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FATCA - Cost of Compliance for Foreign Banks

By 2013, international banks need to be ready to comply with the U.S. Foreign Account Tax Compliance Act (FATCA), which requires them to report U.S. citizens' offshore bank accounts to the Internal Revenue Service (IRS).

The cost of compliance is expected to be steep, and the Institute of International Bankers (IIB) and the European Bankers Association (EBA) predict that large financial institutions may have to spend $250 million each over the next two years.

Not preparing for FATCA is also a costly option, as institutions that do not identify accounts held by U.S. taxpayers may be charged a 30 percent withholding on certain U.S sourced income payments to the institution. 

"We are talking about huge financial institutions operating all over, which means they need to understand the privacy laws of every country in terms of what information they are allowed to gather, so the costs could clearly be in the billions in aggregate for financial institutions around the world," Ellen Zimiles, New York‐based managing director with Navigant, told The Wall Street Journal.

The Treasury Department and the IRS are expected to release additional guidance on FATCA this summer, giving financial institutions some room to lobby for lighter restrictions, which may reduce compliance expenses.  


A Short Guide to FATCA

The government’s efforts to combat tax evasion have culminated in the Foreign Account Tax Compliance Act. We discuss the steps financial institutions should consider taking today to build a compliance program to prepare for FATCA's enactment in 2013.

 Article / White Paper


Ellen Zimiles

As the Head of Global Investigations & Compliance practice and leader of the Financial Risk & Compliance segement, Ellen is a leading authority on anti-money laundering, regulatory and corporate compliance, fraud control, and public corruption matters.

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