Traps for the Unwary: Are Financial Institution receiving adequate FATCA consulting and training?

FATCA is Chapter 4 of the Internal Revenue Code (IRC).   It conscripts Foreign Financial Institutions (FFIs) to act as reporting and withholding agents for the U.S. Government.  To enforce its conscription, it contains a mechanism for financially penalizing FFIs that do not comply.

Developing regulatory and administrative guidance to implement FATCA took more than four years from the date of its passage to reach the point of FATCA implementation on July 1, 2014.  Its first permanent regulations published in 2012 were more than 500 pages in length. Its second round of permanent regulations published in 2013 were also more than 500 pages.  By themselves, the FATCA permanent regulations encompass more than 1,000 pages without considering related regulations of IRC Chapter 3, Chapter 61 and IRC Code Section 3406.  FATCA continues to be an evolving project with further regulations expected.

An interconnected web of regulations, governmental procedures, agreements with financial institutions, Intergovernmental Agreements (‘IGAs’), forms and instructions were developed to establish structure and compliance procedures for implementing FATCA. The complexity of coordinating IRC regulations under FATCA with IRC Chapter 3, Chapter 61, and Section 3406 is unprecedented. Understanding and interpreting more than 1,000 pages of FATCA regulations requires an underlying understanding of their words, (a new vocabulary) and the spirit behind their wording to avoid being inadvertently victimized by FATCA sanctions and problems with correspondent U.S. Financial Institutions (USFI).

Providing appropriate FATCA consulting services to FFIs requires years of experience working with U.S. Taxpayers and with the U.S. IRC in the space of U.S. International Taxpayer Compliance and in working within the internal compliance environment of Financial Institutions (FI).  Being able to effectively communicate compliance in the language of FI is a qualification for working and consulting effectively in the FATCA space.  U.S. licensed CPAs working in U.S. International Taxpayer Compliance and working within the internal compliance environment of FIs are best able to communicate with FFI clients in the FFI language.  Those that offer FATCA implementation consulting services who are not part of this U.S. licensed and trained set of consultants do not possess the same inherent FATCA consulting services qualities.

FFIs whose local FATCA consultants have left them experiencing FATCA initial and ongoing implementation issues did not receive appropriate FATCA training and will not be prepared for the upcoming FATCA audits and self-certifications.

Don’t be a victim of your own making.  Financial Institutions that are questioning the effectiveness of their FATCA consultant’s training or advice should check their FATCA consultant’s history with other FFI local associates or FFIs in other jurisdictions regarding their FATCA consultant(s) experience.

https://www.jdsupra.com/legalnews/traps-for-the-unwary-are-financial-57591/