| | |
Actimize - Mitigating Transactional Risk Across Enterprise Silos
Media Contact

Cindy Morgan-Olson
Head of Public/
Analyst Relations
NICE Actimize
1359 Broadway
New York, NY 10018
(212) 851-8842
cindy.morgan-olson@
niceactimize.com



Actimize Clients

Actimize News

NICE Actimize News


Back to News


The Wall Street Journal Home Page

Treasury, IRS Issue Proposed FATCA Rule

The U.S. Treasury Department's proposed rule implementing the Foreign Account Tax Compliance Act, published Wednesday, yielded some concessions to critics but still requires new work by financial institutions.

FATCA , passed in 2010, requires foreign institutions to start reporting detailed information about foreign account holders to the Internal Revenue Service. The 388-page proposed rule gives a graduated road map for full compliance, culminating in 2017 when foreign financial institutions would be required to report not just on the value of an account but its gross proceeds. Those institutions that don't comply face a 30% tax penalty under the statute.

Financial institutions have decried the law as overly burdensome since its passage, and have spent the last two years trying to weaken it, if not kill its enforcement outright. The proposed rule acceded to one key demand: That such reporting could violate privacy regulations in several countries, and it could cause the financial institutions to become an extension of the U.S. tax authorities.

To that end, the Treasury Department announced (pdf) along with the rule that it struck an agreement with France, Germany, Italy, Spain and the U.K. that has them exploring a "common approach" to compliance. It calls on those governments to collect the necessary information, which would be turned over to the IRS through a reciprocal exchange.

"We are pleased that today's joint announcement on an intergovernmental approach to information exchange appears capable of addressing certain legal difficulties and compliance burdens that would otherwise arise for financial institutions affected by FATCA," said the British Bankers Association in an emailed statement.

However, the agreement announced Wednesday didn't reach countries where people tend to hide their money for tax evasion, said Rebecca Wilkins, a senior counsel on federal tax policy for Citizens for Tax Justice, an advocacy group focusing on tax policy at the federal, state and local levels.

"It's going to give some people a way out, a loophole," she said. Further, "it remains to be seen what the Treasury will ask for when it exchanges information with these governments."

A Treasury official speaking on a call explaining the rule said the department is working on agreements with other countries, and is open to a government-to-government approach on information sharing.

Much of the administrative burden of identifying U.S. accounts by foreign financial institutions under the proposed rule was reduced to hew closer to processes they already conduct as they check out money-laundering risks when doing due diligence on prospective customers, Treasury said.

But that doesn't mean there isn't more work to be done for banks to comply. The rule clarified the value thresholds necessary to report an account to the IRS, said Tony Wicks, director of AML solutions for NICE Actimize, which makes risk-management platforms for financial institutions.

"It's lightened the burden but it definitely has not gone away," Wicks said. "Many institutions had been putting plans on hold; the starting pistol is gone and they have to get off the box quickly to get their systems in place."

Individuals are already feeling the effects of the law, which requires them to disclose more information about their overseas holdings on their tax returns for the 2011 tax year.

The Treasury official speaking on the conference call said Congress, when passing FATCA, estimated the loss of tax revenue via offshore evasion to be about $1 billion per year, but the official emphasized that it's impossible to know the actual figure without numbers to base it on.

The Wall Street Journal reported on the proposed rule, and there's more here, here, here, here and here.