To postpone the application of the law 'leaning back' does not prevent the U.S. in compliance with pre-Arab banks

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To postpone the application of the law 'leaning back' does not prevent the U.S. in compliance with pre-Arab banks

Adnan Ahmed Yousif

Tuesday, August 6, 2013

Treasury Department decided to delay the start of American labor law compliance with U.S. tax (leaning back) for six months until 1 July 2014 to give foreign banks a chance to better prepared to comply with the law. And the challenges and difficulties faced by non-US banks, including Arab banks, to comply with the law and many well-known, expressed as a large number of banks concern about the cost and scope of application of the law, it is sometimes inconsistent with local laws to protect information on the owners of the accounts. Many banks has been unable to develop the technical and legal arrangements necessary for compliance. To help solve these problems of legal work and the U.S. Treasury Department to formulate agreements allow governments where she works non-American banks from dealing as an intermediary entrusted with the information ministry.

In regard to Bahrain, the Central Bank issued a few months before a speech for all banks operating in Bahrain demanded the completion of preparations by the end of the year to comply with the law.Bankers' Association held in Bahrain for meetings on the discussion of this subject and the nature of the law and its implications for local banks, in conjunction with the issuance of U.S. Treasury final rules to comply with the tax law of America.

Included rules issued by the U.S. Treasury Department to give two options for foreign banks, including banks, Bahrain and the Gulf Cooperation Council in compliance with the law. The first model and applied by countries such as Britain, Ireland, Germany, Spain, Norway, Switzerland, Iceland, Mexico, Denmark, 60 countries are negotiating to enter it, requires that the same governments, not banks sign cooperation agreements with the U.S. government. To enter into these agreements, countries need to sign agreement on exchange of information or a double taxation agreement with the United States. Unless expect their governments agreements with the U.S. government regarding the law, financial institutions to enter into bilateral agreements with the U.S. IRS in the form of an individual, but in the event of the signature, the register banks only.

And favors the U.S. Treasury Department this option, this will make compliance with the law easier and cheaper for banks because it will remove a number of legal obstacles, especially secret bank accounts, as are the financial institutions in the country are participating in compliance with the law, and the non-participation of branches and subsidiary banking unit of Bank Gulf certain that Gulf is outside the country will not affect the status of the bank.

Under this model will provide financial institutions in the country reports to the local regulatory authorities in their countries, which in turn will submit reports to the U.S. authorities. The financial institutions will be governed by the agreement signed by the government with the U.S. government and is not a law legislation to comply with U.S. tax.

And most of all that when financial institutions can do their governments to sign these agreements follow the local legislation to combat money laundering and to identify the persons or entities American (foreign non-financial institutions). This will reduce the big picture overtime in the study due diligence procedures for the client.

But under the second option, any failure by the governments of countries to sign agreements directly with the U.S. government to comply with the law, GCC banks should enter into direct agreements with American tax office within the deadlines specified in the law. As well as the need to cooperate with the central banks and the U.S. Treasury Department in the reporting of non-cooperative financial institutions in their countries. Should these institutions to begin work on the study of the due diligence for its customers browsing Learn what is called in the rules of the law «directories U.S.» any possibility of the definition of the American authorities to persons or entities subject to tax, with the establishment of new procedures into effect for new customers and modify systems at the earliest opportunity .

Under the rules of law, citizenship is one of the many conditions relating to the definition of the persons or entities subject to tax. There are a number of other facts that can make a person liable to tax in the United States, regardless of nationality, including, for example, place of birth, and a green card, and continuous residence in the United States.

Due to the ease of application of the first model, especially to comply with the law involves the operating costs of many resulting from the amendment procedures for opening new accounts and follow-up, monitoring and scrutiny, systems and transaction processing and procedures to identify the client used by the foreign banks, and the costs of education and the establishment of a special unit to comply with the law employs staff qualified and experienced personnel and others, many banks began to Arab and Gulf actual move with central banks to persuade their governments to enter into direct agreements with the U.S. Treasury to implement the law.

Therefore, it is expected to convene a number of Gulf governments including the government of Bahrain to sign agreements with the U.S. government regarding the implementation of the law would be reflected positively on the tasks of local banks in compliance with the law, especially as the Central Bank of Bahrain and the rest of the central banks of the Gulf has been a leader always in introduction of legislation and the new global regulations, and the diversity of the Gulf in the banking industry makes it imperative to deal with it according to the latest banking rules, which facilitates the work force and banks can continue to fulfill their vital roles.

 

Chief executive of Al Baraka Banking Group 

 

 

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