The Bahamas “has made significant strides” in preparing for the US Foreign Account Tax Compliance Act (FATCA), which comes into force in January 2013, according to accounting firm Deloitte‘s lead partner for the FATCA initiative, Lawrence Lewis.

“Financial institutions [in The Bahamas] have been pressing forward, identifying what they need to do. Vis-a-vis the world stage, we have not been that far behind,” he says.

FATCA requires all Foreign Financial Institutions (FFIs) to enter into an agreement with the US Treasury to disclose information on certain US clients.

The financial sector in The Bahamas has been readying itself for the changes for the past year, with several institutions voicing concerns at the wide scope of the act.

A revision of the regulations presented in guidelines released in February 2012, however, has made the new legislation less onerous. The threshold for accounts has been raised, meaning FFIs are obligated only to examine accounts holding $250,000 or greater.

In addition, the time frame has been relaxed, giving institutions longer to comply with the FATCA provisions.

“The legislation has softened, reflecting the realities of the challenges in implementing them the way they were proposed,” explains Lewis. “It is a bit of relief.”

However, the accountant warns that there is still a lot of work to do. “There is a lot of effort involved in getting compliant,” he says. “Certainly this is not something organizations can do in six months. They are going to be chasing down information and that will take some time.”

“There is also going to be a huge cost associated with it,” he cautioned. “What is important for organizations to think about is: ‘how do I implement this in a structured way, so that it is as cost effective as possible?’ You cannot escape the cost, but you can think about how best to manage it.”

“You need to have some upfront planning,” he advises. “Look at creating a coordinated approach and go through some kind of budgetary process.”

A consultation period, during which financial institutions can submit feedback on the FATCA legislation, closes at the end of this month.

cmorris@dupuch.com