The financial services industry is concerned about the impact that the implementation of the Foreign Account Tax Compliance Act (FATCA) will have on the country's trust and wealth management sectors. Lawrence Lewis, a partner at Deloitte & Touche, who has responsibility for FATCA in The Bahamas, said trust and wealth management are critical parts of the country's attractiveness as a financial services center.
"Trusts and similar structures form a very big portion of what we do, so there is great concern out there in the industry around the actual impact on trusts," he said yesterday. "Will trusts be foreign financial institutions (FFIs)?How will they need to be managed within the context of FATCA and who is going to get pulled into this?" FATCA's impact is an issue that Lewis is expected to address during a regional workshop on FATCA being hosted by the Ministry of Financial Services, the U.S. Embassy and the Bahamas Association of Compliance Officers (BACO) at the British Colonial Hilton today.
"One of the biggest challenges is that they (trusts) have got a little bit more of an interconnected web of participants in their structures so they've got people who are service providers who are going to get pulled into FATCA. They have third parties that they're doing business with. They will have their custodian and broker relationships and will have those on the administrative and accounting sides that are not employees of the fund themselves, and they can have different types of people and entities invested into them," he explained.
"How do they deal with this when it's not all in-house? When you look at the funds, they're responsible for it but not all of the moving pieces are under their direct control. These are some of the things that we see as challenges across the region."
The one-day workshop will be open to the private sector and an invitation has been extended to all CARIFORUM regional governments and other non-CARIFORUM regional governments including relevant regulatory and central government agencies. It will feature presentations by United States Treasury officials from the International Tax Counsel and the Internal Revenue Service (IRS)
He pointed out how there are some jurisdictions like the Cayman Islands and the British Virgin Islands (BVI) that have a stronger funds business than others, therefore the impact will vary across the region.
"Some jurisdictions are a little bit more into funds than others. Across the Caribbean we are probably somewhere in the middle. Of course the Cayman Islands is a funds leader and then you have got Bermuda and the British Virgin Islands (BVI) and us having some level of investment management infrastructure.
"The issues are likely to hit everybody but it's just that for us in The Bahamas, the funds part of our business is not as big as the private bank and wealth management piece of what we do. We will have some of those funds-related concerns but they are likely to be overshadowed by some of the concerns that we would have on our international financial services."
Last week, Financial Services Minister Ryan Pinder announced that the government is working aggressively to meet a June deadline that will determine The Bahamas' approach to the implementation of FATCA.
"We have a deadline of June 1 essentially where we have to make a decision on whether we will undertake an intergovernmental agreement (IGA) and then the one we will undertake. Then we have to finalize negotiations with the United States."
Pinder confirmed to Guardian Business that a recommendation is expected to be given to Cabinet by May.
FATCA was signed into U.S. law in 2010 though the Hiring Incentives to Restore Employment Act. FATCA seeks to identify U.S. taxpayers having accounts at foreign financial institutions and attempts to enforce the reporting of those accounts. It is projected to raise $7.6 billion in tax revenue over a 10-year period.
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