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Opinion: ‘Global FATCA’ Clock Starts Ticking For Fund Management Industry, Warns Linedata

By Justin Hayes, Product Manager, Linedata Services

When the FATCA returns and listing deadline of 1st June ends, financial institutions must quickly turn their attention to even more expensive and burdensome regulations. Justin Hayes, product manager at Linedata, the leading international software and solutions provider, outlines the impact the OECD Common Reporting Standards, dubbed ‘Global FATCA’, will have on the industry.

“Under the OECD Common Reporting Standards, dubbed ‘Global FATCA’, financial institutions have just seven months to get their act together as they will be required to track unprecedented volumes of investor information from the start of next year. This will be an unparalleled regulatory headache and a steep learning curve for fund administrators and investment managers. In essence, this is FATCA ‘on steroids’.

“These multilateral regulations, which stem from G20 efforts to crack down on international tax avoidance, will provide a new single global standard for the exchange of tax information, bringing thousands of financial institutions across the world and millions of individual citizens within the orbit of a global regulatory regime.

“Operating on a multi-jurisdictional level, investors who were not previously impacted by FATCA will now have their financial information shared with other jurisdictions on an annual basis.  For financial institutions, including administrators, this will mean some client accounts will need to be reported across multiple jurisdictions, adding to the pressure on resources and costs to gather and report this information.

“The new regime will be very challenging for fund managers and administrators due to the sheer volume of reporting required. There is also likely to be an issue that jurisdictions may interpret the rules differently, adding another layer of complexity for global financial institutions to navigate.

“The new global standard could also be intrusive and introduce a strain on investor and client relations, requiring administrators to carry out additional checks on investors in order to report to the authorities.

“While there is not tax withholding for non-compliance, as with the US FATCA, financial institutions need to start implementing the changes, because complying with the rules is so involved for affected firms and individual member states may impose their own penalties for non-compliance. With more than 50 jurisdictions having signed up as of December 2014 and a further 46 committed to join, there is an international impetus around this initiative.”

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