By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

BAHAMIAN financial services institutions must ensure they are ready, from a training and systems perspective, for implementation of the US Foreign Account Tax Compliance Act (FATCA), a senior compliance officer said yesterday.

Robin Scavella, director of compliance and legal services at Scotiabank (Bahamas), and member of the Bahamas Association of Compliance Officers (BACO), told a Bahamas Institute of Financial Services seminar it was important that financial institutions educate their staff on what can and cannot be done under FATCA.

“We have the option of either an Inter-governmental agreement (IGA) I or an IGA II. In the IGA I, the options is financial institutions locally registered would file their US client information directly with a central revenue agency. With the IGA II, you would file directly with the IRS, and in the IGA, the compliance officer is identified as the responsible officer,” said Ms Scavella.

“Not withstanding the IGA, we want to make sure from a training perspective that front line staff and unit heads appreciate what we can and cannot do with US clients.

“You must ensure you are able to communicate with them about seeking the right kind of tax advice. Don’t expose your respective organisations to risk and, from a systems perspective, make sure we start to have the kind of dialogue about how things will change.”

Minster of Financial Services, Ryan Pinder, recently told Tribune Business that preparation towards a June 1 decision on which IGA the Government would choose was going well, with a final industry consultation set to come.

FATCA, which was brought into law in March 2010, is a set of rules set out by the US Internal Revenue Service (IRS) designed specifically to limit tax evasion by US persons living abroad.

Compliance with FATCA will include entering into a Foreign Financial Institution (FFI) agreement with the IRS, if the business concludes that it needs to become a participating FFI.

Under FATCA, US taxpayers holding financial assets outside the US must report those assets to the Internal Revenue Service (IRS) or face penalties.

FATCA will also require foreign financial institutions to report directly to the IRS certain information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest.