Source: Date: Updated: |
TheBahamasInvestor.com
Thursday, April 14, 2011 Thursday, April 14, 2011 |
A leading financial advisor has warned that the Foreign Account Tax Compliance Act (FATCA) will place a significant burden on financial intermediaries in The Bahamas when it comes into force January 1, 2013.
“FATCA is a huge concern,” says Benno Räber, principal at private wealth risk management firm Prime Advisory Group (PAG). “It will be a big issue for financial institutions in terms of organization.”
Räber believes that financial intermediaries will be most affected by the upcoming legislation, which requires all foreign financial institutions (FFIs) to disclose information on US clients. The Act has broadened the scope of the previous Qualified Intermediary (QI) system to include bodies such as brokers, investment companies and fund structures. Accounting firm Ernst & Young estimates that this will affect 50,000 to 100,000 financial intermediaries worldwide.
“The banks are not so much a part of the issue,” says Räber. “The problem will be for financial intermediaries. For these companies, it will be tough and it will be a lot of work.”
Another group that will be negatively impacted by FATCA, according to the PAG partner, is the clients themselves. “Everyone is talking about the FFIs, no-one talks about the client–they now have to ask: ‘do we need to restructure our portfolios?’
“The client now has to make a decision about how much of his wealth will be exposed to the system.”
Räber warns that the new regulations may dissuade some financial institutions from doing business with the US.
“The US has not anticipated that there will be financial institutions that do not participate. The potential economic fallout for the US will be much higher than they anticipated.”
Räber also expresses concerns about the impact of the FATCA regulations worldwide and believes that many banks will find the requirements too onerous. “It separates the world into two parts–the people who want to invest in the US and those who do not.”
The opinions expressed in this article are those of the interviewee and not necessarily those of The Bahamas Investor.
cboal@dupuch.com