The U.S. Treasury Department and Mexico’s Ministry of Finance have struck a bilateral agreement to implement the Foreign Account Tax Compliance Act requiring financial institutions to report the holdings of U.S. and Mexican taxpayers to each other’s tax authorities.

The agreement implements the provisions of FATCA, which was included as part of the HIRE Act of 2010. The law, which has provoked controversy abroad, requires foreign financial institutions, including hedge funds, to report on the holdings of U.S. taxpayers to the IRS, or face stiff penalties. To help ease concerns abroad, the Treasury Department has been striking agreements with foreign governments to require U.S. banks to report on the holdings of foreign taxpayers to their countries’ tax authorities.

So far, the U.S. has reached agreements with the United Kingdom and Denmark, and published joint statements with the governments of the U.K., France, Germany, Italy, Japan, Spain and Switzerland. The Treasury Department recently announced that it is engaged in talks with more than 50 other countries and jurisdictions across the globe on FATCA implementation and compliance (see U.S. in Talks with 50+ Nations on FATCA Tax Enforcement).

Mexico was one of the countries that the Treasury had hoped to conclude the negotiations by the end of the year. The agreement was negotiated under the terms of existing tax treaties between the U.S. and Mexico in 1989 and 1992.