Fenergo’s FFI Four-Point FATCA Plan.

Foreign Financial Institutions (FFIs) face new headaches with FATCA implementation as 79% surveyed by Fenergo in September last year have concluded that their KYC and customer due diligence procedures and processes will have to be amended, revised or rewritten.

In its just released survey of FFIs running the full spectrum of financial services called the ‘Road to FATA’, Fenergo found that 65% of them are struggling to efficiently complete client identification process because of problems with in-house client data retention systems.

30% Withholding Tax.

Importantly, this is not just a systems and processes problem because under the provisions of the US Foreign Account Tax Compliance Act  (FATCA) failure by FFI’s to disclose information on financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership will result in a requirement to withhold 30% tax on US source income.

Here’s the Plan:

1. Use FATCA as a stepping stone to other classification-based regulations;

2. Try to create links between client data and documentation already lying in various repositories by interfacing internal systems to create a more holistic client profile;

3. Use this data to pre-classify clients to reduce the number of clients that will have to be contacted for self-certification; and

4. Automate as much of the process as possible and use this opportunity to collect additional data pertaining to other regulatory obligations.


Think Again…

For FFi’s who think that the obligations being pursued under the G-20 commissioned agenda for increased transparency and greater exchange of information for tax purposes and managed by the OECD Global Forum are onerous; they may well find that they pale in comparison to the seemingly all-embracing requirements of the extra-territorial provisions of the FATCA.

Especially in circumstances where unlike the OECD, FATCA rules are not are open to discussion or appeal.


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