Australia is just not ready for the ‘know your customer’ challenge that is FATCA. A partner specialising in forensics and financial crime at Deloitte, Graham Dillon, says Australian super funds have not even responded adequately to the five year-old anti-money laundering obligations, according to the latest stakeholder survey from the supervising body, Austrac. “So you would have to doubt how well-prepared super funds and funds managers are going to be for a further test of their know-yourcustomer procedures,” Dillon said.
He noted that several large global financial institutions had estimated their costs of compliance with FATCA would exceed $100 million apiece. Noelle Kelleher from Deloitte’s superannuation practice observes many funds wrongly assumed their members would be granted an exemption from FATCA, whereas only single-employer corporate funds had been definitively relieved. More information on exemptions will be provided throughout his year and next, before the planned start of FATCA on the first day of 2013. Kelleher said funds had no basis for believing that FATCA would not apply to them. However, she did sympathise with the notion that few would-be American tax dodgers are likely to choose Australian super as their medium of choice, particularly given they would not be able to access the illgotten gains until they are 65.
FATCA seeks to identify US taxpayers with accounts at foreign financial institutions (FFIs), and attempts to enforce reporting of those accounts by imposing withholding tax. Apart from the extra account verification requirements, which Dillon said required funds to “prove a negative” in terms of their members’ non- American status, the costs of noncompliance with FATCA are real. Technically, the application of the law to financial institutions licensed outside the US is voluntary, but the US will apply sanctions to institutions it knows to be harbouring US tax-avoiders. Under those sanctions, a withholding agent will be obliged to withhold 30 per cent on withholdable payments to FFIs whose procedures are found wanting by US Internal Revenue.
So much for last month’s Obama- Gillard lovefest. Deloitte has prepared a checklist of what FFIs – including super funds and funds managers – are required to do under the FATCA regime. • FFIs and their 80 per centowned affiliates are required to enter into an agreement with the US Internal Revenue Service (IRS). • Reporting of information on certain US customer accounts at least annually including deposit accounts, custody accounts and any equity or debt securities (except for listed securities which are regularly traded ). This reporting must include names, addresses, account balances and account movements.