US Fatca is just the start, warns CSC

The financial industry is so focused on US Fatca that it is ignoring the risk of other governments implementing their own Fatca, warns IT and consultancy firm CSC.

The delivery of final rules for Fatca, the US Foreign Account Tax Compliance Act, in January sounded the starting gun for financial services firms and their technology suppliers to start rolling out solutions that can assist in ensuring compliance.

The Act seeks to ensure the US gets taxes it believes are owed by US citizens. Unlike many other jurisdictions, the US taxes its citizens wherever they may live in the world. Generally, any financial accounts belonging to US citizens containing assets in excess of $50,000 are key targets.

Banks, insurers, asset managers and other financial institutions must be able to prove to US tax authority the Internal Revenue Service that they either do not have any US citizens on their books or, if they do, they are moving towards the next phase of Fatca implementation, which will collect and repatriate relevant taxes.

Subsequent to the final rules being delivered by the IRS and the US Treasury, financial institutions are now in a position to start the painstaking work of trawling their customer accounts for any people with US links.

Easier said than done

This is still easier said than done, however, as responses from the software and services industry suggest there are still considerable obstacles to overcome in terms of certifying data capture processes and ensuring reliable account identification and classification.

But the challenge of Fatca is unlikely to stop there, according to Davide Ferrara (pictured), a partner in the consulting team at CSC.

As the company’s lead consultant for Fatca, he works with clients such as banks and fund managers to help them comply with the legislation. His view of Fatca is boosted by the fact CSC is a “prime supplier” to the IRS, and so has been involved for a long time with developments around the legislation.

And it is this work with both tax authority and financial institutions in different jurisdictions that leads Ferrara to warn that businesses knuckling down to implement solutions to US Fatca could be hit by a wave of copycat legislation flowing particularly out of other OECD members. 

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