The Foreign Account Tax Compliance Act (FATCA) could have a minimal impact on internal operations at leading financial institutions, according a leading accounting firm. Lawrence Lewis, a partner at Deloitte & Touche, noted that FATCA would have "very little direct impact on our internal operations". In fact, under FATCA he said Deloitte would only be viewed as a non-financial foreign entity.
"This would mean that we would provide some information internally to our bankers, showing that all persons involved are Bahamians and that should be sufficient. Most of our work is to advise companies of where they stand and what they face," he shared. The accounting executive pointed out that the local branch of the accounting firm is part of a global network whose company is based out of the United Kingdom.
He also confirmed that The Bahamas is a separate partnership from other jurisdictions and that such partnerships are based on national boundaries. "I suspect that will be the case with most accounting organizations and professional services bodies with a global connection. So, from that standpoint, there should be very little interruption to what's happening in our internal operations," he explained.
His comments to Guardian Business come as the country's industry stakeholders look to put the framework in place so that active negotiations can begin between the Bahamian and U.S. governments early next year. Lewis, who has responsibility for FATCA within The Bahamas, shared that the country's financial institutions are in a better position to prepare, as the deadline to sign on has been pushed back until December 31, 2013. Based on discussions with industry partners, Lewis said many of the institutions were on track to be completed by the original date of June 30, 2013.
"The push back in the timeline is not only good for The Bahamas but for institutions in general, because I don't think institutions were on track to be ready. Some of them would have gotten there but it would have taken quite a lot of effort to get there before June 30, 2013," he explained. Last month, Lewis projected that compliance with FATCA could cost those in the financial services industry millions of dollars in the coming years.
He said the cost attached to become FATCA compliant would depend on the size of the organization and the outcome of the final regulations. "If we look at the sector as a whole, it would definitely be in tens of millions of dollars. A lot of that will depend on what the final regulations are looking like and if there are any kind of collapsed requirements so that a trust company can do all of the work on behalf of the individual trust. That will have a significant impact on the size of the cost," Lewis said.
He also pointed out how trust and wealth management is a critical part of The Bahamas' attractiveness as a financial services center. He believes it's a sector that will undoubtedly be impacted by FATCA's implementation. "I think FATCA is going to do a couple of things. It adds complexity to the operations of the trust business. Offshore people that are bringing assets to The Bahamas are really the people that the U.S. government is after, wanting to make sure that the high net worth individuals are paying the bulk of the taxes. There is going to be a specific focus around trusts and high-net-worth individuals," Lewis added.
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