While most firms appear to be aware of the decisions that need to be taken around FATCA, “minimal regulatory guidance, lack of budgetary allocation and [only] partial board awareness threaten to stretch already saturated risk and compliance functions in the financial services sector,” the authors of the report say, in a summary of its findings on the Thomson Reuters website.
The report is based on responses from nearly 200 compliance, risk, audit and legal practitioners, whose companies are located throughout Europe, the Americas, Australasia, Asia, Africa and the Middle East.
Mark Schlageter, managing director of Governance, Risk and Compliance at Thomson Reuters, said the survey showed “a significant divide in the extent and state of preparations being undertaken for the new FATCA rules”.
“While this has been driven predominantly by continued lack of clarity about what the final practical requirements will entail, financial firms must ensure they fully understand the detailed impact that the final FATCA requirements will have on their businesses," Schlageter added.
FATCA was introduced in 2010 as part of a Congressional effort to crack down on the use, by American citizens, of offshore financial institutions to evade their US tax obligations. It sets out to do this by obliging all “foreign financial institutions”, or FFIs, to report to the Internal Revenue Service on any accounts, including trusts and investment funds, held by Americans. Failure to comply would result in a withholding charge of up to 30% on any income and capital payments the institution in question receives from the US.
Since the bill was signed into law by President Obama in March 2010, many American expatriates have said they are finding it increasingly difficult to keep or to open bank accounts, obtain mortgages and otherwise obtain basic financial services from non-US financial institutions.
FATCA-watchers are currently awaiting the final FATCA implementation rules, which are expected to be released this month. As reported, in February, when releasing some 388 pages of guidance on how FATCA is to be implemented, the US revealed it had agreed a deal with five European countries, including the UK, whereby financial institutions in these countries would forward the necessary data on American account-holders to the governments of the respective countries, which then would forward it to the US.
Similar deals are thought to be in the works, including such other countries as Ireland and possibly Israel.
Other key findings from the report:
- More than half of the practitioners surveyed were unsure of the impact that the new FATCA requirements would have on their company
- 43% of companies are still unsure of their strategic approach for FATCA; among those businesses with a US legal entity in the group, 51% were unsure of what approach to take in relation to US customers
- More than a third of respondents stated that FATCA had either only been discussed once, or never at all, at board level
- More than 50% of respondents believed that overall responsibility for ongoing compliance with FATCA fell to the company’s compliance operations
- Overall, 59% of respondents are expecting the new requirements to have “some impact” on their bottom line; however, for almost 60% of firms, no separate or specific budget has been allocated in order to prepare internally for FATCA
To view a copy of the full Thomson Reuters report, click here.
