Legal Industry News
May 9, 2012
Majority of Banks Will Miss FATCA Compliance Deadline According to Banking Executives: KPMG Survey
Finance and tax executives in the U.S. and global banking industry are discovering that preparing to comply with the Foreign Account Tax Compliance Act (FATCA) is very challenging. 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 LLP, the U.S. audit, tax and advisory firm.
According to forty percent of the 150 respondents with U.S. domestic banks, and 44 percent 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 percent of the respondents with U.S. banks, and 36 percent 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,” said 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,” added Price.
Account identification requirements were cited by 31 percent of respondents with U.S. domestic banks, and 30 percent 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 percent with U.S. domestic banks and 28 percent with foreign banks).
When asked to identify the largest unresolved area of FATCA compliance for the banking industry, pass thru payments was cited most frequently by 32 percent of respondents with U.S.domestic banks, and 49 percent of respondents with foreign banks. Account identification requirements (22 percent 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,” said 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”, Boyd explained.
However, 37 percent of respondents with U.S. domestic banks, and 46 percent of respondents with foreign banks said their institutions were currently conducting internal assessments. While 13 percent with U.S. domestic banks, and 18 percent with foreign banks, had already completed one. Lastly, 18 percent with U.S. domestic banks, and 20 percent with foreign banks, said they had not started assessments.
The KPMG survey was conducted during a KPMG Tax Practice-sponsored event focused on FATCA.
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