FATCA was implemented worldwide at the beginning of this month, but the impact (and costs) are only now just beginning to filter through to the financial services community.
Part of the US Hiring Incentives to Restore Employment Act (HIRE), FATCA aims to ensure Americans, wherever they are and whatever investments they have, are paying the correct level of US tax.
The UK Government estimates it will cost UK financial institutions up to £1.6bn to implement FATCA in this country, with ongoing costs of up to £90m per year. But, as far as wealth managers are concerned, this is more than just about spending money.
The ongoing compliance burden facing intermediaries is well known, with the FCA’s requirements on suitability of advice, its wholesale sector competition review and AIFMD among the issues causing more than a few sleepless nights. FATCA could be toughest of the lot in terms of keeping client data in order.
Andy Thompson, director of operations at the Wealth Management Association, stresses that understanding the purpose of FATCA and what is required is difficult, particularly for small firms.
“While the registration process is relatively straightforward, the due diligence for all pre-existing accounts and every new account is a huge undertaking for any firm, big or small as is the amount of information that will have to be reported for relevant accounts,” he says.