USA Law and Practice Contributed by: Scott Naidech, Basil Godellas, Olga Loy and Beth Kramer, Winston & Strawn
4.9 Double Tax Treaties Utilisation by Investors
On 28 August 2024, FinCEN published a rule that imposes certain anti-money laundering and combat - ing the financing of terrorism programme and other Bank Secrecy Act-related obligations (the “IA AML Rule”) on most private fund managers, including RIAs and “exempt reporting advisers” (“Covered IAs”). On 5 August 2025, FinCEN issued an order providing exemptive relief for Covered IAs from all requirements of the IA AML Rule until 1 January 2028. During the postponement of the IA AML Rule, FinCEN stated that it intends to issue a notice of proposed rulemaking (NPRM) to propose a new effective date for the IA AML rule no earlier than 1 January 2028. It is expected that this NPRM could include substantive changes to the IA AML Rule, considering FinCEN’s earlier announcement that it intends to revisit the substance of the IA AML Rule together with the FinCEN-SEC joint proposed rule establishing customer identifica - tion programme rule requirements for Covered IAs. 4.12 Data Security and Privacy for Investors Regulation S-P requires RIAs and their funds to adopt written policies and procedures that address admin - istrative, technical, and physical safeguards for the protection of customer records and information. This includes protecting against any anticipated threats or hazards to the security or integrity of customer records and information and against unauthorised access to or use of customer records or information. The rule also requires firms to provide initial and annual privacy notices to customers describing information-sharing policies and informing customers of their rights. 4.13 Anticipated Changes for Investors On 15 May 2024, the SEC adopted amendments to Regulation S-P, the regulation that governs the treat - ment of non-public personal information about con - sumers by certain financial institutions. The amend - ments apply to RIAs and are designed to modernise and enhance the protection of consumer financial information.
Non-US investors in funds may be able to claim tax treaty benefits (typically, a reduction in or com - plete exemption from the 30% US withholding tax described above) under an income tax treaty between their jurisdiction of residence and the United States. In order to establish eligibility to claim tax treaty benefits, a non-US investor should claim such benefits on an applicable IRS Form W-8 provided to the fund. Structuring Issues Certain jurisdictions, such as Germany and the United Kingdom, may limit the availability of tax treaty ben - efits to a resident of those jurisdictions that invests in a fund organised as an LLC rather than as a limited partnership. For this reason, US funds that are target - ing non-US investors may choose to be organised as limited partnerships rather than as LLCs. 4.10 Foreign Account Tax Compliance Act (FATCA)/Common Reporting Standard (CRS) Compliance Regime Under FATCA, US funds are generally required to collect and remit a 30% US withholding tax on their payments of US-source dividends and interest to a non-US “foreign financial institution” or “non-financial foreign entity” (each as defined) unless such non-US person makes certain certifications or provides certain information relating to its US owners or qualifies for exemption from FATCA. Typically, a US fund will obtain an appropriate IRS Form W-8 from its foreign investors that will include the requisite FATCA certifications. Different rules may apply to foreign financial institutions located in juris - dictions that have an intergovernmental agreement with the United States governing FATCA. 4.11 Anti-Money Laundering (AML) and Know Your Customer (KYC) Regime During regulatory examinations, the SEC staff will typically request information from investment advisers regarding AML compliance policies and procedures. Information requested frequently includes the identity of private fund investors.
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