The Internal Revenue Service has issued an updated Qualified Intermediary Agreement for foreign banks that have been approved to withhold funds from a client’s bank account to be paid to the IRS.

The new QI Agreement was released in accordance with the Foreign Account Tax Compliance Act and has been posted to the FATCA Web site in Revenue Procedure 2014-39, which updates and supersedes the QI Agreement that was originally released in 2000.

Qualified Intermediaries can be foreign financial institutions, foreign clearing organizations and foreign branches of U.S. financial institutions or U.S. clearing organizations.

FATCA, which was included as part of the HIRE Act of 2010, requires foreign financial institutions, or FFIs, including banks and hedge funds, to report on the holdings of U.S. citizens to the IRS, or else face heavy penalties. The law has attracted controversy abroad with countries concerned that it violates their own banking privacy laws. In response, the Treasury Department has been negotiating a series of intergovernmental agreements with other nations and softening some of the requirements.

However, after some delays, the deadlines are beginning to take effect this year, including one in July for new accounts. On Tuesday, the IRS updated its FFI Agreement for FATCA (see IRS Updates FATCA Agreement for Foreign Financial Institutions).