Linedata warns on ‘Global Fatca’

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Justin Hayes, product manager at software and technology provider Linedata, has warned that fund managers and their administrators should be less concerned by the first reporting deadline for Fatca, which occurs on 31 March, and more worried about the OECD Common Reporting Standards, dubbed ‘Global Fatca’.

The Foreign Account Tax Compliance Act is intended to plug holes in US fiscal legislation. It has caused significant concern because of the reporting requirements placed on so called foreign financial institutions, which must report to US tax authorities.

However, Hayes terms the US regulations “a drop in the ocean compared to what’s about to hit the financial world next year.”

“The OECD’s Common Reporting Standards will take the reins from Fatca on a global scale. With over 50 jurisdictions already on board and a further 46 committed to sign up, Fatca has a limited impact compared to the administrative challenges set to face global financial firms under its global equivalent.”

“Operating on a multi-jurisdictional level, administrators and investors outside of the US and not previously impacted by Fatca could now find themselves falling into this remit. Some client accounts may need to be reported across multiple jurisdictions, adding to the pressure on resources and costs to gather and report this information.”

“The new global standards to tackle secrecy on tax matters could also see a strain on investor and client relations, requiring administrators to carry out additional checks on their existing investors in order to report to the authorities.”

According to the US Treasury, there are still a significant number of countries that are yet to formally sign a so called Intergovernmental Agreement (IGA) with the US government, despite agreeing to do so “in substance”.

The OECD’s CRS were agreed by finance ministers representing the G20 at a meeting in February 2014, ahead of the release of the full Standards in July 2014. The Standards were designed according to the principle of automatic exchange of data.

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