Articles
FATCA clarification confirms urgency for FFIs
5 European countries join US in supporting disclosure of income on US clients. An intelligent, elecronic review of client data is the viable option for compliance.
Johannesburg, 16 February 2012 - Recent updates to FATCA (the Foreign Account Tax Compliance Act) have provided limited relief to financial instiutions, with some details being added to the legislation. However, the core requirement - to report on the trading activity of US persons or face a 30% withholding tax on all US trades - remains.
In particular, the limit for electronic review of US clients has been increased to any existing account with a value of less than US$1million, substantially reducing the need for manual verification. An intelligent electronic review of client data is more relevant than ever.
Two principle challenges must be addressed. In order to identify the US$1million threshhold traders must report on the amalgamated total of all client trades - an accurate client muaster is necessary across product lines and business units. Alternatively, all accounts must be checked.
Secondly, a simple check of (say) "Country" field is only valid if this field is correctly captured. An electronic check must be able to deal with inaccurate residential information such as "1 Avenue of The Americas, Manahatten, South Africa" as well as checking for other US indicators.
The check must also not incorrectly cause the FFI to report on non US clients - as this would be in breach of privacy legislation.
FFIs can no longer afford to sit on the fence! While the regulation will undergo further revisions, the joint announcement by five major European countries on intergovernmental cooperation on the prosed legislation is the strongest signal yet that this law will not only not go away, but that it is likely to impact more than US clients.
Foreign Financial Institutions should seriously consider the Trillium FATCA Readiness Assessment to enable them to accurately scope their exposre and begin to address the requirements of the Act. This assessment utilises Trillium Software's unique understanding of international client data to accurately identify US clients, quickly and cost effectively.
