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Impending and Imperative, FATCA Demands Immediate Action

Capco highlights critical success factors and key steps to FATCA implementation

This Capco FATCA paper explains why you need to know about FATCA, what you need to know, what you need to do, how quickly you need to do it and the next steps to take. Capco has also identified critical success factors and key steps to FATCA-readiness.

FATCA - a major, comprehensive and aggressive instrument of US tax legislation – requires focus, understanding and informed early action.

Large banks are estimated to spend around $250 million each on FATCA compliance, pushing the global implementation bill far beyond the projected $8.7 billion increase in tax revenue for the US.*

Despite banks and government lobbying against it, this aggressive piece of US tax legislation is now only months away from starting to take effect. In this point of view, Capco Partners, Maurizio Bradlaw, Christine Ciriani, Peter Lewis, and Managing Principal, Cyrill Kiefer provide a practical guide to:

  1. Understanding specifically how FATCA will impact you.
  2. Understanding how prepared – or exposed – you are right now.
  3. Understanding what needs to be done in operational terms to get ready for FATCA.

Implementation costs will be substantial, but the price of non-compliance is even greater. The majority of financial institutions worldwide are affected, unless they are prepared to quit US business.

FATCA - ten practical issues to keep front-of-mind:

1. Timing : FATCA remains a timing challenge (not just in terms of key dates but pace of preparation and identification of major milestones)

2. Scope: FATCA is not yet fully defined – the complete legislation is not available in one single statement or announcement – it keeps evolving and needs to be monitored closely

3. Cross-business impact: FATCA will have ‘front-to-back’ impact through financial institutions: from customer awareness and information management, through permissions, data quality and deep operational/systems readiness

4. Cost: FATCA will cost money – it will bring systems and operational change and that will have investment implications; it will be important therefore to take the right actions at the right time, to achieve cost-effective compliance

5. Communication: FATCA will create customer communication requirements – somebody will have to explain data sharing and privacy issues to customers

6. Data quality: FATCA will have major implications for customer data quality and availability (particularly ‘older’ clients of institutions, who may have been customers since the days when data requirements and transparency were less

7. Opportunity: FATCA is not just a challenge, it is an opportunity: to improve customer data quality and availability, to open new dialog with customers, to transform compliance in this key area from a ‘box check’ into a source of operational improvement

8. Imperative: FATCA is a ‘must fix’ not a ‘maybe fix’

9. Impending: FATCA is at a ‘five minutes to midnight’ critical stage – it WILL happen and financial institutions need to have a clear picture of their readiness or lack of readiness (compare the situation with another initiative - MiFID – Markets in Financial Instruments Directive)

10. Immediate: The time to act is NOW

*Sources: SBA (Swiss Banking Association), EBF (European Banking Federation) and IIB (Institute of International Bankers)


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