FATCA penalties loom for financial institutions

Financial institutions have less than a year to comply with the requirements of FATCA (foreign account tax compliance act) or accept a 30% withholding tax on U.S. revenues and proceeds from sales of instruments which yield revenues from U.S. sources.

January 12, 2012

Financial institutions have less than a year to comply with the requirements of FATCA (foreign account tax compliance act) or accept a 30% withholding tax on U.S. revenues and proceeds from sales of instruments which yield revenues from U.S. sources. The Trillium FATCA Compliance Data Assessment service enables organisations to gain an early and accurate perspective on the data management challenges they will face in meeting these requirements.

Master Data Management, the South African reseller for Harte-Hanks Trillium Software®, announced that they will be providing the Trillium FATCA Compliance Data Assessment service to assist financial institutions (FFIs) that must comply with FATCA or accept significant penalties.

FATCA is a new directive of the United States government that requires FFIs with U.S. client accounts to share information on those clients with the United States Internal Revenue Service (IRS) to ensure that U.S. citizens report income above certain levels earned outside the United States. This impacts any FFI, including banks, insurance companies, brokers, and investment firms, that deals with U.S. individuals or trades in U.S. markets.

According to the South African Institute for Financial Markets, the scope of FATCA is significantly broader than the current Q1 regime and the act cannot be adhered to with existing processes and systems. Participating FFIs must prove (annually) that they have identified all relevant clients and report the relevant client information to the IRS, or accept a 30% withholding tax on payments.

Says Kerry Allemann, senior consultant at Master Data Management, “The Trillium FATCA Compliance Data Assessment helps FFIs measure the state of their data for enabling the identification of U.S. accounts and the sharing of necessary information as required by the act.  The assessment provides a detailed ‘map of the gaps,’ allowing firms to determine and plan any data or process-change activity that will be required to ensure that data is fit to support the requirements of the act on an on-going basis.”

The assessment combines a purpose-built data quality platform with data analysis expertise and professional consulting services. The platform leverages pre-populated rules and templates that facilitate the automated assessment, measurement and monitoring of key indicia of the qualification criteria for FATCA reporting. This assessment includes review of all data elements necessary for determining U.S. ownership of an account and stat review, for determining reporting as defined by the act. The assessment leverages over two decades of experience supporting the complex requirements of data management across global enterprises, including many of the world’s largest financial institutions. The process readily discovers ‘unknown’ issues and presents findings in ways that facilitate transparency in regulatory reporting.