FINANCIAL institutions and the Government are only just waking up to potentially damaging new US legislation that has been in the works for years.

Sector players say they are bringing legislators and regulators here up to speed ahead of next year’s implementation of the new law, the Foreign Account Tax Compliance Act (Fatca).

Jamaica National Building Society (JNBS) General Manager Earl Jarrett accepted that “the law is in place”, as it was signed into legislation in 2010, after an earlier version with a different name was first proposed in 2007 by then Senator Barack Obama.

Switzerland-based American Citizens Abroad (ACA) has launched a campaign to have the Act repealed, which a member of its board described in a speech to a tax summit in London last year as “an unacceptable manifestation of US financial imperialism”.

But the subject is believed not even to have figured on the agenda at the Summit of the Americas in Cartagena, Colombia, over the weekend.

“It (Facta) has not been an issue that Caricom has found space to have a conversation about,” Jarrett said at yesterday’s Observer Monday Exchange. “In fact, local legislators have not had a conversation about this law and how it will impact us.”

He thinks, however, that the Government can still seek an alternative arrangement, such as shifting the reporting requirement to the authorities.

“People are trying to negotiate accommodations and we are seeing where some countries have been able to negotiate, particularly in Europe, for the relationship to be between the regulator of banks (and not the individual banks) and the IRS,” Jarrett said.

Indeed, France, Germany, Italy, Spain, and the UK have formed partnerships with the US Treasury aimed at implementing a government-to-government Fatca framework.

JNBS’s compliance officer, Tasha Manley, said that “Fatca partners are in a far superior position than other countries” because the burden has been removed from the financial institutions. Importantly, “the IRS have said that they will consider other Fatca partners” which creates an opening for Jamaica.

Fatca presents additional costs mainly to do with the many layers being added to existing reporting requirements, which have been enhanced over the past decade through tough anti-terrorism measures such as the US Patriot Act.

“We have some pretty robust anti-money laundering and anti-terrorism legislation that have passed,” said GraceKennedy Financial Group CEO Courtney Campbell. “The banks were all compliant with them. On top of that, the regulators implemented the Proceeds of Crime Act.”

The new requirements already pose significant challenges in identifying who are “US persons”. However, none of the previous legislation required banks to report individuals’ bank balances.

Domestic firms also face the possibility of a portion of their funds — 30 per cent — being withheld in the US, should they not sign an agreement with the IRS by mid-2013 and start reporting on their clients who are classified as “US persons”.

Faced with onerous new rules, many non-US financial institutions abroad are already closing American clients’ accounts, the ACA said in a letter addressed to the IRS two weeks ago.

“It is not just bank accounts of Americans resident in the United States, but also Americans working and residing overseas in the country where the foreign financial institution (FFI) operates that are being closed,” said the ACA’s letter to the IRS.

It went on to say that Americans working abroad are also losing access to foreign pension plans and foreign life insurance contracts, students studying abroad faced difficulty opening bank accounts, and even US companies aiming to establish a presence abroad to sell US products find it difficult to access FFIs.