Finance and tax executives in the United States and global banking industry are discovering that preparing to comply with the Foreign Account Tax Compliance Act 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.

Forty percent of the 150 respondents with U.S.-based banks and 44% 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% of the respondents with U.S.-based banks and 36% 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,” says 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,” says Price.

Account identification requirements were cited by 31% of respondents with U.S.-based banks and 30% 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% with U.S.-based banks and 28% 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% of respondents with U.S.-based banks and 49% of respondents with foreign banks. Account identification requirements (22% for both groups) were the second largest unresolved area.

“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,” says 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% of respondents with U.S.-based banks and 46% of respondents with foreign banks said their institution was currently conducting an internal assessment, and 13% with U.S.-based banks and 18% with foreign banks had already completed one, 18% with U.S.-based banks and 20% with foreign banks said they had not started one.

http://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Press-Releases/Pages/US-And-Global-Banking-Execs-Say-Majority-Of-Banks-To-Miss-FATCA-Compliance-Deadline-KPMG-Survey.aspx

 

 

[This article was posted on June 5, 2012, on the website of ABA Banking Journal, www.ababj.com.]       

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