FATCA may mean more fraud prevention-management spending in 2013

Financial companies expect to spend more on fraud prevention next year, in part because of the Foreign Account Tax Compliance Act (FATCA).

I just got a copy of Detica NetReveal’s annual Financial Crime Survey results, which points to more security spending among financial institutions in 2013.

Over 100 senior executives from global financial institutions were polled regarding financial crime prevention and 86 percent predicted an increase in their fraud management budget (compared to 45 percent in 2012 and 47 percent in 2011). Meanwhile, 84 percent expect an increased budget for anti-money laundering initiatives in the new year, compared to 34 percent in 2012 and 38 percent in 2011. Financial institutions appear to be bracing for impending legislation such as the Foreign Account Tax Compliance Act (FATCA).

“As the financial services industry stabilizes, we are seeing strong evidence of investment catch-up, with financial institutions increasingly recognizing the power of advanced technology to identify and prevent fraud," George Robbins, UK General Manager & Director, Detica NetReveal, said in a press release. "Regulatory pressures continue to drive compliance budgets, along with new challenges such as FATCA now firmly on the horizon and generating new waves of activity.”

For those unfamilliar with FATCA, here's some detail posted on the IRS website:

The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts. Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. This reporting will be made on Form 8938, which taxpayers attach to their federal income tax return, starting this tax filing season.

In addition, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

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