Below are some of David's thoughts – How have you
approached FATCA? What's your biggest challenge? What has the
impact been? Tell us in the comments below.
What issues has FATCA given rise to in Australia?
The implementation of FATCA in Australia is pursuant to a
'Model 1 Intergovernmental Agreement (IGA)' signed by
Australia and the US. This was not formalised until the end of
April 2014. The domestic legislation that implements the IGA also
came late in the piece on 30 June 2014 for a 1 July 2014 start.
This resulted in many Australian financial institutions being
unprepared for implementation of the FATCA regime.
The IGA is the key source document. However, the Model 1 template
uses a drafting style that is less formal than that used in
Australian legislation. Further, a number of concepts are those of
the US regulatory system that do not translate well into the
Australian regulatory system. This has created interpretation
difficulties, and a lack of clarity around which Australian
entities, financial products and business models the FATCA regime
applies to. The Australian Tax Office (ATO) has released multiple
versions of draft guidance on how it interprets the IGA, but there
has been limited assistance from other areas of the Australian
Government. This has resulted in considerable uncertainty about the
regime's application in particular situations.
Many Australian financial institutions expressly restrict their
products from being offered in the US (due to issues with SEC
regulation) and are under the impression that if they do not have
US clients then FATCA does not apply to them. Prior to the IGA this
approach was a reasonable one. However, the IGA and implementing
legislation potentially goes well beyond applying FATCA only to
entities with US clients. In Australia, financial institutions may
be caught by FATCA based on their service offerings, who they make
payments to, as well as the identity of clients – and even
without any obvious US connection.
How are companies/individuals preparing in your
The larger Australian institutions appear to be well aware of
FATCA and have prepared for it - as have the local offshoots of
foreign institutions. Other local institutions have not been well
prepared for FATCA and are often unaware of FATCA, or still in the
process of determining its application to them.
We are seeing more clients requesting legal advice on FATCA. The
legislation has not had a high profile in the Australian business
media to date – but its visibility is increasing.
For companies where FATCA applies, we see three areas of
Amendment to onboarding documentation and processes (including
FATCA due diligence policy);
Screening current client database and obtaining FATCA
information for post 1 July 2014 clients; and
Reporting to the ATO.
What do you think will be common or recurring problems and
In our experience, the biggest difficulty Australian financial
institutions are facing under FATCA is ascertaining whether or not
it applies to them. Once this is ascertained, the application of
the regime is relatively straightforward and can integrate well
into current AML/CTF processes and procedures.
In our view, Australia is yet to feel the full impact of the
FATCA regime as many financial institutions are still determining
the impact of FATCA, and implementing FATCA processes and
procedures. The first reports are not due until 30 June 2015.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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