The Cayman Islands announced on March 15 that it intends to enter into a Model 1 Intergovernmental Agreement (IGA) with the Internal Revenue Service for Foreign Account Tax Compliance Act (FATCA) compliance purposes.

Accordingly, hedge funds and private equity funds that operate in the Cayman Islands will not have to enter into FATCA agreements with the IRS (although they still will have to obtain FATCA identification numbers). In addition, any FATCA reporting required of such funds will be to the Cayman Islands government, which in turn will provide information concerning direct and indirect ownership by US persons to the IRS. The IGA, when finalized, also may exempt certain funds (that are unlikely to have any direct or indirect US investors) from FATCA compliance.