Get Your FATCA Straight
Do you remember the scene from The Bourne Identity where Jason Bourne heads into a Swiss bank with no identification other than his fingerprints and then proceeds to open a safe deposit box filled with passports, money and guns? Most people probably think that is nothing more than another overly-dramatized Hollywood scene. But believe it or not, it’s more feasible than it seems. There are many foreign countries with very strict customer privacy laws protecting their banking customers, so it’s possible that Jason Bourne would not be asked for his name or a photo ID.
What is FATCA?
If you work in financial services or compliance, chances are you’ve heard of something called the Foreign Account Tax Compliance Act (FATCA). The intent of FATCA is to help curb the $100 billion the IRS estimates it loses annually on what it refers to as “offshore non-compliance” (otherwise known as tax evasion). FATCA aims to curtail the IRS’s losses by requiring Foreign Financial Institutions (FFI) to report information back to the IRS about people and companies that each FFI identifies as those who should be paying U.S. taxes.
Whom Does FATCA Affect?
On the surface, FATCA seems like a U.S. foreign policy that only affects foreign banks; but in actuality, it is a complex, data-intensive effort that affects most financial institutions in the U.S., as well as those abroad. One of the reasons for this is that most U.S. banks and investment firms have at least a few mutual funds, hedge funds, and the likes, structured as foreign legal entities. They do this for the purpose of achieving tax advantages or certain other investment objectives. Therefore, FATCA’s impacts are felt both near and far.
Kenway and FATCA
Recently, Kenway began a project at a large financial institution (LFI), where one of the goals is to assist with FATCA compliance activities. You may be wondering why a Management and Technology Consulting firm like Kenway was chosen over the “Big 4” accounting firms that typically do this type of work. The answer lies in the data…literally. The problem for this particular LFI (and many others) is that there was just as much undefined and inaccurate data as there was good, accurate, and analyzable data. The LFI didn’t know where to start, let alone how to execute the data analysis that would tell them which investors were “FATCA-relevant.”
The Recipe: A project team mixture of regulatory compliance experience, along with Kenway’s Business Intelligence and data analysis expertise.
The Result: By providing the right mix of experience and expertise via our services based approach, Kenway accomplished in a matter of a few hours, something that this particular LFI had been attempting (and struggling) to start for the previous several months. The final deliverable was an executive summary which sliced, diced, and subtotaled the amounts and types of investors that were invested in the LFI’s various funds. Armed with this information, the LFI will be able to make strategic business
decisions on where it should focus its time and resources; increasing cost effectiveness, and lowering its risk of non-compliance.
To me, this was a validation of why I feel Kenway is an invaluable business partner to all of our clients. Not only do we have technical “know how” and tools, but we also have the diverse industry experience necessary to provide the business insight to get a complex and ambiguous job like this done correctly, efficiently, and cost-effectively.