Know your customer (KYC) – why does the bank ask?

Banking is based on trust. The ingredients of trust are good service, the right decisions and the fact that the bank knows its customers. We want to know our customers well in order to be able to meet their needs in the best possible way. Legislation also imposes obligations on banks to know and identify their customers.

A corporate customer is identified on the basis of a document from a reliable source, such as an extract from the Trade Register. The extract from the Trade Register must not be more than 3 months old. In addition, the identity of the company's representative is verified from identity documents accepted by the bank.

In addition to the details concerning identity, the bank must have sufficient information on the owners of the company, the nature and extent of the business operations, business partners, the company's financial position, the company's need for banking services and the purpose for which the banking services will be used. This is the reason why the bank may ask customers questions concerning not only their use of banking services, but also account transactions volumes, their origin and purpose.

Legislation requires the bank to investigate if the customer is liable to pay tax in the US (FATCA) or a politically exposed person (PEP) or family member or a close associate of a PEP. As far as our corporate customers are concerned, this means that we investigate whether the owners or representatives of a company are PEPs and hold such a position that it should be taken into account in the company's banking. In addition, the bank has to identify the corporate customer's beneficial owners, in other words, those private persons who own at least 25% of the company or otherwise exercise authoritative powers in the company.

The bank must obtain these persons' basic details and verify their identity from an identity document if necessary.

If the bank does not obtain all necessary or sufficient information to establish a customer relationship or to support a business transaction, it shall according to law refuse to establish a customer relationship or carry out a transaction. All documents provided to the bank by the customer will be treated confidentially in accordance with the Finnish bank secrecy regulations.

If you have questions on this subject, see frequently asked questions and answers tor contact Nordea Corporate Service (0200 2121; service in English) Mon–Fri 10.00–16.30 (local network charge/mobile call charge).

Please note that Nordea cannot provide tax advice related to the FATCA act. If you have taxation-related questions, contact a taxation specialist or refer to the IRS websiteOpens new window.

TAX liability in the USA - forms Questions and answers TAX liability in the USA - forms

Tax liability in the United States - FATCA

The United States and Finland have agreed on information exchange subject to FATCA, Foreign Account Tax Compliance Act concerning the taxation of US foreign accounts. By virtue of the agreement, financial institutions must recognise the accounts and assets of US persons and report their number and amounts to local tax authorities. These will report the information further to the US tax authority, the Internal Revenue Service (IRS).

‘US persons’ refers, among others, to persons residing in the United States, US citizens, persons with dual nationality, holders of a permanent residence permit (Green Card) and businesses registered in the United States.

We kindly ask you to fill in one of the forms listed below if you receive from Nordea a letter concerning FATCA-related matters. Please return it to us as instructed in the letter.

FATCA and CRS forms
CustomerForm
Individuals
Self certification (pdf, 258 KB)Opens new window - replaces earlier used forms W-8BEN and W9.
Entities
Self certification (pdf, 277 KB)Opens new window - replaces earlier used form W-8BEN-E
If you need another form, you can find all forms on the IRS homepageOpens new window
Questions and answers

Tax liability in the United States - FATCA

QuestionAnswer

What is FATCA?

FATCA is the Foreign Account Tax Compliance Act valid in the United States.

The purpose of the act is to prevent tax evasion in the US. By virtue of FATCA, financial institutions must identify US Reportable Persons among their customers.

FATCA has been or will be transposed into local legislation in several countries, including all Nordic and Baltic countries.

What are the impacts of FATCA?

As a result of FATCA, financial institutions are under an obligation to identify those of their customers that are US persons, companies and corporations and subsequently report information about financial accounts and assets held by these customers, directly or indirectly, on an annual basis. The financial institutions usually report to the local tax authorities in their respective countries.

FATCA has been or will be transposed into local legislation in each Nordea country. An exception to this is Russia where Nordea has signed an agreement on compliance directly with the IRS.

Thus Nordea must comply with the FATCA requirements in each country and review all current and new customers to confirm their FATCA status. Where necessary, Nordea will contact customers for further information.

Nordea must also withhold tax on FDAP (fixed or determinable, annual or periodical) payments from a US source to certain financial institutions that do not comply with FATCA.

Does FATCA replace other US tax rules?
 

No. FATCA and the related local laws only regulate the customer due diligence and reporting that financial institutions must perform. It does not affect the tax laws you as a person must consider.

Nordea recommends that you consult a tax professional if you have any questions regarding tax rules.

 

What is Nordea required to do in order to comply?

Nordea must:

  • Conduct a review of existing and new customers to identify those that are US reportable under FATCA.
  • Report information to the local tax authorities about all accounts held directly or indirectly by US persons. In Russia and Switzerland Nordea reports directly to the IRS.
  • Nordea will also have to report information about accounts and other assets held by customers who do not respond to questions regarding their US status.
  • Withhold tax on FDAP (fixed or determinable, annual or periodical) payments from a US source to certain financial institutions that do not comply with FATCA.

Is Nordea the only bank doing this?

No, all financial institutions are required to comply with the requirements of FATCA. However, their approach may differ from the one taken by Nordea.

I was contacted by another bank. Why did they ask for different documentation than Nordea?

Financial institutions may have different approaches to how they collect information from customers in order to verify their FATCA status; therefore the forms may differ between banks.

Nordea cannot advise you on your FATCA classification or US tax status. If you need further support, you should consult a tax professional.

What information will Nordea report to the local tax authorities?
 

The information to be submitted on the year 2014 includes name, address and US taxpayer identification number as well as account numbers and balances.

How does this affect individual persons?

Am I only affected if I am a US citizen?
No. The law specifies a number of criteria that financial institutions must look for in respect of all customer accounts in order to determine if someone may be a US person. Customers that meet any of these criteria may be contacted in order to obtain further information:

  • US citizenship or residence
  • US place of birth
  • Work permits (“Green Cards”)
  • Persons who spend a significant number of days in the US each year
  • US address in the beneficiary register
  • US telephone number in the beneficiary register
  • Recurring payments to an account maintained in the US
  • Powers of attorney or signatory authority granted to a person with a US address
  • Instances where a “care of” address or post office box address is the only address known to Nordea.

Note that financial institutions are required to search their customer bases for indications of US persons. They may therefore contact customers who in fact are not US persons.
 
I am a US person. How am I affected?
If you are a US person, Nordea may contact you in order to obtain further documentation. You may also wish to determine if you are required to submit any other information to the US authorities.

Note that Nordea cannot give you any advice on this, so please contact a professional tax adviser.

Nordea is required to report information about you and your accounts to the local tax authorities annually. In Russia and Switzerland Nordea reports directly to the IRS.
 
I am not a US person. How am I affected?
Most customers who are not US persons will see no impact and will not be required to act.

However, Nordea may contact you to confirm your status as a non-US person if there is reason to believe that you may be a US person for FATCA purposes.
Note that if you have a joint account with a US person, this account will be treated as being subject to the FATCA regulations.
 

I am a US person and own a large part of the shares of a company. How am I affected?
 

Since you own a large part of the shares of a company, you are most likely a beneficial owner/controlling person in that company.

Nordea may be required to report information about you, but that depends on the business your company is conducting. If your company’s business is “passive”, Nordea must report information about you if you are a beneficial owner/controlling person in that company. A company may be seen as passive if, for instance, more than 50 per cent of the income of the company consists of interest or dividends.

What are the impacts on companies and corporations?
 

Are only US companies affected?
No, FATCA has a wider impact that goes beyond just US companies.

Nordea will contact many customers worldwide to determine their FATCA status in order to be able to classify each customer. This may take place using Nordea forms or US tax forms, depending on what information is needed.

What types of documentation will I have to provide?

Nordea will contact affected customers and provide full details as to what information is needed and what forms must be completed for FATCA purposes. These forms may include self-certification forms or US tax forms or withholding certificates (so-called “W forms”).

Will Nordea provide me with all necessary forms?
 

When Nordea contacts a customer, we will either include the relevant forms or provide links to a website from which they can be downloaded.

What will Nordea do if I do not provide the information requested under FATCA?

Under the FATCA regulations, financial institutions are under an obligation to treat customers who do not provide the information requested as US reportable persons. This means that Nordea will report the same information about such customers to the local tax authorities as it will about those who have provided documentation confirming their status as US persons.

In some exceptional circumstances, financial institutions may be required to withhold tax on certain payments from US sources coming into accounts held by customers who have not provided the information requested.