Local commercial banks are reportedly moving closer to developing modus operandi for compliance with the United States Foreign Account Tax Compliance Act (FATCA) with the banking community preparing for a crucial meeting with the Bank of Guyana to make a presentation on their collective position on FATCA, which could now be a matter of weeks away.
While both the commercial banking community and the central bank have for months, been tight-lipped on the likely local response to FATCA, an official of the Guyana Bankers Association (GBA) under whose auspices the US legislation is being considered, disclosed to Stabroek Business that the commercial banks were currently considering a document prepared by the GBA, which is to be forwarded to Bank of Guyana Governor Lawrence Williams shortly. The GBA official told this newspaper that local commercial banks are currently being provided with an opportunity to thoroughly study the document and that while, up until a few days ago, one bank had already submitted its views, others were still to do so. The official said, however, that the deliberations were pointing in the direction of the local banking community’s full compliance with FATCA regulations.
Enacted in 2010 by the US Government as part of a broader swathe of legislation known as the Hiring Incentives To Restore Employment (HIRE) Act, FATCA requires financial institutions to utilise “enhanced due diligence procedures” to identify US persons who have invested in either non-US financial accounts or non-US entities. The stated intent behind FATCA is to suppress the practice of evading taxes payable to the US government by hiding income overseas.
The foreign financial institutions that decline to comply with FATCA’s stipulations could face significant consequences. The process of compliance requires foreign financial institutions to enter into agreements with the US Internal Revenue Service (IRS) to report specific information on their US account holders. Those institutions will be required to make significant process and technology changes if they are to comply with FATCA.
Caribbean territories have, for some time now, been moving towards becoming FATCA compliant by establishing committees comprising state agencies and commercial banks to work through the processes and the local official conceded that in this regard countries like Jamaica and Barbados are probably ahead of Guyana.
Under FATCA, foreign financial institutions can either report on the activities of their US account holders directly to the IRS or through their own governments – in the case of Guyana, the central bank – which will, in turn, collate and transmit the data to the IRS.
Contemplation of the implications of compliance with FATCA in Guyana and the rest of the Caribbean has been underpinned by privacy agreements between financial institutions and their account holders, in this instance, those account holders who are US citizens or Green Card holders. Earlier this week a senior local commercial bank official told Stabroek Business that there could be “legitimate concerns” that account information forwarded to the IRS could be used for purposes “apart from monitoring attempts to evade taxes.”
A second consideration has to be with the likely costs to local and regional financial institutions of implementing the provisions of FATCA. While no such costs are as yet available for local commercial banks, Stabroek Business understands that estimated price tags for the implementation of FATCA by the more than 600 affected financial institutions in Jamaica could run into around US$30 million each.
Asked to comment on what is seen here as the slow pace at which consideration of FATCA is proceeding, the GBA official told Stabroek Business that the exercise was “a complex and complicated one” and could not be “rushed.”
