While the commercial banking sector in Guyana is yet to make a pronouncement on how it is likely to respond to the US’s new Foreign Account Tax Compliance Act (FATCA) which requires the banks to submit to the Internal Revenue Service (IRS) financial information on clients deemed by Washington to be “persons of interest,” the new law, which comes into effect in January 1, 2013 is making waves in social, political and business circles in Jamaica.
Indeed, the new law has already triggered discussions between some commercial banks in Jamaica and the local regulator, the Bank of Jamaica.
The new federal law sets out penalties for banks and other final institutions outside the US that decline to turn over financial information on US citizens holding accounts in those countries and Jamaica continues to make arguments that reflect its discomfort with the law and which seek to assert both the country’s right to its sovereignty and the right of holders of accounts in its banks to privacy.
Yesterday, the Jamaica Gleaner reported that its nationals who frequent the United States including businessmen, athletes and entertainers could expect to see their income and savings above US$50,000 come under scrutiny under FACTA. “The implementation of the US legislation means that the US will have more information than even the Jamaican Government on the financial and spending patterns of countless Jamaicans who are not even green card holders,” the Gleaner said.
However, the Gleaner article says that local institutions and policy makers are likely to move to comply with the new US law in view of the penalties for non-compliance. The magnitude of public importance attached to the new US law has given rise to the convening of public fora in Jamaica including a Gleaner Editors’ Forum last Wednesday.
Non-compliance with the new US law when it comes into force in January next year will trigger penalties that will include the withholding of 30 per cent of US source income should any account holder or foreign financial institution fail to comply. The Gleaner quotes an official of the auditing firm Deloitte as saying that financial institutions in Jamaica had “no option” but to comply.
While the FATCA issue has become a matter of public discourse in Jamaica, local banks and other financial institutions are yet to make any pronouncement on how they intend to respond to the new US legislation. Those commercial banks to which this newspaper has spoken alluded to the likelihood that the issue might, at some stage, reach the forum of the Guyana Bankers Association though up to the time of this story we had confirmed that no such discussion had taken place.
One consideration that might reportedly give rise to serious contemplation on the parts of commercial banks is the likelihood that compliance with the law might trigger the closure of accounts by long-standing customers. The Jamaica National Building Society (JNBS), according to the Gleaner could see up 30 per cent of its accounts and half of its deposit flows affected by FATCA. Setting aside speculative comment on the issue no official information has been forthcoming regarding where local commercial banks stand in relation to FATCA though, unofficially, some officials are prepared to say that the close ties between the commercial banks that operate here and the United States are sufficient to provide an assurance that they are unlikely to want to run the risks of facing the penalty associated with non-compliance.
