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Other jurisdictions likely to follow US FATCA lead

Speaking at a recent Bahamas Association of Compliance Officers event, tax experts cautioned financial services providers not to be complacent regarding the upcoming US Foreign Account Tax Compliance Act and noted that other jurisdictions are likely to follow suit with similar legislation. 

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TheBahamasInvestor.com
Thursday, September 20, 2012
Thursday, September 20, 2012

The US Foreign Account Tax Compliance Act (FATCA) is set to become law in January 2013 and experts are warning that the legislation, which calls for transparency of US accounts held outside of the US, could soon be followed by similar provisions from other jurisdictions.

Rowena Bethel (pictured), a consultant in financial regulation, international tax policy and eGovernment, says FATCA could be a precursor to other countries enacting similar legislation. “It is always an indication, when you see the US this busy, that it is not being done totally in isolation of other jurisdictions,” she said. “The US tends to surface first, it does not mean the others are not already looking at it themselves. Behind the scenes they are looking at the implementation aspects of these agreements.”


Bethel, a former legal advisor to the Ministry of Finance, participated in a FATCA panel discussion at the recent Bahamas Association of Compliance Officers’ Money Laundering Reporting Officers (MLRO) Day.

Her fellow panelist Geovannie Rodgers, manager in Assurance and Advisory Services at Deloitte & Touche, advised institutions that the three stages of becoming FATCA compliant are: assessing your organization; performing a “gap analysis” to discover what’s lacking; and developing an implementation plan.

He said that the greatest investment in preparing for the legislation would be in technology, so that processes become more streamlined and efficient ahead of time, and cautioned banks to set up a structure in good time so that “you won’t have to do it all again in a year.”

While the US has not released its final draft of the legislation, both panelists warned the audience not to become complacent, with Rodgers saying: “You know it is coming and you know it is not going away.”

Under FATCA, Foreign Financial Institutions must register with the IRS and provide reports on all accounts held by US taxpayers or be subject to a 30 per cent withholding tax. The legislation will pass into law in January 2013, but the implementation will be phased in gradually with annual reporting beginning in January 2014.

Bethel predicted that FATCA will not deter legitimate business, so long as the levels of efficiency in serving clients was not compromised. While it would entail an “enormous amount of work”, financial professionals should be able to adapt, she added.

“The global financial situation is not static. We have to be able to react to developments. It is not a challenge; it is just the way business is.”

cmorris@dupuch.com

Pictet Bank and Trust Bahamas has agreed to once again sponsor the Speed Week Ball and Auction of Promises to be held December 1. Last year the event raised more than $40,000 for local charities. Pictured (below): Pictet managing director Yves Lourdin (right) is pictured with the Governor General Sir Arthur Folkes at the Speed Week 2011 gala event.

The Financial Services Minister's visit to Brazil as part of the sector's Bahamas Landfall promotional campaign and the Financial Services Industry Excellence Awards top the business news agenda this week. Watch the full ZNS report here.

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