Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .


FATCA – The IGA Puzzle


Colin-CampBy Colin Camp, Managing Director – Products & Strategy at Dion

Even though the final regulations have been published, the sheer volume of ‘noise’ around FATCA and the ‘will they, won’t they?’ stories regarding the signing of Inter-Governmental Agreements (IGAs) is creating a great deal of uncertainty in the market. This is added to, in no short measure, by the anti-FATCA lobbyists who are succeeding in raising questions about the integrity of the American legislation – particularly following rumours of China refusing to consider an IGA unless they receive more tax information on their citizens with US assets, and Russia becoming the latest state to attack the reach of the regulations.

In reality, the basic fact is that no-one knows what is going on behind closed doors between the US and other countries – and firms shouldn’t use IGAs as an excuse to hold off on FATCA compliance.

The intention of the IGAs is to ease the burden of the regulations on a country’s financial industry, and enhance existing tax cooperation arrangements with the US. Whether or not your country has signed an IGA has no bearing on FATCA compliance.

For many countries – especially those with major financial centres – an IGA is already on the table. But given the detail in the final regulations, the two templates for IGAs and the missing information the industry is still waiting on from the IRS, it will take time for government departments to digest everything, identify the local products and businesses that can be excluded and ensure the correct model agreement is in place. Working out the specifics will require liaison with local industry bodies and market participants, as well as input from the IRS and US Treasury. Even when countries are confident they have identified the correct model, the IGAs may require changes to or implementation of new local laws. This won’t happen overnight.

As the FATCA regulations stand today, FFIs need to register or sign an agreement with the IRS before October 2013 or they will not be included in its first list of participating Foreign Financial Institution (FFIs) due to be published in December 2013. If they aren’t on this list, they not only face the risk of withholding tax on their US sourced transactions, but also the reality that some of their counterparties may refuse to engage with them going forward. It remains down to each individual FFI to get its own house in order in terms of implementing a FATCA compliance program. And while this is on the agenda of many, it’s surprisingly only being actioned by a few.

The only thing financial institutions can do is put a program in place to comply with the regulations as they stand now to ensure they avoid any potential repercussions down the line. That said, institutions must ensure their systems are flexible enough to cater for any last minute changes and able to incorporate the subtleties contained within local IGAs where relevant. This is particularly important for institutions operating across multiple jurisdictions where IGAs may be signed at any point in their compliance program.

When it comes to FATCA the advice is simple. Despite all the uncertainties, FFIs must ensure they are ready for the regulations. It’s not going to disappear any time soon and the clock is ticking.




Global Banking & Finance Review


Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!

By submitting this form, you are consenting to receive marketing emails from: Global Banking & Finance Review │ Banking │ Finance │ Technology. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post