Preparing for FATCA

March 26, 2013

“The long-awaited final Foreign Account Tax Compliance Act (FATCA) regulations have arrived and while much analysis still needs to be done, the US Department of Treasury and the Internal Revenue Service (IRS) provided welcome relief on a number of key issues for the asset management industry.

 That being said, significant implementation challenges still remain for the asset management industry and substantial work must be undertaken through the course of 2013 in order for asset managers to be compliant by January 1, 2014.  Failure to undertake the necessary tasks in 2013 could expose investment managers to a variety of business and investor relation risks.” – PwC,  Global IRW Newsbrief, Feb 6, 2013 – read full brief here.

On January 17th, 2013, the US Department of Treasury and the IRS published the final version of the Foreign Account Tax Compliance Act (FATCA).   Even though the regulations were delayed from their original timeline, the January 1st, 2014 effective date is now approaching and asset management firms need to prepare.

FATCA’s reach is one of the broadest of all regulations. The legislation applies to any entity which has U.S. clients on its books (with account limit thresholds), including banks, investment managers, custody banks, etc. It was passed into law in order to compel foreign financial institutions to disclose U.S. account holders’ information to the IRS.  It is intended to increase transparency for the IRS with respect to U.S. persons that may be earning income through non-U.S. institutions. 

Within asset management organizations, the impact of FATCA is just as far reaching – from the on-boarding of clients (and Know Your Customer rules) all the way through back office operations and associated systems.  Financial firms need to be working throughout their organization to make the necessary changes to policies and procedures and preparing their systems to assist in adhering to new legislation in a timely and efficient manner. 

At PORTIA, we have been monitoring the regulations and requirements as they evolved, and have published a paper to help our clients understand the main provisions of FATCA and the reporting requirements this legislation will involve.  The paper also provides suggestions on how PORTIA can be configured to store and report on the information needed for FATCA. (Current PORTIA clients can click here to access the paper from the PORTIA Client Service Portal.)  With PORTIA’s data management and reporting flexibility, our clients have the ability to report on the information necessary to adhere to the FATCA regulations, without any new releases or versions being implemented.  

In addition to the FATCA paper, we also offer our clients a service specifically designed to help them address FATCA regulations, where we:

  • Assist in the identification and storage of key data items
  • Identify best practices for data storage and usage
  • Create reports that capture FATCA holdings and transaction information
  • Calculate  withholding amounts on qualifying transactions 

The work to be done to comply with FATCA will impact every aspect of asset management organizations.   Companies and their end-clients will benefit greatly from a full understanding of this regulation and how it affects the organization, coupled with a comprehensive plan of what processes, procedures and systems need to be addressed to fully comply.

– Rosemary Cook, Project Manager/Product Consultant


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