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FATCA Compliance – an achievable goal



Davide Ferrara

Among the many new regulatory requirements financial institutions are facing, FATCA has potentially the longest term impacts and the least amount of specific compliance requirement information available. The challenge for C-level executives/compliance officers is to understand what they can do now to ensure cost effective and timely compliance is achieved in the full life cycle of what is required. Davide Ferrara from CSC believes there is an effective way forward.Davide Ferrara

As it stands, the US initiated Foreign Account Compliance Act (FATCA) will require all Foreign Financial Institutions (FFIs) to report any income earned by their American clients to the US’s Internal Revenue Service (IRS), regardless of where earnings are accrued.

This has significant implications for most financial institutions as a new set of reporting, and most importantly aggregation and identification of the required data to derive such reporting, is required.  The costs of compliance to FATCA for FFIs are likely to be significant and generally in inverse proportion to the extent to which information management policies and related data solutions are up to date.

Responsibility for compliance is required to be assigned to a specific individual within the FFI – usually the Chief Compliance Officer – who can ultimately be held responsible by US authorities. The FFI also remains responsible however, with non-compliance resulting in a 30 percent withholding tax on any income gained by the FFI from US sources.  Additional penalties and sanctions can also be applied by US authorities so as to directly target an errant FFI or those that trade financial instruments deemed to be subversive to FATCA’s intentions. To make matters even more challenging, FATCA is intended to be applied globally and ubiquitously across all financial sector participants.

So the challenge is very real, with direct share-value impacting consequences and is pervasive to all areas of an FFI’s operations.

US driven FATCA is the first of many

Unfortunately for FFIs, that is not where it ends. Rather, the current US driven FATCA is likely to be but the first of many FATCA-like tax regulations that other countries will direct towards their own expatriate communities. After all, in these times of large budget deficits, a new source of government income can only be welcomed, if not outright pursued as an opportunity.

As a result, several countries are already drafting FATCA-like legislation or in preliminary reviews that will ultimately see them do so. This not only includes the UK, but also most European countries. Furthermore, several international organisations – including the OECD – have strongly advocated the wider adoption of FATCA-like tax regimes as a route to achieve additional international oversight in areas such as money laundering and corruption. The way the US driven FATCA is being implemented through bilateral agreements, also makes the eventual reciprocity easier.

The reality is therefore that the current FATCA will not exist singularly as a US driven effort relating to American citizens abroad, but rather, will be a first step towards new tax regimes for the citizens of many countries, wherever in the world they may reside.It is ultimately for this scenario that FFIs need to plan as this is the real challenge faced from FATCA.

The response so far

FFIs have not been sitting still. Several approaches are already in the process of being implemented. In short, the acceptance that something must be done is not in question. The current topic of debate is instead identifying what the most cost effective way to achieve compliance is, now and for the future.

One approach which has gained some following, especially from FFIs with relatively limited international footprints, is to simply cease accepting business from new American clients and potentially close the accounts of existing ones. For organisations where such clients are in the hundreds, or even low thousands, and where such business is not strategic, this can seem like a worthwhile approach to achieve immediate FATCA compliance.

However, a closer look at the longer term application of this approach – as more FATCAs are implemented by other countries – quickly shows the problem: with each additional country adopting a FATCA regime, the FFI will lose an additional set of clients. Ultimately the FFI will only be left with national clientele in whatever country they are operating, thus significantly hindering their ability to offer cross-border or higher value services such as wealth management or private banking.It is also the case that the FFI will still need to be able to demonstrate to relevant authorities that it is achieving compliance through a “client reduction” process. This will require similar reporting effort to that required for FATCA compliance achieved without reducing the client base.

The effectiveness of this approach is therefore premised on the current US led FATCA being the only FATCA and on a misconception of what proving compliance requires. The result is an approach that is both misinformed and destructive to shareholder value.

A more common approach being adopted by FFIs is to “focus on the now”, with an emphasis on minimum investment and timescales, so as to achieve compliance to the US driven FATCA with minimum disruptions to operations and as cost effectively as possible.This sounds sensible and shareholder value enhancing and explains why a majority of FFIs are adopting this route. After all, the argument often follows, how can we plan to do something that has not yet been defined? How can we put together a business case for FATCA solutions that there are no actual requirements for?

The complexity equation

Valid points, until one considers the inevitability of further FATCA-like legislation on the one hand and, on the other, how such legislation will be applied to FFIs.

For a start, for each new country implementing FATCA like regulation, the complexity of the data required for compliance increases geometrically, rather than linearly. It is therefore estimated that by the time the fifth country rolling out FATCA-like reporting requirements comes to fruition, the data management complexity of compliance to that country will be at least 24 times what it is for the current US only FATCA. While this applies only part of the logic behind the geometric progression, compliance to multiple FATCAs becomes a huge data management, reporting and compliance management issue.

Secondly, as the implementation of FATCA-like regulation starts to gain more steam, it will be increasingly easier for countries to adopt versions of their own, since precedent – legal and operational – will have been set. This means that once the FATCA train leaves the station, it will pick up speed quickly, resulting in FFIs being faced with numerous compliance requirements – and implementations – all within a short period of time. Each implementation will have its own sanctions and penalties and its own specific variations of what FATCA means.

The right approach, at the outset

For a FFI to achieve cost effective FATCA compliance in the short, medium and ultimately longer term, it needs to fully appreciate the context in which FATCA is occurring. This means understanding that the current FATCA is the first of many FATCA-like regulations and that each of these is likely to have its own specific requirements. It is also important to realise that those same regulations will be subject to changes over time.

This means that a strategy for FATCA must be premised on the fact that a FATCA compliance solution is not a ‘one size fits all’ in respect of FATCA requirements, but rather should supply a working framework and solution which provides the flexibility and the information management structures to enable quick and cost effective changes to be made continuously.Additional aspects of the strategy will need to consider integration with legacy systems and processes – such as customer on boarding – and the ease, flexibility and accuracy required in reporting.

It is also the case that as compliance to FATCA gains steam, the volume of processing required – especially at the start, to process existing clients– will be considerable. It therefore makes sense to think in terms of achieving economies of scale in such processing, such as through the creation of one or more shared service centre(s) where all FATCA processing can be centralised. This has its own implications for the framework and solution to be put in place to support compliance, as it implies that it must be scalable and centrally managed, with regional and even sub-regional (branch level) instances.

A further issue which is quickly becoming a concern to FATCA commentators is FATCA’s potential to conflict with data protection legislation in specific countries. In handling this, the compliance strategy should ideally aim to separate the actual customer account data from the processing of on boarding or completion of required compliance forms, such as the W-9 Form for US FATCA.

It should also look to separate reporting on the extent of compliance to process, such as reporting on numbers of customers being processed, from actual reporting of specific tax liability information. These two issues of operational separation have direct impact on eventual architecture, business processes and technology elements of a solution.

Finally, the strategy needs to allow for an exhaustive audit capability. This will be essential as any eventual audit by the IRS or any other regulatory body will need to clearly demonstrate how compliance is being achieved; will need to be able to track any specific exceptions arising (of which, there are likely to be some at each FFI) and will need to be able to prove that the FFI has generally complied and has made best efforts in doing so to independent third parties, such as a court. An FFI’s Chief Compliance Officer should be especially focused on this aspect as he / she will always remain personally accountable. It is an interesting point of the US legislation that responsibility for FATCA compliance cannot be delegated.

Once a clear FATCA compliance strategy is derived, secondary aims, such as improved customer service through customer access to the FATCA solution (self-serve) and new tax related services or value adding provisions to customers, such as, reporting and improved data availability, can also be considered.  These need not divert from the compliance goal, are relatively easy to achieve and can significantly enhance the FATCA business case.  This will turn required FATCA compliance from a short sighted ‘point in time’, reactionary approach, to a strategic on going means to deliver enhanced shareholder value.

Keep up to speed with FATCA by joining the debate on Twitter #csc-fatca and for more information on CSC’s offerings related to FATCA, go to

Davide Ferrara, partner, CSC

Davide is a partner, who works with CSC banking and fund management clients, helping them leverage business assets through solutions that add real value, without increasing costs.

He is the CSC lead consultant for FATCA and is actively engaged with clients to help them prepare to comply with this forthcoming complex and far-reaching legislation.

Davide’s many years’ of experience in financial services ranges from investment banking and fund management, to strategic consulting for venture capitalists.  His experience includes restructuring and M&A, to shared service implementations, decoupling of investments, to integrating private equity investments.

Davide is passionate about the creative use of technologies to improve business processes, devise new markets and to bring about product innovation.






For lenders: 5 reasons for losing a customer



For lenders: 5 reasons for losing a customer 1

By Matt Cockayne, Chief Commercial Officer at Yapily

Businesses of all sizes are battling the ongoing effects caused by the pandemic, and there’s no denying that the UK economy is perhaps worse than it has ever been before. As local lockdowns make their way across the country, businesses are in dire need of extra financial support.

The government-backed loan schemes have been a lifeline for many. But as the demand for financial aid continues to grow, many businesses are not receiving funds quickly enough, and lenders are bearing the brunt of this scrutiny. Indeed, there are those who suggest that lenders are fully aware of the current urgency, so should be doing more to respond to their customers’ needs.

No one could have predicted the detrimental impact Covid-19 has had on the global economy. For lenders, this has left them with no choice but to enforce stricter rules, and add more stringent criteria to manage this influx of loan applications.

While shutting up shop to new customers is an easy route for lenders to take, it’s not forward thinking, and the current market, we hope, is only temporary. As such, growing a customer base is equally as important as retaining existing accounts – especially as there are still lots of  businesses in need of support.

We are already seeing innovative lenders, who are spotting this opportunity to grow their customer base, however there are still some who are missing this possibility to expand.

Below are 5 reasons to why lenders may be losing customers, and how best to fix this:

1. Limited personalisation

Standardised loan options mean customers are limited to how they can respond to the current market and thrive in a post-covid world. But every business is different, so they need personalised options best suited to them.

Services like Open Banking allow lenders to distribute hyper-personalised solutions to their customers. By harnessing real-time transaction and account data, lenders can make much fairer and faster decisions based on a business’ actual financial position, not estimates.

2. Manual, outdated processes

Traditional lending processes take time, and in this current climate – time is money. Not only do manual, paper-based loan procedures take far too much time, they also increase the chance of inefficiencies. By relying on outdated information, lenders are not in the best position to offer businesses the optimal lending options.

Through innovation, the speed and efficiency of lending will drastically improve. Instant access to up-to-date financial information via Open Banking APIs, means lenders can speed up all mandatory approval processes and businesses can receive funds directly into their bank accounts, reducing the delay in receiving loans..

3. No sense of transparency

A lack of transparency for providing loan terms or rejecting loan applications, creates an element of doubt, which ultimately drives customers away.

Lenders need to over-communicate with their customers, explaining in detail how they have reached their solution. This process is made easier through harnessing services like Open Banking. Decisions are based solely around an individual’s financial situation, using real-information instead of generalised data sets, meaning lenders can give transparent feedback to the business in question.

4. Lack of security

Out-dated systems, and long manual processes not only cause inefficiencies, increasing the chance of human error or fraud. For example, human error led CitiGroup to mistakenly transmit $900 million earlier this year.

By harnessing Open Banking, lenders are able to access fast, and highly secure data transfers – customers get to decide who accesses their financial data, and how long they’d like it to be shared for. As processes go digital, there is a significantly lower chance of human error or loopholes opening the door to fraudsters.

5. Substandard lending decisions

Unmanageable application checks are exposing businesses to risk, and causing a holdup for loan distributions – and in these challenging times, it’s not an option for money and time to be wasted.

Open Banking means lenders can develop an accurate picture of their customers’ financial position using up-to-date information. Combined with deep-learning technology and real-time data, lenders can access spending patterns, income, debt and identity verification to build a customer profile and personalise their lending options.

It’s time for lenders to do everything they can to support businesses’ survival. By digitising their lending cycles and harnessing services like Open Banking, lenders can act fast to determine customers’ borrowing options, fairly and efficiently. Not only will this help attract new customers to grow their base, but it will assist in a speedy economic recovery, and help many more businesses as we head into a post-covid world.

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Eight Benefits of International Financing



Eight Benefits of International Financing 2

By Luigi Wewege is the Senior Vice President, and Head of Private Banking of Belize based Caye International Bank


Lending is one of the key elements of any international banking strategy. Just as you would carefully select an offshore bank to provide essential services like checking, term deposit, and savings accounts, it makes sense to learn a bit about the lending options. As you compare loan options, there are several advantages that you’ll notice about many international loan offerings.

Here are a few of the significant benefits that you’re likely to encounter.

Broader Range of Lending Options

The diverse options for international loans are one of the first things that many people notice. You’ll find all the loan types that you’re used to encountering in a domestic setting. If one of those happens to work well for you, that’s great. If not, you’ll find other approaches that are more to your liking.

Exactly how the different loan options compare to one another will vary. Some will be different in terms of how the interest rate is applied to the loan balance. In some cases, the fees that are assessed on the front end or during the life of the loan will be different. Some may require a deposit that you must leave with the lender, while others will require nothing more than paying fees.

In each case, you can compare the terms and costs, settle on the loan type that works for you, and hopefully receive an approval.

Policies and Procedures That Work for You

Another perk of considering international financing is that banking laws and procedures may differ from what you encounter at home. Since some laws vary from one country to the next, it’s possible to find a combination that happens to work in your favor. If so, you could end up saving a significant sum on various fees and charges.

Taking the time to learn about applicable banking laws and procedures is essential. Don’t assume what you know about domestic lending is also valid in a different nation. Work closely with lending officers to ensure you understand how the loans are structured and what obligations you take on if the loan is approved.

Competitive Interest Rates and Terms

One factor that you will find pleasing about international lending is that many types of loans come with interest rates that compare favorably with what you’re used to at home. The terms and conditions are also likely to provide you with more incentive to seek an international loan.

This is especially true in nations that are welcoming to expats. The goal is to encourage expats to invest in the country by taking out loans designed to meet their needs and simultaneously stimulate the economy. To do that, the loan contracts are often structured so that international clients enjoy rates and terms that they may or may not qualify for in their countries of origin.

In other words, you could find more than broader options for loan types and terms. An international lender may be willing to extend financing with terms that a domestic lender would not offer to you.

More Options for Multi-Currency Choices

Have you considered how securing a loan in a different currency could prove helpful? The currency involved could be the local one, or it could be a currency that is currently enjoying an excellent exchange rate with other currencies. By option for that approach, you could conceivably increase the purchasing power that the loan proceeds provide.

Think of what that means if you’re a business professional looking to establish a presence in a given nation. The loan could provide you with funds in local currency to pay suppliers, vendors, or even construction professionals. Even if you’re an expat who’s retiring in a given nation, funds in certain currencies provide what you need to pay necessary bills as well as help cover medical costs not included in medical insurance.

Privacy and Security

You already know that many international financial institutions provide protections that are not always available at home. That applies to loans just as it does to your time deposit or checking account. Obtaining information about the loan terms, payment history, and other essentials will be difficult for anyone who is not authorized to receive the data. It’s one more way that the lender seeks to protect your privacy.

There’s also plenty of security surrounding your personal data. It’s not just a matter of having a password that allows access. The security network of the typical offshore lender contains several measures designed to prevent data theft. That ensures you don’t have to be concerned about your information leaking to anyone who could exploit it for their purposes.

Safety from Political Unrest

Political shifts can and do impact the financial world. That’s true in any nation. You can protect yourself by opting for a country that appears to be politically stable and is unlikely to experience any major upheaval in the future.

Why does this matter? Political shifts do pave the way for possible changes to financial laws and lending. They can also lead to economic changes that may include the onset of a recession or depression. Shifts of this nature can impact all your offshore banking, including any active loans. With loans based in the right nation, you can rest assured that few if any changes will occur during the life of the loan.

Potential Tax Advantages

Depending on the type of loan you’re seeking, there may be tax advantages related to an international loan versus a domestic one. The difference could be mainly in the amount of tax you’ll owe on the loan balance itself. Even a small difference on a loan that will take years to retire could be significant.

The best way to determine what tax advantages exist is to talk with a loan officer. You’ll get a better idea of any taxes that may be assessed by the country where your loan resides. It’s also easier to determine if the banking laws allow the agencies in your country of origin to impose any tax on the international loan. Once you understand what sort of tax burden applies, it will be easier to decide if the international loan is right for you.

Easy to Manage the Loan

How will you go about managing the loan? Just as many offshore banks have full online access to other forms of banking accounts, the same is true for loans. If you have other types of accounts in place with the lender, you can manage everything using a single online account interface.

That makes it easy to check the current loan balance, make payments using funds in a checking account, and even know when the most recent payment is applied to the loan balance. Since the online interface is up and running any time of the day or night, you can manage your loan no matter where you happen to be at the time. As long as you have your login credentials, managing the loan is easy.

Take Advantage of an International Loan Today

Use offshore banking and international lending to your financial advantage. The team at Caye International Bank is ready to help you with all of your banking needs, including personal and business loans.

Contact one of our banking service professionals today and outline what you have in mind. Once you learn more about the various types of options available, one of them is sure to be perfect for your needs.

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How the UK’s tax system could change to recover from COVID-19



How the UK’s tax system could change to recover from COVID-19 3

By Finn Houlihan, Director at ATC Tax  

The economic impact of the COVID-19 pandemic on the British economy continues to be profound. In October, national debt surpassed 100% of GDP, causing Chancellor Rishi Sunak to stress the books needed to be balanced. In order to so, the Government will almost inevitably turn to tax increases as a core part of the long-term recovery effort.

And, with the Office for Budget Responsibility estimating that tax increases of £60bn are needed to restore the UK’s public finances to stability, and avoid a return to austerity, the UK’s tax policies could be set to undergo significant reform.

First up

Already it looks like the Chancellor will begin tax reformation by raising taxes for the wealthy, with a review of capital gains tax ordered in July. There are various ways capital gains tax could be reformed to raise funds. Removing or reducing the annual exemption or losses relief, currently standing at £12,300 would be the obvious way forward. However, while this would apply to a lot of people, it wouldn’t generate a significant amount of funds, although it would most likely win cross-party support.

Inheritance tax has also been discussed in being one of the first types of tax to be reformed. Last year, the Office for Tax Simplification published plans to streamline inheritance tax rules to limit the number of exemptions. While the report hasn’t been put into practice yet, the Government could return to the plans to raise funds.

Fresh approach

With the focus on increased taxes on the wealthy, the calls for a new wealth tax have grown and opinion polls indicate general public backing for one. Implementing a wealth tax would ensure those with the most assets carry the brunt of the financial load, while also raising a significant amount to shore up public finances.

However, the tax would require the creation of a huge administrative framework to deal with the declaration of assets from millions of Brits. The complexity of doing so would likely dissipate some of the public support while would take a long time, given government departments are already overwhelmed with responding to the crisis. A compromise could be found with a one-off wealth tax which would not require the same level of administration while still raise funds in the short-term.

Finn Houlihan

Finn Houlihan

Other new forms of tax have been put forward, including a new tax on goods solid online to prevent the potential collapse of the high street, which is being considered by The Treasury. This tax would involve a 2% levy on goods sold online and a mandatory charge on consumer deliveries. With the Chancellor recently deciding to abolish tax-free shopping for tourists in the UK, it’s clear retail is a main focus of the Government’s tax policy, so this could well become reality.

Another new tax policy considered by the Treasury is the “Capital Values Tax”. This would replace current business rates and be based on the value of land and the buildings on it, with the tax paid by the property owner, rather than the business leasing it.

Precedent set

Another avenue the Government could go down is what has gone before in times of crisis. During both world wars, the Treasury issued war bonds to encourage investment while reduce inflation and remove money from circulation. To aid the economic recovery effort, the Government could introduce COVID-19 bonds to have a similar effect and help businesses recover.

The recovery plan from the 2008 recession will also be on the minds of the Government, particularly as many would have been in the government setup then. However, with Prime Minister Boris Johnson effectively ruling out a return to austerity, it’s likely the Government will do everything they can to avoid the return of unpopular taxes such as the “bedroom tax” which came into effect then.

New landscape

As the COVID-19 pandemic continues to reshape Britain’s economy, so too must its tax policy change with it. Funds will need to be raised in order to reduce debt and this will inevitably involve tax increases and it’s likely the Chancellor will employ a range of methods to create the new tax regime.

Early signs indicate taxes will be raised for the wealthy more than other demographics, with capital gains tax and inheritance tax likely to be targeted. Additionally, new forms of taxes relevant to the changed landscape will likely be put in place, particularly the online sales of goods tax to reflect the digital age. The Government may even look to previous crises, including the world wars and 2008 recession, to see what was done then.

Regardless, there can’t be any doubt that we’re about to enter a new stage of the pandemic response, which focuses around how to emerge from the crisis economically, and tax rises will be one of the first things to come into play.

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