FATCA. Are you prepared?
- Montag, 18. November 2013 00:00
The Foreign Account Tax Compliance Act (FATCA) is scheduled to take effect July 1, 2014, and Swiss financial institutions must be prepared to comply. Compliance will include extensive new due diligence on pre-existing accounts to specifically identify and resolve any U.S. indicia associated with the account. In addition, FATCA will require Swiss banks to adopt robust account opening procedures on behalf of new individual or entity clients.
Much of the industry discussion around FATCA has focused on the Act's conflicts with local laws. Many of these conflicts were addressed when Switzerland and the United States Treasury Department signed an intergovernmental agreement (IGA), which governs the due diligence, withholding, and reporting provisions of FATCA for Swiss institutions. Independent of FATCA, but re-affirming the Act's policy goals, the U.S. Department of Justice (DOJ) and the Swiss Federal Department of Finance released a Joint Statement outlining the steps Swiss Banks must take in connection with the DOJ's enforcement efforts.
The unprecedented attention on U.S. tax compliance coupled with clear cooperation between the Swiss and U.S. tax authorities underlines the need for Swiss based firms to implement FATCA compliance strategies.
How can we help
Brown Brothers Harriman & Co. (BBH) has a history of working with Swiss financial institutions to assist in mitigating pain points around U.S. tax compliance. When the Qualified Intermediary (QI) rules were first introduced in 2000, BBH's collaborative, solution-oriented approach, simplified the cumbersome process for our clients. Whether through BBH's comprehensive U.S. tax reporting offerings or diligent approach to account structures and U.S. withholding, BBH worked with its clients to offer a pragmatic and workable approach. BBH is employing a similar strategy with FATCA and will offer a suite of U.S. tax compliance solutions to support clients' management of U.S. tax reporting requirements.
The most immediate concern should be of the solutions to address key aspects of FATCA compliance. The groundwork of FATCA lies in the ability of a financial institution to properly classify their accounts. As a result, financial institutions will need to collect the appropriate U.S tax forms, self-certifications and documentary evidence, plus validate and store the information received. Accordingly, BBH offers its E-W8TMsolution, an electronic tool that automates the collection, review, validation and renewal of any necessary FATCA account diligence. E-W8 was developed by a team of tax attorneys and tax operations experts at the industry leading Compliance Technologies International, LLP (CTI) and the law firm Burt, Staples and Maner, LLP. Each user of E-W8 receives a Memo of Understanding (MOU) from the IRS, confirming the tool's regulatory compliance.
E-W8 is a highly versatile, automated tool that can be deployed to:
- Collect and validate electronic U.S. tax forms and self-certification statements;
- Validate paper U.S. tax forms and Know Your Customer (KYC) documentation (1);
- Provide and track real time U.S. tax status of accounts;
- Assist in the determination of FATCA status for foreign financial institutions;
- Identify and document entities listed in Annex II of the Swiss IGA and,
- Manage changes in circumstance
E-W8 offers an integrated electronic solution to FATCA's account diligence challenges, achieving the following benefits:
- Risk Mitigation – CTI has secured numerous Memorandums of Understanding (MOU) (2) from the IRS on the use of E-W8, thus providing an IRS-approved mechanism to validate FATCA documentation and mitigate the risk associated with manual processes.
- Automation – E-W8 facilitates self-service through an interactive question-and-answer format to assist customers in completing required documentation. In addition, the software is available in more than 40 languages.
- Cost Reduction – E-W8 establishes a more cost-efficient validation and renewal process. The tool reduces the costs associated with client correspondence and the ongoing training of employees and customers.
E-W8 is an industry leading application already deployed globally by a wide array of leading financial institutions. For guidance and help to get started on FATCA Compliance, contact Brown Brothers Harriman & Co.
(1) Reference to KYC documentation is in the context of validation of accounts for U.S. tax purposes and not as part of the AML/KYC Compliance function
(2) The IRS does not have any exclusive arrangement with any specific developer of an electronic W-8/W-9 system, the IRS Memorandum of Understanding can be issued to withholding agents who create their own electronic W-8/W-9 tools and/or use other electronic W-8/W-9 products other than those created by CTI
BBH is a privately held financial institution that has been a thought leader and solutions provider for nearly 200 years. The firm serves the most discriminating and sophisticated individuals and institutions in its five business lines: Corporate Banking, Investment Management, Investor Services, M&A Advisory and Wealth Management. BBH's culture of accountability fosters deep and lasting relationships built on commitment, adaptability and trust. The company is independent, selective and specialized by design.
BBH operates a global business with seventeen locations, including Beijing, Boston, Charlotte, Chicago, Denver, Dublin, Grand Cayman, Hong Kong, Kraków, London, Luxembourg, New Jersey, New York, Philadelphia, Tokyo, Wilmington and Zürich. For more information about Brown Brothers Harriman's integrated and differentiated approach, please visit www.bbh.com.
Compliance Technologies International, LLP (CTI)'s software and services have been used in multi-national corporations and eight of the ten largest financial institutions in the world since 1998. CTI has a strong team of highly specialized and experienced international and domestic tax and software professionals, including lawyers, accountants, and software engineers and operations experts. CTI's team is a leader in cutting-edge global tax technology; consulting and outsourcing services specializing in information return reporting and tax withholding. Years of practice have contributed to CTI's long standing and solid relationships with worldwide financial institutions, multi-national corporations, tax authorities and governments. For more information, see www.cticompliance.
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