The majority of asset managers polled in a recent survey have admitted they are still unclear about the requirements of the Foreign Accounts Tax Compliance Act (FATCA) – despite the cut off period for compliance now less than six months away.
The survey, conducted among 60 of Northern Trust’s clients, cited a ‘lack of consistency’ and ‘uncertainty’ in the implementation of FATCA as the “major challenge” for 51% of asset managers.
While this percentage is lower than last year's survey (55%), Northern Trust FATCA product manager Kathleen Dugan said that the concerns shared were still the same.
“Although the implementation deadlines have been extended many of the same concerns are still shared,” said Dugan “Clients are already faced with meeting a multitude of regulatory requirements and feel challenged by the FATCA timelines and the daunting technological challenges presented.”
Dugan added that the potential differences between intergovernmental agreement rules and regulations were also “a cause for concern”.
However, some big asset management firms have confirmed that their implementation programs are already well under way. Schroders has said that it intends to be "fully compliant with FATCA requirements across its entire global business" and it has already established a dedicated programme that is assessing, preparing and implementing any necessary changes to existing arrangements.
"While there is a significant amount of effort required to prepare for FATCA compliance, we do not anticipate significant changes to our business model," a spokesperson added.
The survey itself also points to a marked increased in companies which actively had projects under way - these rose from 20% last year to 48% this year.
Similarly, in 2012 the majority of respondents (66%) were only “broadly aware” of FATCA's implications and had not activated initiation projects yet, this year that number has fallen to 46%.
FATCA, which aims to prevent tax evasion by US citizens who use non-US vehicles, such as offshore accounts, to avoid their tax obligations will come into effect in January 2014.
Some financial institutions have heavily criticized FATCA, arguing that it will become too expensive for companies to invest in America because of the cost factor.
This has prompted some US companies to file law suits against the US Government, claiming that that FATCA’s onerous reporting requirements will cost them billions.