Controversial legislation aimed at revealing the assets being held by American taxpayers in foreign countries has hit a major stumbling block, a conference has heard.
The Foreign Account Tax Compliance Act (FATCA) compels a Foreign Financial Institution (FFI) to disclose the details of their American clients to US tax authorities or face hefty fines for not doing so.
The FFI concerned will be hit with a 30% withholding charge on all financial transactions between it and the US.
Now delegates at a major conference to discuss FATCA and its implications have heard that with the first deadline for compliance looming in October many banks in the Asia Pacific region are nowhere near beginning their compliance procedures.
The Asian Financial Crime Risk Executive Forum was held in Singapore and revealed the lack of readiness for the new tax regime among banks.
It is also clear that many financial institutions are confused about their obligations under the FATCA regime.
One delegate told the conference that despite FATCA being in its final form there are still many questions unanswered.
He told the conference that the ‘devil is in the detail’ and pointed to the regulations concerning new clients which are very different to their current procedures.
Indeed, the situation is so complex that many of the regulations will need the help of tax specialists because not all of a financial firm’s operations will need to comply.
The cost of complying with FATCA was also highlighted as being of a major concern.
There is confusion too, the conference heard, concerning branch offices based in the Asia Pacific region of major banks which may be based in Europe or the Middle East and whether they needed to do more to comply or whether it was the domain of their head office.
Many delegates highlighted the fact that their own head offices had not yet begun their compliance procedures and this was going to cause a future issue.
One concern expressed is that the smaller institutions simply didn’t have the technology being demanded for compliance to be implemented.
Even those financial firms who do not deal with American clients or companies will still need to fulfil their compliance regulations.
Delegates were also confused about whether the law demanded one compliance officer for their Institution or whether one was needed for each a region.
However, the conference heard that the leap from complying with Singapore’s own tough anti-money laundering laws was not that big when compared with compliance with FATCA.
The concerns of delegates underline those of financial institutions questioning the validity of FATCA with some countries dragging their heels over implementation, such as Germany, while others look unlikely to ever implement it, such as China.
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