Industry leaders have warned the upcoming FATCA regulations from the US are "as big as RDR" and could cost the UK hundreds of millions of pounds.
Schroders' managing director Robin Stoakley said he is concerned fund groups and platforms are not doing enough to prepare for regulation that could be a game-changer on the scale of the Retail Distribution Review.
"FATCA is the elephant in the room no-one is talking about," he said. "I am staggered that this could be such a huge expense for the industry, but no-one is doing anything about it.
"Platforms and distributors will be massively impacted by this as well as fund managers. In many ways it is as big as RDR. Administratively, it is huge."
According to Schroders' estimates, FATCA will cost $500bn globally to implement and $10bn a year to run, and will bring in $1bn of revenue to the IRS annually, with the majority of the costs borne by non-US institutions.
Other estimates have placed the cost to the UK financial services industry alone at £400m, based on investments on behalf of US investors of £240bn.
Stoakley said Schroders has already begun preparing for FATCA, especially in its private banking arm, which will be especially affected by the administrative nightmare the rules present.
"We will have to write to 70,000 or 80,000 customers to get the information required under FATCA, and how many times will we have to write to them before we get a reply?" he said.
"With RDR and FATCA combined, 2013 could be the perfect storm year for us."
Kames Capital's product research manager Gareth Gettinby said uniform record-keeping will be a challenge for the UK fund industry.
"As the deadline approaches, the sense of panic among the distributors will become palpable," he said.
"I would concur that FATCA could be as big as RDR. FATCA is a bigger issue because of the lack of awareness. IFAs have some sense of the implications of RDR for their business, but if you rang up 20 IFAs today and asked them what FATCA is, I would be astonished if one of them knew."
Gettinby added other countries may begin trying to impose their own versions of FATCA to claw back tax from citizens investing overseas, creating a much larger problem.
"There is the fear we may start to get tit-for-tat FATCA-type regulations coming in from different countries, so you have a worldwide problem, which has nightmarish connotations. We are already seeing murmurings on this from Latin America and the EU."
The IMA's head of tax Stephen Lynam said for firms with internationally focused business models, FATCA will present a particularly major challenge.
"It is not an exaggeration to say FATCA could be bigger than RDR for groups selling globally," he added.
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