Finance and tax executives in the U.S. and global banking industry are discovering that preparing to comply with the Foreign Account Tax Compliance Act (FATCA) is very challenging, and many predict that the majority of banks that need to comply with the law’s requirements will not be ready to meet its deadlines, some of which begin on Jan. 1, 2013, according to a survey conducted by KPMG LLP, the U.S. audit, tax and advisory firm.
Forty percent of the 150 respondents with U.S.-based banks and 44 percent of the 100 respondents with foreign banks, who participated in the KPMG survey, said getting their organizations ready for the FATCA regime has been very challenging.
In addition, 28 percent of the respondents with U.S.-based banks and 36 percent of the respondents with foreign banks did not believe the majority of banks impacted by FATCA would be ready to comply in time.
“FATCA is changing the way impacted banks do business and a significant amount of time and resources are required to meet the deadlines,” said Mark Price, KPMG’s Banking and Finance practice national tax leader. “It’s clear to bank executives that FATCA is an operational change -- and more than just a tax issue -- for foreign and domestic banks alike.
“Bank executives also are learning it is critical to coordinate many areas -- operations, tax, IT, legal, and KYC / AML departments -- to successfully address FATCA’s significant compliance, reporting, and monitoring risks,” added Price.
Account Identification Biggest Challenge
Account identification requirements were cited by 31 percent of respondents with U.S.-based banks and 30 percent of respondents with foreign banks as the biggest compliance challenge for their institution. Reporting requirements were identified as the second most difficult compliance hurdle (24 percent with U.S.-based banks and 28 percent with foreign banks).
When asked to identify the largest unresolved area of FATCA compliance for the industry, passthru payments was cited most frequently by 32 percent of respondents with U.S.-based banks and 49 percent of respondents with foreign banks. Account identification requirements (22 percent for both groups) were the second largest unresolved area.
Need to Refine, Create Systems, Processes
“Foreign and domestic banks will need to refine current systems and processes in order to comply with FATCA, and in some cases create new ones,” said KPMG Washington National Tax principal Laurie Hatten-Boyd. “Conducting an internal assessment to understand what entities within the bank will be impacted by FATCA and the steps needed to ensure compliance can help bank leadership teams get a game plan together.”
While 37 percent of respondents with U.S.-based banks and 46 percent of respondents with foreign banks said their institution was currently conducting an internal assessment, and 13 percent with U.S.-based banks and 18 percent with foreign banks had already completed one, 18 percent with U.S.-based banks and 20 percent with foreign banks said they had not started one.
The KPMG survey was conducted during a KPMG Tax practice-sponsored event focused on FATCA.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 145,000 people, including more than 8,000 partners, in 152 countries.