Michael Shashoua: Putting Fatca in Perspective

In February 2012 and in October 2013, in this space, I tracked the progress of the Foreign Account Tax Compliance Act (Fatca) regulation from when US regulators began their effort to collect withheld tax from foreign holdings by US entities, through attempts to institute compliance plans.

With the new postponed compliance date of July 1 now fast approaching, the industry is looking at a two-part endgame. The first is getting the last parts of guidance from the US Internal Revenue Service on what Fatca requires, including details of the W8-BEN-E form firms must file under the Act. The second part is getting data management technology up and running in time for the looming deadline.

At Inside Reference Data’s March 18 breakfast event covering Fatca, Dax Philbert, global Fatca loans program manager at Deutsche Bank, advanced the idea of a “Fatca hub” that gathers the necessary data and distributes it to different groups within a firm.

Workarounds may be necessary. “Then have a phase two or plan B that will get you the future phase of a complete Fatca system,” Philbert said.

Privacy
Some markets have strict privacy regimens, such as Saudi Arabia, Dubai, Hong Kong, Singapore, Luxembourg and some other Middle Eastern and North African markets. The “Fatca hub” concept could be a way to cope with varied levels of privacy rules.

What if the IRS or US Treasury decide that Fatca does not go far enough and additional requirements need to be added?

“You have to think systematically about how you address sharing of information, manage the business effectively, and also have consistency in your processes,” Philbert said.

The industry may be contending with a host of interim solutions implemented for Fatca data, in a climate where changes in larger systems may have been tough to get done, according to Jon Watts, director and head of banking and securities, Fatca, at Deloitte & Touche, who delivered a keynote address at the event.

Data management operations dealing with other new regulation and standards have spurred the industry to get stronger capabilities for handling reference information concerning entities, customers, and transactions, all of which can fit into Fatca compliance and filings, according to Watts. “If you improve flexibility, quality and fungibility of your data, there is an opportunity to use that in a positive way, to help drive the business,” he said.

Unanswered Questions
Before anyone can advance theories on how to structure or change data management operations concerning Fatca filings and information, however, there appear to be a lot of unanswered questions about Fatca requirements—more than just the nature of the W8-BEN-E form, said Watts.

Numerous intergovernmental agreements (IGAs) between the US and other countries are now in place, but standards bodies, especially in Europe, may emerge to tie together the various IGAs and provide consistency, according to Watts. He said he sees this development and other uncertainties about Fatca rule information needing three or maybe even five years to achieve that consistency.

Undoubtedly, there will be a lot of “noise” after July 1, said Watts, “because a lot of companies have thought about Fatca for a long time but have only just started the process of reaching out to customers.” That will also become evident when deciding whether firms are required to only collect documentation for compliance or remediate their processes completely.

Beyond July 1, a February 2015 deadline must also be heeded, for getting reporting processes and customer remediation set up. What will occur if the IRS or US Treasury should decide that Fatca does not go far enough and additional requirements need to be added to Fatca’s purview? That could further muddy the waters for any firm looking to comply with the regulations, both on July 1 and the latter deadline about a year away.