FATCA: Still Work to be Done, One Year on
As the first anniversary of the implementation of the US Foreign Account Tax Compliance Act (FATCA) approaches, many financial firms have made good progress addressing the client classification, onboarding and due diligence changes necessitated by the regulation according to Thierry Haensenberger, senior vice president, EMEA for AxiomSL.
However, he also cautions that most firms are yet to tackle the reporting requirements of FATCA in the “scalable, strategic manner” needed to deal with the changes that are to come in 2016 and beyond – including the introduction of the common reporting standard (CRS).
“The beginning of FATCA reporting in 2015 has been complicated, in a number of cases, by the late confirmation of important regulatory details,” says Haensenberger. “However, the number of accounts that firms must report on this year is limited, as only accounts opened between July and December 2014 are in scope.
“As a result, many firms have chosen to take a tactical approach to FATCA reporting in 2015, building in-house applications and relying on manual processes in some cases.”
“In 2016 I expect this situation to change, as the scope of reporting will increase significantly and it will not be possible for firms to manage this tactically. At the moment, firms are sizing up their own requirements and monitoring what others are doing, in preparation for migrating to a long-term, strategic solution for both FATCA and common reporting standard (CRS) reporting.
“As firms make important decisions about how they will tackle FATCA reporting in the future, it is essential that they consider the flexibility and scalability of their chosen platform. They will need a smooth, easy approach to change management in order to handle the many variations of the Internal revenue Service’s (IRS) reporting format that are required by tax authorities in different jurisdictions.
“Flexibility and scalability will also be crucial for ensuring firms can use the same reporting platform for FATCA-related requirements, such as CRS and ‘UK FATCA’.”