Caribbean banks urge regional governments to sign FATCA agreements with US

The Caribbean Association of Banks (CAB) has strongly urged governments in the region, which have not yet completed the process towards a signed intergovernmental agreement (IGA) under the US Foreign Account Tax Compliance Act (FATCA) with the US to do so speedily before December 31, 2014.

FATCA was enacted by the USA to target non-compliance by US taxpayers using foreign accounts. FATCA requires foreign financial institutions (FFIs) to report to the Internal Revenue Service (IRS) information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest.

The impact of FATCA is far reaching and affects any person, US or foreign, who is involved in making or receiving payments that fall within the scope of FATCA. Failure to comply with FATCA could result in a 30% withholding tax levied on withholdable payments. It may also result in the potential loss of correspondent banking relationships for banks, which are critical to facilitate business transactions with the US.

IGAs make it easier for partner countries to comply with the provisions of FATCA. Under an IGA, FFIs in partner jurisdictions will be able to report directly to a local competent authority; who in turn will report to the IRS.

The latest IRS announcement states that, after December 31, 2014, countries that have not signed an IGA will only be treated as jurisdictions with an “IGA in effect “ provided that they demonstrate “firm resolve” to sign the intended IGA as soon as possible. The US Treasury will review the list of jurisdictions having an agreement in substance (but not yet signed), on a monthly basis, to assess whether any of the jurisdictions should be removed from this list.

Caribbean countries affected by this announcement include Anguilla, Antigua and Barbuda, Dominica, Grenada, Guyana, Haiti, Montserrat, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines and Trinidad and Tobago.

Financial institutions in the region have spent the last few years making the necessary preparations to ensure that they are ready to comply with FATCA. It is now time for their governments to support this work by moving quickly to complete the process of establishing a signed IGA with the US.

Caribbean Association of Banks, Inc is a community of banks and other financial institutions in the Caribbean/CARICOM region, which provides opportunities for discussion on issues impacting the regional banking/financial services community as well as for the sharing of experiences and networking. CAB is an organization dedicated to the advocacy of national and institutional adherence to AML/CFT. It recommends and supports full compliance with the AML/CFT standards in order to protect all financial systems, within the region, from ongoing money laundering and terrorist financing risks offering ongoing training and education for its members.

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