FATCA: Stick without a carrot
Compliance with FATCA has been regarded with trepidation by banks, ever since it was signed into law on March 18th, 2010. What are its implementation challenges and what can banks do about it? May 14, 2012 | Levina LimSeveral years ago, the US Internal Revenue Service (IRS) investigated a Swiss bank in which many Americans were investing in, yet did not pay any taxes out of their dividends and capital gains. This resulted in a well-publicized prosecution, which had the Swiss bank paying $1 billion in evaded taxes by US individuals. It then dawned upon the tax collectors – how much would it cost the government if 10 other banks evaded their tax obligations in a similar manner? It was thus that FATCA was rushed out of the womb. FATCA forces compliance The infamous 30% withholding penalty for failing to comply with FATCA by disclosing substantial U.S. owners or not certifying that none exist, drew widespread indignation among the financial community: How can the US government force FATCA on banks? According to Duncan Edwards, executive director of Ernst & Young, no one who is forced to comply with FATCA. Foreign Financial Institutions (FFIs) is “invited” to enter into an agreement with the IRS, in which they are to identify individuals defined as US persons by the IRS, for tax collection purposes. “When you sign this agreement, you are entering into a business contract. If you don’t want to enter into this contract, you don’t have to. But what you will find, is that many banks who enter into this FATCA agreement will have no dealings; no counterparties with any other bank or insurance company who are not registered. Whoever wrote FATCA is an absolute genius,” he said at the FATCA session held during the Risk & Regulation Conference at the 2012 Asian Banker Summit. Does FATCA affect you? FATCA’s definition of a US person is so broad, that almost everyone in the banking community is affected, one way or the other. Not only do participating FFIs need to find out who their US account holders and customers are, they must also ask if these clients hold a green card or a US dual ci... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Asian Banker Summit 2012, Regulation, Risk and RegulationAsian Banker Summit 2012,riskregulation,Risk and Regulation, Asian Banker Summit 2012,Regulation,Risk and Regulation, Keywords:FATCA, Duncan Edwards, Ernst & Young, David Millar, Jim Calvin, Deloitte, Deepa Chandrasekhar, United Gulf Bank FATCA, Duncan Edwards, Ernst & Young, David Millar, Jim Calvin, Deloitte, Deepa Chandrasekhar, United Gulf Bank
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