Highlighting the DMS/SEI FATCA readiness survey, this CNS Business(Cayman News Service) article incorporates the views of Cayman Finance and the Cayman Islands Financial Services Ministry on how investment managers should be preparing for FATCA, which takes effect on July 1, 2014. Read the article below:
Four years after the Foreign Account Tax Compliance Act (FATCA) was enacted and just weeks away from a key deadline on 25 April, a recent survey has found that investment managers appear to be underestimating the time, effort and costs entailed in preparing for its implementation. The survey, conducted by DMS Offshore Investment Services (DMS) in partnership with SEI (NASDAQ:SEIC) across a number of jurisdictions, found that more than a third of respondents have either not yet established a plan or have yet to decide how to proceed when it comes to planning for the completion of investor due diligence.
Over two-thirds (69%) anticipate that the annual cost will be less than $10,000 for each of the following FATCA-related expenses: legal, administration, FATCA Responsible Officer, and FATCA compliance.
“The objective of conducting the survey was to measure the level of FATCA preparedness of investment managers across different jurisdictions representing various size brackets based on assets under management,” said Silvana Zepeda, DMS Director. “DMS hoped to capture data on their interactions with key service providers such as administrators, lawyers, auditors and FATCA Responsible Officers. We were able to identify misperceptions on the cost of compliance and also measured the level of awareness on the upcoming deadlines. The results were enlightening.”
“The information from this survey reinforces to the hedge fund industry that FATCA ushers in a whole new set of compliance regulations and requires a diligent understanding of its implications and immediate action,” said Anne Storie, Chief Executive Officer of DMS. “This paper serves as a timely addition to the discourse surrounding FATCA and as a guide to helping managers better prepare for its implementation in the short time frame that remains.”
Gonzalo Jalles, CEO of the private sector umbrella organisation Cayman Finance, said that FATCA should be a priority for all investment managers and non-compliance is not an option.
“This is a complicated topic and there are lots of things to consider, so Investment Managers, if they have not done so already, need to be engaged with their professional advisers now to make sure that they are taking the rights steps to be ready for FATCA.” Noting that the Cayman government had recently clarified the deadline for registration, considering the fact that Cayman has signed an IGA1, he said the April deadline was not applicable to all Cayman funds from a legal perspective, “although it may be convenient for some to register before that day anyway”.
Commenting on the survey’s findings, the Cayman Islands Financial Services Ministry noted that since February this year, the FATCA Working Group has issued two advisories to industry in order to assist them with their preparations.
“This continues government’s open communication with industry on FATCA, which includes the hosting of several seminars, most recently in conjunction with Cayman Finance; and the consultation with industry regarding which model agreement to pursue with the US. government’s efforts to keep industry informed commenced shortly after the US enacted FATCA in 2010,” a ministry spokesperson said.
Like government, she said, industry also has particular responsibilities that it must undertake in order to be prepared for FATCA. These primarily relate to how reportable information will be collected, managed and compiled, within FATCA parameters, by the institutions themselves. Because industry is central to FATCA compliance, the US has established a website to provide direct guidance to institutions, and it periodically issues guidance notes as well.
“From the feedback government has received from industry, there are still questions about how to prepare for FATCA,” the spokesperson said. “This is to be expected, as FATCA is uncharted waters globally; but again, guidance is available. Government and industry have been working together and also fulfilling their particular responsibilities, and Government has received strong indications that as a whole, our industry is on track with its readiness for FATCA.”