter 4 status of a payee. .03 Additional Requirements for Iden- tification and Documentation of Ac- count Holders and Payees.

(A) In General . To the extent that the participating FFI is required to retain a record of the documentation collected (or otherwise maintained) to establish the chapter 4 status of an account holder or payee, the participating FFI must do so in accordance with the requirements of §1.1471–4(c)(2). The participating FFI must also institute procedures that meet the requirements of §1.1471–4(c)(2) to ensure that any change in circumstances is identified with respect to an account. For the definition of a change in circumstances, see §1.1471–4(c)(2)(iii). In the case of a reporting Model 2 FFI that applies the procedures of Annex I of the applicable Model 2 IGA with respect to an account, a change of circumstance has the meaning that such term has under Annex I of the applicable Model 2 IGA.

(B) Requirements for Documenta- tion.

(1) In General . To the extent the participating FFI obtains withholding certificates, substitute certification forms, written statements, or documentary evidence, such documentation must meet the requirements set forth in §1.1471–3(c). Sections 1.1471–3(c)(3) through (5) provide the requirements of valid withholding cer

tificates, written statements, and documentary evidence. Section 1.1471–3(c)(6) provides other applicable rules for withholding certificates, written statements, and documentary evidence, including their periods of validity and electronic transmission requirements. Sections 1.1471–3(c)(8) and (9) provide requirements related to the sharing of documentation and reliance by a participating FFI on documentation collected by another person. A participating FFI must obtain the documentation specified in §1.1471– 3(d) to establish the chapter 4 status of an entity account holder or an entity payee other than an account holder. A participating FFI may rely on documentation that meets the requirements of §1.1471– 3(c) until the expiration date of such documentation or until there is a change in circumstances (as defined in §1.1471– 4(c)(2)(iii)) that affects the account holder or payee’s claim of chapter 4 status. If the participating FFI is unable to obtain the required documentation within 90 days of the expiration date of the documentation or a change in circumstances, the participating FFI must apply the presumption rules of section 3.04 of this agreement with respect to the account or payee until valid documentation is obtained upon which the FFI is permitted to rely.

(2) Requirements for Reporting Model 2 FFIs. To the extent a reporting Model 2 FFI applies the due diligence procedures described in Annex I of the applicable Model 2 IGA with respect to an account, such documentation must meet the requirements described in the applicable Model 2 IGA, and the reporting Model 2 FFI may rely on such documentation until the expiration date of such documentation or until there is a change in circumstances (as defined in Annex I of the applicable Model 2 IGA) that affects the account holder or payee’s claim of chapter 4 status. Upon the expiration of the documentation or a change in circumstances, the reporting Model 2 FFI must obtain new or additional documentation or must redetermine the status of the account in accordance with the due diligence procedures set forth in Annex I of the applicable Model 2 IGA. If an account holder of a new account (as defined in the applicable Model 2 IGA) has a change in circumstances that would cause such account to

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be treated as a U.S. account and the account holder refuses to provide consent for such account to be reported, the reporting Model 2 FFI must report the account as a non-consenting U.S. account as described in section 6.03(B) of this agreement. 04. Presumption Rules in Absence of Valid Documentation. If the participating FFI is required to, but is unable to, obtain a record of the documentation that meets the requirements of this section 3 within the applicable time period as referenced in section 3.02 of this agreement, or if the participating FFI knows or has reason to know that documentation provided for an account holder or payee is unreliable or incorrect (as determined applying the standards of knowledge referenced in §1.1471–4(c)(2), or as determined under Annex I of the applicable Model 2 IGA in the case of a reporting Model 2 FFI that applies such procedures with respect to an account), the FFI is required to apply the presumption rules described in this section 3.04 until valid documentation is provided for the account holder or payee upon which the FFI is permitted to rely. However, following a change in circumstances, a participating FFI may continue to treat otherwise valid documentation previously provided by an account holder or payee as valid and rely on such documentation until the earlier of 30 days following the change in circumstances or the date new documentation is obtained upon which the participating FFI may rely to document the chapter 4 status of the account holder or payee. Additionally, a participating FFI may choose to escrow amounts withheld (in lieu of depositing such amounts as tax withheld) with respect to an account holder or payee after the date of a change in circumstances until the earlier of the date that is 90 days after the date the first withholdable payment is made to the account following the change in circumstances or the end of the calendar year in which such withholdable payment is made.

(A) Payee or Account Held by an Entity. With respect to a withholdable payment made to a payee other than an account holder, a participating FFI must apply the presumption rules of §1.1471– 3(f) (as applicable to entities). The presumption rules of §1.1471–3(f) (as appli

cable to entities) also apply to an account held by an entity. However, in the case of an account held by a passive NFFE that provides the documentation described in §1.1471–3(d)(12) to establish its status as a passive NFFE but fails to provide the information regarding its owners required under §1.1471–3(d)(12)(iii), the participating FFI must treat the account as held by a recalcitrant account holder in accordance with §1.1471–5(g)(2)(iv).

(B) Account Held by an Individual. With respect to an account held by an individual, the participating FFI must treat the account as held by a recalcitrant account holder in accordance with §1.1471– 5(g) and classify the type of recalcitrant account holder in accordance with the chapter 4 reporting pools described in §1.1471–4(d)(6)(i).

(C) Presumption Rules for Report- ing Model 2 FFIs. To the extent a reporting Model 2 FFI applies the due diligence procedures described in Annex I of the applicable Model 2 IGA, such FFI must apply the procedures of the Annex I of the applicable Model 2 IGA to treat the account as held by a nonparticipating FFI or non-consenting U.S. account. A reporting Model 2 FFI that applies the due diligence procedures described in section 3.02 of this agreement with respect to an account must treat an account that would otherwise be treated as held by a recalcitrant account holder as a non-consenting U.S. account to the extent required under the applicable Model 2 IGA. With respect to a withholdable payment made to a payee other than an account holder, a reporting Model 2 FFI must apply the presumption rules of §1.1471–3(f) (as applicable to entities).