FATCA Update

The commencement date for FATCA framework took effect from 1st July 2014. We are glad to note that all member banks are now registered as participating FFI. While registration is an important aspect of the process, complying with the provisions of the framework is critical. This involves establishing internal compliance process to comply with the provisions of the Act particularly on the aspect of on boarding of new customers and monitoring existing customers. Compliance requirement on FATCA withholding on fixed determinable annual periodical income (FDAP) for all new accounts commenced on 1st July 2014. In the New Year, participating FFI are expected to have commenced by the 1st January 2015 to withhold any undocumented individual preexisting high value account. In addition to comply with this withholding provision, participating FFIs should prepare to begin FATCA reporting on Form 1042-S for U.S source FDAP income for calendar year 2014. The due date for this reporting is 15th March 2015. Although the country is yet to establish an Intergovernmental Agreement (IGA) with the American Government, the Government of Kenya through the National Treasury has committed to support compliance of this framework. To demonstrate its commitment to the process, the National Treasury constituted a 10 member taskforce comprising of representatives drawn from CBK (2); KRA (2); NT (2); KBA (3) and AKI (1) to guide and expedite the IGA process for the country. KBA was also nominated to serve as the Secretary to the taskforce while National Treasury was appointed to chair the taskforce. By end of last year the taskforce had met thrice and is in the process of compiling a list of exemptions that the country will seek to negotiate with the Internal Revenue Services (IRS). While all effort is made by the taskforce to fast-rack the IGA negotiations, member banks are encouraged to continue to comply with provisions of the framework.