The key elements of FATCA for funds

Who is affected?

•  Funds will be the counterparty to a Foreign Financial Institution (“FFI”) Agreement with the Internal Revenue Service
• Directors will ultimately be responsible for the strategic decision whether the fund will be a “Participating FFI” and, if so, ensuring compliance
• Managers will need to support the Directors and oversee the implementation
• Administrators will most likely be the party carrying out the work on behalf of their fund client

Education
To ensure FATCA readiness, education regarding the Act, its requirements and the resulting impact to the businesses is key.  This awareness raising will necessitate early, senior-level commitment and communication.

• Strategy and leadership
  Early consideration needs to be given to the financial institution’s strategy and the effort required to comply with the Act.  Decisions need to be made regarding the allocation of resources: people and budget, and project ownership across the businesses involving finance, operations, compliance, legal and tax departments.
• Customer data
  Mergers and acquisitions or technology and system upgrades can lead to institutions having a number of legacy systems, meaning that there is no single source of account holder information to assess what ‘Know Your Client’ (KYC) information is available and what is required to fulfil the FATCA requirements.
• System and technology
  Individual systems must be reviewed and modified to enable new client take-on, reporting and withholding requirements to be fulfilled.
• Counterparties
  The FATCA strategy capabilities and preparedness of all counterparties will need to be assessed as FATCA will affect all funds and their service providers in varying degrees.
• Timing
  The time frame for implementation requires immediate attention.  Although the deadlines have been extended, FFIs have a lot to consider before June 30, 2014.