(MENAFN- Arab Times) The Union of Investment Companies (UIC) has asked the surveillance authorities, such as the Central Bank of Kuwait (CBK) and Kuwait Stock Exchange (KSE), to give clear instructions to financial institutions on the implementation of the Foreign Account Tax Compliance Act (FATCA). In a press statement Tuesday, the union stressed the need to have mutual understanding between Kuwait's government and the American administration, indicating that both parties should specify a clear framework for the application of this law. It also called for laying down the necessary penalty mechanisms. The union pointed out that most governments have exerted tremendous efforts and have taken serious steps to organize the exchange of information through certain channels to be monitored by the concerned authorities in bid to protect their financial sectors and sovereignty. Therefore, the issue should be handled by governments to guarantee the sovereignty; adding that Bahrain, Jordan, United Arab Emirates are negotiating for a bilateral convention.
Risks
Since the surveillance authorities in Kuwait have yet to issue definite instructions regarding FATCA, this might cause problems to the financial institutions here, such as the suspension of dealing with American dollar, boycotting relations with international banks, and the possibility that the American tax authority will seize nearly 30 percent of receivables for these financial institutions from an American source. The Central Bank of Kuwait issued a circular in June 2012, stating that the local law does not allow banks to reveal information regarding their clients to a third party. Accordingly, the financial institutions, which adhere to this law, may face penalties in future. However, the circular indicated that it is possible to meet the requirements of FATCA as banks should take a written abdication or empowerment from the owners of American accounts; thus, banks will be able to disclose details of their American clients to the American tax authority as per FATCA.
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