FATCA and other regulations

During the last few years, governments have introduced new regulations at country, regional and global levels. The pace and complexity of regulations shows no sign of slowing down for the foreseeable future. Anticipating and managing increasing regulatory requirements is a critical issue.
Financial institutions are affected in every aspect of their business ranging from capital requirements, customer tax compliance, product registration, licensing of personnel and units based on their activities.

The United States has been particularly active in this regard with financial institutions having to digest and navigate issues ranging from the Offshore Compliance Initiative of the Department of Justice, the Foreign Account Tax Compliance Act (“FATCA”) and the Dodd–Frank Wall Street Reform and Consumer Protection Act.

Increased attention by the U.S. government on the tax compliance of its taxpayers maintaining accounts at foreign financial institutions has put pressure on institutions to remain compliant with U.S. law. FATCA is a particular challenge, requiring non-US financial institutions to agree with the U.S. Internal Revenue Service (the “IRS”) to perform due diligence procedures to determine the identity of account holders and to report on their U.S. account holders.

Once implemented, FATCA will require banks to review the ownership of all accounts, including accounted held by legal entities and structures, in order to identify substantial U.S. owners. FATCA also requires banks to collect corresponding documentation, report detailed information to the IRS and withhold taxes where applicable. Many implementation related issues relating to FACTA still need to be addressed but implementing surely will be challenging and costly.

Increased attention to compliance issues relating to the Investment Advisers Act of 1940, as amended, also is relevant for Swiss based financial institutions with U.S. resident clients. The broad scope of the activities requiring registration under the Advisers Act comes squarely within the typical offering of a Swiss based bank.