FATCA
FATCA (Foreign Account Tax Compliance Act) is a US law that aims to prevent tax evasion by US taxpayers holding financial assets outside the United States.
To implement FATCA, the Indian government signed an Inter-Governmental Agreement with the United States in 2015. Under it, financial institutions in India must collect and report certain financial account information of US taxpayers. This information is shared with the Indian Income Tax Department, which may further exchange it with the US Internal Revenue Service.
Politically exposed person (PEP)
A politically exposed person is someone who holds or has held a prominent public position and may therefore be exposed to a higher risk of corruption or misuse of public funds.
The following are generally classified as PEPs:
- Political figures: senior officials in the executive, legislative, administrative, military or judicial branches of government.
- Immediate family members of political figures, typically parents, siblings, spouses, children and in-laws.
- Close associates of political figures, including anyone who may conduct financial transactions on their behalf.
Financial institutions classify PEPs as higher-risk customers and may apply additional due diligence checks to comply with regulatory requirements.