Asset managers continue to be challenged by the ‘lack of consistency’ and ‘uncertainty’ around the Foreign Account Tax Compliance Act (FATCA), according to data released by Northern Trust following its annual survey of fund managers.
Consistent with the 2012 survey which saw 55% of respondents citing their greatest challenge surrounding FATCA as ‘uncertainty around the requirements’, this year’s results still show the majority (51%) consider ‘lack of consistency’ and ‘uncertainty’ a major challenge.
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"Although the implementation deadlines have been extended, many of the same concerns are still shared," said Kathleen Dugan, FATCA product manager, Northern Trust.
"Clients are already faced with meeting a multitude of regulatory requirements and feel challenged by the FATCA timelines and the daunting technological challenges presented. Additionally, the potential differences between the intergovernmental agreement rules and the regulations are causing concern," Dugan added.
FATCA, which aims to prevent tax evasion by US persons who use non-US vehicles, such as offshore accounts, to avoid their tax obligations, was originally enacted in March 2010 with plans to generally come into effect in January 2013 (for US financial institutions) and July 2013 (for foreign financial institutions). However, recognizing the complexities of the rules and the delays in publication of certain key guidance, the US Internal Revenue Service and Treasury Department postponed the general implementation date until January 2014.
In a marked increase on the previous year, 48% of fund managers surveyed had projects ‘actively underway’ to manage the set requirements, compared to 20% in 2012.
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By GlobalDataSimilarly, in 2012 66% of the respondents were only ‘broadly aware’ of the implication and had not initiated projects to manage their response to the impending regulation. This number has reduced in 2013 to 46% as the majority of fund managers now have projects actively underway, the report says.
"Given the progressing timeline, we would anticipate a change in the readiness of fund managers to implement FATCA ahead of the January 2014 implementation," said Toby Glaysher, head of global fund services for Europe at Northern Trust.
The survey was conducted among 60 Northern Trust clients in Europe, Middle East and Africa attending a seminar on The Foreign Account Tax Compliance Act (FATCA). It follows a similar survey conducted in 2012 among 30 of Northern Trust’s fund management clients.
Northern Trust’s Global Fund Services business provides custody, fund administration, investment operations outsourcing, and ETF solutions to investment managers across the globe and across the spectrum of asset classes.
