Banks embrace Foreign Accounts Tax Compliance Act
Commercial banks in the country are slowly embracing the Foreign Accounts Tax Compliance Act (Fatca) which was initiated by the United States government to address issues of tax evasion.
The Fatca was enacted in March 2010 in an effort to improve compliance of US taxpayers with foreign financial assets and offshore accounts.
Fletcher and Evance Head of Research and Consulting, Handsome M’bwana, said Malawian banks and other financial institutions may face huge financial and reputation risks if they do not comply with the Act.
But M’bwana said a few banks have shown interest to comply with the Act.
“A few banks have come forward to enquire on the processes on how they can comply with the Act. This is very welcome, even though we could have wanted all banks to comply.
“There are huge consequences if banks do not comply with the Act and, with our economy, the penalties can result in closure of some of the banks,” M’bwana said.
He further said, in order to enforce compliance, Fatca requires financial institutions, such as banks, to report information to Internal Revenue Service (IRS) about financial accounts held by US taxpayers and entities, in which US taxpayers hold a substantial ownership interest or suffer a 30 percent withholding penalty.
“The legislation affects both personal and business customers who are treated as a US person for US tax purposes,” he said.
Fatca was developed by the United States Department of Treasury and the IRS to combat offshore tax evasion by US nationals.
Fletcher and Evance, leveraging on their expertise in anti-money laundering, regulatory compliance and tax, are helping financial institutions assess Fatca readiness, develop and implement policies and manage the risks associated with Fatca compliance.