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How Will FATCA Impact Companies?

Foreign banks now have to identify their U.S. account holders.

The Foreign Account Tax Compliance Act, which took effect in 2010, requires foreign financial institutions to tell the Internal Revenue Service about any account belonging to U.S. residents.

The law goes further, as Forbes magazine explains, charging account holders who do not identify

The Foreign Account Tax Compliance Act, which took effect in 2010, requires foreign financial institutions to tell the Internal Revenue Service about any account belonging to U.S. residents.

The law goes further, as Forbes magazine explains, charging account holders who do not identify themselves a 30 percent tax on any transfers or payments. A side effect of this act is that many American residents are facing roadblocks when they want to establish "legitimate new accounts abroad," the source notes. 

Writing for GTNews, Michael Wright of KPMG says that corporations need to have the law on their radar, since the IRS will be working through FATCA investigate and measure whether U.S. taxpayers are observing the letter of the law.

Foreign financial institutions in particular will need to establish controls and systems for complying with FATCA. Wright notes that FFIs should start, if they haven't already, to train the senior managers on the financial and legal implications of failing to comply, while also assessing how much work needs to be done to ensure customer types, business units, reporting software and other factors follow FATCA's requirements.

He also tells FFIs to make customers aware of the impending changes, he advises, and also appoint one team or several (depending on the number of countries in which the FFI operates) to lead the compliance initiative.