Up to two weeks ago the local banking sector remained tight-lipped on the progress it is making in meeting the conditionalities imposed by the Foreign Account Tax Compliance Act (FATCA) enacted by the US Congress in 2010.
This legislation was put in place to clamp down on non-compliance by US taxpayers who use foreign accounts to facilitate tax evasion. FATCA requires US financial institutions to withhold a portion of payments made to Foreign Financial Institutions (FFIs) that do not agree to report information on US account holders required under the law.
A source close to the Guyana Bankers Association (GBA)—the comercial banking sector umbrella body—says that local commercial banks are unlikely to be numbered among those that will risk US Treasury Department penalties for non-compliance with FATCA. However, the banking sector has been reluctant to make detailed disclosures on the progress being made in putting the attendant mechanisms in place.
A few weeks ago a GBA source told this newspaper that a document articulating the views of the local banking sector on FATCA had been doing the rounds among the various commercial banks and was likely, eventually, to be returned to the Bank of Guyana with the full and final views of the various banks. Last week, another banking official confirmed that local banks had “moved closer to a position” on FATCA though the source said that it was probably for the Bank of Guyana to make that position public. The source added that complying “on paper” with the FATCA mechanisms apart, it was also a matter of the banks putting the “mechanistic things” in place to ensure “efficient implementation.”
Last Friday, seemingly to make allowances for those countries whose banking sectors had been making slow progress in addressing the FATCA requirements, the Treasury Department announced that “it was extending by six months the start of the withholding and account due diligence requirements of FATCA, until July 1, 2014, to allow more time to complete agreements with foreign jurisdictions.” It said that this was due to what it termed “overwhelming interest from countries around the world”. The delay will also provide those FFIs with more time to comply with FATCA, the US Treasury said.
This is the second time the full implementation of FATCA provisions have been delayed. They were originally set to be implemented in 2013. However, banks and other financial institutions in several countries had complained about onerous provisions, which, in some cases, conflict with countries’ banking secrecy and privacy laws. Stabroek Business understands that the parties have been seeking to address those concerns through inter-governmental agreements that allow banks and other financial institutions to first send the information to their own governments, which would then decide on the information to be shared with US tax authorities.
The local banking source told Stabroek Business that one of the concerns that might be raised by some of its local account holders may well be how the US Treasury Department wishes to use the information it receives on holders of accounts with banks in the jurisdiction.
Stabroek Business understands that while the start of withholding and due diligence has been extended will be extended to July 1, 2014, the first report of information under FATCA remains due in 2015. Those reports are expected to contain information about accounts maintained during 2014.
