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Financial institutions still taking refuge behind popular FATCA myths

Colin Camp, managing director of Dion Global Solutions, feels that FATCA compliance is a task that needs continual monitoring for internal compliance, changing client status and further regulatory adjustments.

September 04, 2013 | Colin Camp

As important deadlines for FATCA implementation draw closer, there is still a troubling lack of awareness about what foreign financial institutions are really required to do. Many appear to be taking refuge behind popular myths about FATCA that have taken root in the industry. It is time these myths were resoundingly debunked, if institutions are to successfully navigate the waters of international regulation and benefit from the support that is available to them.

Myth number 1: FATCA isn’t a major issue for institutions without many US clients

This is perhaps the biggest misunderstanding doing the rounds and it’s a dangerous one for a number of reasons. First, institutions need to prove they don’t have US clients – and that still requires client data to be checked.

Second, our experience is that a surprising number of clients actually do meet one or more of the US indicia laid out in the regulations and will need to be investigated.

Third, and most importantly, FATCA is only the start. It is the end of the beginning. As the mood moves towards more international collaboration on tax matters, more countries will no doubt impose their own versions of FATCA. The requirement to monitor and report on clients from different countries according to more diverse criteria is only going to grow.

Myth number 2: FATCA is just a Know Your Customer (KYC) data issue

Certainly, one of the most important tasks for achieving FATCA compliance is checking on client data for both new and existing clients. Some institutions may have recorded that data as part of their existing KYC processes. However, identification of data is only the first step. FATCA has three other broad stages for compliance touching other areas of the business:

• Remedial case management for identified accounts and/or missing data, including document storage.
• Calculate withholding tax as required.

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Data & Analytics, Data Management, Regulation, Risk & Performance, Risk and Regulation, Technology & Operations

Keywords:Colin Camp, Dion Global Solutions, FATCA, KYC, IRS, IGA