From 1 July, financial institutions will face tax-withholding penalties if efforts are not being made to comply with the Foreign Account Tax Compliance Act (FATCA).
The act requires institutions to identify US citizens who have invested in either non-US financial accounts or non-US entities to prevent the hiding of income and assets overseas.
Steve Engdahl, senior vice president of product strategy at data management provider GoldenSource, says that firms must check for “last-minute consideration or requirements” as some firms have “focused on gathering data on US-domiciled clients but not paid as close attention to US-based securities held by clients.”
He added: “From what we're seeing, tier-1 financial institutions have made the biggest strides towards FATCA compliance. These are firms that are quite disciplined in their project approach [and] are positioned to detect and escalate impending requirements.”
“Smaller firms are running much closer to deadlines in terms of getting everything together to meet the baseline requirements. They too might be surprised when they discover pieces that they overlooked.”
“FATCA is a regulation which impacts global financial institutions and those operating outside the US, however it also applies to US-based securities services firms who provide services to financial institutions with operations outside the US. The deep implications of FATCA may not have occurred to such US-based firms until later in the game, and thus they might also have catching up to do.”
