FATCA for Hedge Funds: Eight Common Pitfalls

by Keith Diamond, Director and AML Compliance Officer at Kaufman Rossin Fund Services

For hedge funds in most jurisdictions, the first wave of registration and reporting deadlines surrounding the Foreign Account Tax Compliance Act (FATCA) is now in the rearview mirror, but a significant amount of work likely remains. Due to the staggered approach regarding the definition of a reportable investor in 2014 versus 2015 and the increasing complexities of future reporting, it’s a great time for investment managers to review where they stand in regards to FATCA compliance. Additionally, for those launching funds in 2015 and beyond, there are many lessons to be learned from the experience thus far.

FATCA in review: No one-size-fits-all approach

The common structures for hedge funds that allow them to attract U.S.-taxable, U.S.-tax-exempt, and foreign investors (e.g., mini masters, master-feeders, or parallel funds) may create confusion for fund managers trying to understand how FATCA affects each of these vehicles. Unfortunately, there is not a one-size-fits-all FATCA reporting approach because each jurisdiction has its own set of agreements, rules, local registration requirements, reporting framework and deadlines.

While most fund vehicles are likely affected by FATCA regardless of the jurisdiction, management companies and investment advisor entities typically fall under the “deemed compliant” definition, which exempts these entities (whether formed in the U.S. or abroad) from registration and certain reporting requirements.

To continue reading, and learn about the Eight common pitfalls investment managers should try to avoid, click here

About Keith Diamond

Keith Diamond is a director, serves as the AML compliance officer and oversees the investor services group. In addition, he also works closely with Kaufman Rossin Fund Services’ chief technology officer to ensure that the company’s in-house software development team continues to deliver cutting-edge technology. He has been with the Kaufman Rossin family since 2003.

Prior to joining KRFS, Keith gained 10 years of financial services experience, including more than four years working for KPMG Consulting's financial services group. During this time, he worked in New York, Luxembourg and London helping large asset managers implement strategic business and technology solutions.

Keith earned his bachelor's degree in quantitative economics at Tufts University and his MBA in finance from New York University.

About Kaufman Rossin Fund Services

Established in 1994, Kaufman Rossin Fund Services (KRFS) is an independent full-service provider of administration services to the investment community. Born out of one of the nation's top CPA firms, KRFS maintains top-tier technical skills, quality control practices and technology. KRFS "Goes Beyond" its competition by delivering expertise in the complex areas of taxation, accounting standards and financial statement preparation. Clients worldwide rely on KRFS for startup, accounting and valuation, back-office outsourcing, investor services, tax services, customized reporting and corporate services. KRFS has offices in New York, Boston, San Francisco, Dallas, Cayman and Miami. Go beyond the numbers at krfs.com.