Investment managers unprepared for Fatca introduction

Gavel lawbooksAs more regulation continues to come their way, a significant number of European asset managers are not prepared for the introduction of the US Foreign Account Tax Compliance Act (Fatca). Just 32% expect to be ready to meet the January 2013 deadline and a whopping 42% have not even assessed the time needed to comply. The new regulation aims to reduce tax evasion in the US, targets US tax payers, wherever they may be in the world. The figures quoted above may indicate that asset managers are underestimating the impact Fatca may have on their business. However, KPMG, the consultancy that ran the survey, found that 39% expect to change their distribution model and 32% expect some level of change to the structure of their product range to implement the requirement. At its most straight forward, any foreign financial institutions investing in the US economy or that has US investors in its funds will have to be Fatca compliant. But in reality, all investment funds will have to identify US persons that hold affected accounts or financial instruments on a direct and indirect basis - across the global business. KPMG explained that identifying and providing the relevant information to the IRS will pose a major challenge. "Non-participation with the Fatca regime will be expensive and customer relationships will be at risk if clients are unnecessarily subject to withholding or have confidential account information provided to the IRS," the consultancy said. Georges Bock, global chairman of KPMG's funds tax group, said: "Fatca represents a major challenge for the investment management community. It impacts on product and market strategy, distribution strategy and business models, as well as the fundamental configuration of funds and legal entities. Its scope is significantly broader than the current qualified intermediary regime and its requirements cannot be met with existing processes and systems. "In order to comply with Fatca, fund operators will have to fundamentally change their operating models, from the identification and documentation of customers, through the product portfolio, to internal processes and IT systems. Many are finding this process incredibly complex and time consuming." ©2011 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.