Standard Chartered conducts session on FATCA for banking leaders

Standard Chartered’s Head – Compliance Training, India and South Asia P. Ananthakrishnan (Ananth) conducted an interactive and impactful session on the Foreign Account Tax Compliance Act (FATCA) for senior managers and compliance officers of Banks and Financial Institutions (FIs) in Colombo on 29 May. The event was organised under the auspices of the Association of Compliance Officers of Banks, Sri Lanka (ACOB).  

Ananthakrishnan during his presentation said over the years the United States (US) Government had investigated a number of instances of US citizens, US residents, US green card holders and foreign entities where there is more than 10% US ownership (together termed as ‘US persons’) of   tax evasion through investments in overseas assets. As a consequence, FATCA was   enacted in March 2010 to detect and prevent tax evasion by US persons.

He said the main provisions of FATCA will come into effect from 1 January 2014 and this deadline was only about six months away now. Ananthakrishnan explained that FATCA requires ‘Foreign Financial Institutions’ (FFIs) i.e. banks and FIs in Sri Lanka to identify and report on the financial accounts (i.e. current accounts, savings accounts and fixed deposits) of their customers who are US persons or suspected US persons (i.e. those who are not able to give documentary evidence to the contrary) to the Internal Revenue Service (IRS) of the US.

Any FFI that does not comply with FATCA by 31 December 2013 and does not sign an agreement with IRS will face Withholding Tax (WHT) of 30% on the income they receive from ‘US sources’. Besides this, FFIs will also have the obligation to deduct 30% WHT on any US source payments they are making to any other FFI or any other Non-Financial Foreign Entity which is not compliant for FATCA.

Ananthakrishnan emphasised that FATCA will have a widespread impact on banks and FIs and will require banks to adopt significant changes to their KYC systems and processes to identify US persons and report the details required to IRS. This will also have a huge impact on cost to implement these changes.

Despite being a US legislation, he said FATCA has extra territorial impact as it requires sharing of customer information and data with an overseas regulator. This could have implications in terms of amendments required to the banking laws and regulations to permit such disclosures. He said that governments of some jurisdictions have already signed the Inter Governmental Agreement (IGA) to facilitate sharing of information.

He said with the key requirements of FATCA coming into effect on 1 January 2014, the session was intended to assist banks and FIs in Sri Lanka to understand the requirements and implications and gear themselves up along with the other industry players, regulators and the Government to meet the demands and challenges of FATCA.

Gayani Godellawatta, Head of Compliance, Standard Chartered Bank, commenting on the session, said: “Standard Chartered takes pride in sharing with the banks and regulators in Sri Lanka the best practices and knowledge on key compliance areas through experts like Ananth who has  in-depth understanding of compliance and regulations. This sharing of knowledge is a reiteration of our commitment to being ‘Here for Good’. Standard Chartered started this process of knowledge facilitation in Sri Lanka about three to four years back and has conducted sessions in collaboration with the Compliance Officers’ Association over the last few years.”

Ananthakrishnan draws on 30 years of industry experience, 19 years of which have been at Standard Chartered where he has held senior positions in business and compliance in India. He rolls out training on banking laws, regulations and compliance policies across the South Asia region to business and functional managers in the bank and externally to other bankers, compliance officers and regulators.

The session, which was held at the People’s Bank Training Centre, was attended by over 65 senior managers from various banks in Colombo. Participants felt the session was extremely useful for banks and FIs to understand the implications of FATCA which was a critical area for banks. They felt that a complex subject like FATCA was dealt with in a very simple and practical manner by Ananth and complimented him for the same.