The Internal Revenue Service (IRS) had previously stated it would issue its draft FATCA regulations by 31 December 2011. However, with the clock ticking towards 1 January 2013, when the Act comes into force, foreign financial institutions (FFIs) are still waiting for publication of the preliminary guidance.
At this stage the IRS cannot confirm exactly when it will release the draft FATCA regulations, but says it expects to issue them this month.
Furthermore, it is rumoured the IRS' delayed regulation draft may not include clarification on how the 'pass thru payments' proposal will operate. Rumours suggest the regulation draft also lacks details regarding the FFI agreement, which institutions are expected to sign with the IRS as of 1 July 2013, committing firms to a series of reporting and withholding obligations.
The FATCA legislation will impact financial institutions along several points in their client value chain. They will need additional client data, new reporting mechanisms and systems to achieve compliance. Implementing the necessary changes by the 2013 effective date will be intensive and difficult to achieve, as it crosses many different internal groups and requires a range of technical expertise.
Information on the fine points of the 'pass thru payments' and FFI agreement are of critical importance for UK banks as they assess the impact of FATCA on their businesses and how to meet the Act's stipulations. Without these crucial details, FFIs will be severely hampered in their attempts to scope and implement their FATCA programmes and budgets.