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FATCA: Implications for banks 

Under FATCA, a 30% withholding tax applies to any US payments (interest, dividend or sales proceeds) made to a Foreign Financial Institution (FFI) unless the FFI agrees, pursuant to a disclosure compliance agreement entered into with the U.S. Treasury, to provide information with respect to each ‘financial account’ held by ‘specified U.S. persons’ and ‘U.S.-owned foreign entities.’

The term FFI may include banks, brokers, insurance and reinsurance companies and investment funds, including private equity funds, hedge funds and real estate funds, as well as certain professionals of the financial sector (PFS).

 

It is important to note, that the new disclosure requirements are in addition to the requirements imposed by the ‘Qualified Intermediary’ regime.

 

Who is impacted?

Any bank invested in the U.S. market for its customers’ accounts or for its own account and any bank which is part of a group which invests in the U.S. market for its customers’ accounts or for its own account.

What is the impact?

This new reporting and withholding regime presents significant challenges for FFIs in identifying US accounts and subsequently identifying and evaluating relevant payments for compliance. In order to comply with the FATCA provisions and to avoid the 30% withholding tax, the FFI must enter into a disclosure agreement with the U.S. Treasury and agree to:

 

  • identify U.S. investors;
  • comply with verification and due diligence procedures;
  • perform annual reporting;
  • deduct and withhold 30% from any passthru payment made to a recalcitrant account holder or another institution without an FFI agreement; and
  • comply with requests for additional information.

How we can help

Complying with the FATCA rules will not only be a major compliance task to fulfill due to extended information reporting but will also influence your business strategy and the markets you serve.
 

The impact on the investment funds is not negligible and requires assistance of specialists.

 

  • Development of Implementation Plans : assistance in developing realistic, pragmatic, plans by utilizing our experience gained in other projects of similar scope and our deep understanding of the technical requirements.
  • Payment Mapping Analysis : assistance with conducting a mapping exercise to determine where your business is impacted and the nature of accounts to which payments are made.
  • Anti-Money Laundering (AML)/Know Your Client (KYC) Reviews : performing a review of the procedures in place for AML/KYC purposes to ascertain whether these will also be sufficient to ensure compliance with FATCA requirements.  We can also assist by developing new account opening procedures to facilitate FATCA compliance and provide training for staff responsible for these processes.
  • Systems Analysis : identify the extent of current capabilities and where new functionality or data records will be needed.  We can also assist in developing or reviewing specification documents and, to the extent we are permitted from a regulatory perspective, to implement and test new functionality.
  • FATCA Help Desk : help desk services that enable staff specified by clients to call with any technical questions related to FATCA.

     

     Consult our FATCA Workshop brochure.pdf (250 KB)

     

     Consult our FATCA Implications for banks brochure.pdf (228 KB)

     

    Get in touch with KPMG

    Contact

    Georges Bock

    Partner

    Tel. +352 22 51 51 - 5522

    georges.bock@kpmg.lu

     

    Gérard Laures

    Partner

    Tel. +352 22 51 51 - 5549

    gerard.laures@kpmg.lu

     

    Frank Stoltz

    Director

    Tel. +352 22 51 51 - 5520

    frank.stoltz@kpmg.lu

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