The financial services industry must work together if it wants to survive under the new Foreign Account Tax Compliance Act (FATCA), according Elizabeth MP Ryan Pinder.
Failure to comply runs the risk of facing strict and hefty penalties.
Pinder told Guardian Business he discussed the issues with some of the country's leading bankers during a FATCA conference held yesterday at the British Colonial Hilton.
He said the legislation imposes a certain requirement for U.S. account holders.
"The banks will have to report to the IRS detailed information about who owns the account, any tax numbers and what the balance is, what the income is, what the gross deposits are. It is a very detailed and intensive reporting mechanism," Pinder said.
He noted that FATCA will not only be a challenge here in The Bahamas, but for all banking institutions.
This is why Pinder suggested that financial institutions formulate a comment letter to the IRS in regards to the legislation's dramatic impact on the industry.
Pinder believes the biggest challenge will be the cost associated with compliance.
"It's going to be a challenge for all banks. It will be a challenge for The Bahamas because I think that the cost factor of compliance is going to be significant. Some of the international banks are planning for it within their organizations, but for some of the local and regional banks, it is going to cause an issue," he explained.
He revealed to Guardian Business that FATCA even extends to the funds management sector.
"It also can extend to funds, investment funds, mutual funds, administrators, fund managers, how do they comply, the cost factor and is that going to negatively affect the fund industry," Pinder shared.
He suggested that all industry partners band together and share the administrative burdens.
This comes days after chartered accountant and Democratic National Alliance (DNA) Carmichael candidate Theofanis Cochinamogulos emphasized the biggest challenge the country will face once FATCA is fully implemented will be having the necessary technology and administrative measures in place.
"It's already embedded in local legislation. However, there is going to be a cost in time and effort in order to meet the United Sates requirements, he said.
Pinder stressed the importance of banks understanding the scope of what is required of them and how to implement it.
"I think the industry in partnership with government has to set the policy and the lead as well, formulate how you are going to address and mandate it because the penalties for not complying are too great in the global arena," he noted.
"We are going to have to comply just like every other country. We can do it as an industry and share the burden and make sure that the integrity of the industry is protected."
The deadline to meet that agreement with the U.S. is June 30, 2013.
Meantime, the Bahamas Institute of Financial Services (BIFS) is expected on host another informational session on FATCA sometime later this year.
Pinder, along with Lawrence Lewis and Tyrone Fitzgerald, presented at yesterday's FATCA seminar.

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