Grenada and the United States have reached an inter-governmental agreement under the latter’s Foreign Account Tax Compliance Act, the Grenadian government announced Monday.

Grenada’s government said it completed the negotiation of a model 1 inter-governmental agreement on June 16 to enable FATCA compliance.

The agreement requires Grenadian financial institutions to submit information on US clients to the Inland Revenue Department for submission to the United States’ Internal Revenue Service.

Grenada will soon be passing the FATCA Implementation and Enforcement Bill to provide for the legal submission of that information.

Grenada said failure to submit information could result in a 30 percent withholding tax on specific income originating from sources in the US “and may result in the potential loss of correspondent banking relationships.”

“As such, Government is committed to ensuring that the required structures are in place to facilitate the requirements of FATCA while preventing the imposition of the withholding tax on the local financial institutions,” it said in a statement.

The US has already signed a similar agreement with the Cayman Islands.