"Many" US and global banking industry executives believe that the majority of banks required to comply with the Foreign Account Tax Compliance Act (FATCA) will not be ready to meet its deadlines – some of which begin on Jan. 1, 2013, a survey conducted by KPMG’s US operation has found.
Forty percent of the 150 respondents with US-based banks and 44% of the 100 respondents with foreign banks who participated in the KPMG survey “said getting their organisations ready for the FATCA regime has been very challenging,” KPMG said in a summary of its findings.
“In addition, 28% of the respondents with US-based banks and 36% of the respondents with foreign banks did not believe the majority of banks impacted by FATCA would be ready to comply in time.”
Mark Price, KPMG's banking and finance practice national tax leader, said FATCA was “changing the way impacted banks do business”.
"It's clear to bank executives that FATCA is an operational change – and more than just a tax issue – for foreign and domestic banks alike,” he added.
"Bank executives also are learning it is critical to coordinate many areas – operations, tax, IT, legal, and KYC / AML departments – to successfully address FATCA's significant compliance, reporting, and monitoring risks.”
The KPMG survey was conducted during a KPMG tax practice-sponsored event focused on FATCA, KPMG said. It did not say when the event was held or where.
As reported, FATCA was signed into law in March of last year by President Obama, when it was a little-publicised component buried inside a larger piece of legislation known as the HIRE Act (Hiring Incentives to Restore Employment). It obliges foreign financial firms to register with the US tax authorities if they have American clients or assets.
Already many Americans expatriates and others with non-US bank accounts and other financial products say they are being told that they must close their accounts, as the institutions seek to avoid having to comply with FATCA.
Account ID is ‘biggest challenge’
Account identification requirements were cited by 31% of respondents with US-based banks and 30% of respondents with foreign banks as the biggest compliance challenge for their institution.
Reporting requirements were identified as the second most difficult compliance hurdle (24% with US-based banks and 28% with foreign banks).
When asked to identify the largest unresolved area of FATCA compliance for the industry, "passthru payments" was cited most frequently by 32% of respondents with US-based banks and 49% of respondents with foreign banks. Account identification requirements (22% for both groups) were the second largest unresolved area.
As one of the so-called Big Four global accountancy firms, KPMG has been active in monitoring and advising multi-national companies on how best to comply with the law's numerous reporting requirements.
Last year, Georges Bock, a Luxembourg-based KPMG partner and head of tax, warned that FATCA could cause investors to sell out of US stocks, bonds and other investments.