FATCA (Foreign Account Tax Compliance Act)
In a step towards transparency of the global financial services industry and preventing tax evasion, the Foreign Account Tax Compliance Act (FATCA) was enacted in the U.S. on March 18, 2010. The U.S. model has since been copied by other nations and all Financial Institutions (FIs) are potentially affected, including banks, custodians and investment vehicles. FATCA imposes due diligence, on-boarding, compliance, reporting and, in some cases, withholding obligations on firms.
The precise requirements on FIs depend on the country concerned, with around 100 nations so far committing to bi-lateral intergovernmental agreements (“IGAs”) with the USA to ease FATCA compliance. Similar obligations have been imposed on financial institutions by the parallel regime (known colloquially as “UK FATCA” which applies to FIs in the UK Crown Dependencies (Jersey, Guernsey and the Isle of Man) and certain UK Overseas Territories (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat and Turks and Caicos Islands).
The OECD has also announced plans to roll out a more generic “common reporting standard” (CRS), built on the IGA model, which is expected to be adopted by OECD member jurisdictions and other nations over the coming years, leading ultimately to a global regime for automatic exchange of information.
Depending on the FI type, compliance with U.S. FATCA, UK FATCA and ultimately the CRS may require significant changes to systems and procedures for investor take-on, client due diligence, compliance monitoring processes, annual reporting, and making necessary withholding. In many cases, registration with the IRS will be required. In the investment world, while responsibility for compliance lies ultimately with fund directors, the reality is that the burden of preparing for FATCA will fall on fund managers, administrators and other service providers.
The Duff & Phelps team has advised numerous clients on FATCA matters and has extensive experience of major program and project implementation. We are ideally placed to assist in all aspects of FATCA preparedness including:
- Group Structure Analysis for GIIN Registration Purposes and Subsequent GIIN Registration
- Identifying FATCA obligations specific to client’s nature of business
- Developing FATCA Toolkits to assist with understanding of business specific FATCA requirements as well as developing decision trees and due diligence questionnaires for FATCA reporting
- Responsible Officer Service to help ensure your funds are IGA/FATCA compliant
Duff & Phelps provides in-depth insight into current and upcoming regulations that impact the financial services industry.
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