FATCA Compliance Solution

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Sybil Garrison
6 years ago
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1 FATCA Compliance Solution

2 Agenda 1. About FATCA and Compliance Challenge 2. Making the FATCA Deadline Requires Automation 3. FATCA Solution Vision- Solution Features & Components 4. Q&A

About the Foreign Account Tax Compliance Act (FATCA ) What is required from FFI s Identify : -U.S. Accounts. - Non U.S. FI's Accounts. -U.S. Sourced income (Direct / Indirect ).

3 About the Foreign Account Tax Compliance Act (FATCA ) What is required from FFI s Identify : -U.S. Accounts. - Non U.S. FI's Accounts. -U.S. Sourced income (Direct / Indirect ). -Gross Proceeds from selling U.S. securities. -Indicate if evidencing documents are provided. Report : -Complaint U.S. account holder personal and account information. -Recalcitrant account holder (aggregate number and volume ). Withhold: -Deduct 30% withhold tax on amounts paid to recalcitrant.

4 About the Foreign Account Tax Compliance Act (FATCA ) Challenges to implement FATCA: Assessment of the assets that generate US source income. Review of all existing account holders to establish whether they are American citizens or foreign entities that are substantially owned by Americans. Establish customer on-boarding and know-your- Customer (KYC) procedures to comply with IRS requirements. Understand whether US account holders are registering their holdings with the IRS. Successfully complete the full change program. Change payment system to withhold tax where necessary.

5 About the Foreign Account Tax Compliance Act (FATCA ) Guidelines to implement FATCA: Conduct a FATCA impact assessment Establish a Strong FATCA Program Allocate resources and budget Define FATCA Requirements Choose the optimal solution Define an internal- external communication strategy Focus on on-boarding procedures

The Challenge Information Management Facts from Banks 30% - 40% of Data not available electronically. 10% - 15% of data not available at all. Data spread between 3-6 systems at each bank.

6 The Challenge Information Management Facts from Banks 30% - 40% of Data not available electronically. 10% - 15% of data not available at all. Data spread between 3-6 systems at each bank. Banks require days monthly involving 2-5 persons working full time on preparing compliance/financial reports. Almost all of the banks has data quality issues. Most of the banks has complex Consolidation requirements. * * Statistics based on Pio-Tech independent survey.

7 FATCA Solution Vision : Implementing FATCA requires combination of tools, technologies and expertise : KYC and AML processing. Workflow, Data management and discovery. Document management and archiving. Central customer data base. Reporting toolsets. Single view of your customer

8 Why banks need to look for a centralized technology solution that centralizes data and get a full 360 view of their customers who can be affected by FATCA? q Compliance with FATCA will increase the time required to onboard a new client q The complex customer due diligence requirements required to comply with, and factors such as multi-nationals utilizing a spectrum of financial products, multiple geographies and various risk factors q Implementing change, especially -Impact on Customer Experience - Potential transition from manual Know Your Customer process to automation -Lack of existing core banking, information management and compliance system agility -Technology Enhancements

9 Given the threatening deadline, volume of transactions and accounts involved, along with the training required on the new on-boarding program, taking advantage of technology to automate and accelerate the process is the best way to reduce costs and ensure compliance. There are three key elements to consider when making sure your technology solution achieves its full automation and accelerated compliance potential:

10 1- The technology solution is centralized. To centralize the technology solution for FATCA compliance, institutions must ensure: Enterprise technology Integration (i.e., on-boarding systems, End to End Sales Process) - Unified KYC and Client On-boarding Information/Case Management - Full or 360 view of the customer institution wide - Ability to reuse customer information with rulebased automation, building a centralized system that allows a financial institution to leverage their existing technology. This allows them to address new and changing regulatory programs quickly and efficiently.

11 2- Secondly, rules-based technology combined with systemembedded FATCA expertise customized specifically for the financial institutions: FATCA risk profile can significantly reduce costs and timeto-revenue while streamlining operations. By tapping into the necessary legal knowledge up front, banks can implement a rules-based technology solution that will automate the vast majority of processing around client data, performing due diligence, reporting, withholding record-keeping, validation and audit. For banks operating in multiple countries, the solution will need to support this as well.

12 . The quicker data is collected, clients classified (i.e. the appropriate withholding tax is applied) and reporting capabilities implemented, the quicker the bank becomes fully FATCA compliant and the sooner these new processes and operations become business as usual. By automating this process, the information collected can be automatically routed through the work flow process

13 The Solution should cover the FATCA requirements in three phases: 1 - Categorization & Customer Identification: Checking all pre-existing customers/accounts of individuals and entities for potential US tax liability Recording client details in line with indicia specified, details of client s green card (if any) and TIN Support during the process of clarifying US tax liability Recording and checking the FATCA relevant information when new business partners and accounts are created Classifying business partners and accounts in pre-defined categories Event-controlled change monitoring Extensive evaluation possibilities.

14 The Solution should cover the FATCA requirements in three phases: Individuals exceeded 50k US or equivalents Corporate exceeded 250k US or other currency equivalents Manual/automatic classification of clients based on documentation 2- Withholding Tax Identifying income subject to tax (US source income like dividends, interest, gross proceeds, etc.) Apply 30% withholding tax, where applicable, on US sourced income, in the case of recalcitrant accounts/ no participating FATCA Withholding tax on pass-through payments Swift monitoring and apply withholding for non participating FATCA

15 The Solution should cover the FATCA requirements in three phases: Reporting For individuals identified as being US tax-liable: information about person, accounts, and financial circumstances For passive non-financial foreign entities (passive NFFE): additionally all natural persons who exercise control over the entity (controlling persons) Reporting of payments to non-participating FFIs Reporting on US customers and entities to regulator(s) Reporting account balances Reporting income/credits Notification to the account holder about the data reported

Bank-BI FATCA Solution Features Features of the Bank-BI (FATCA): Includes a Customer centric information repository. Maintains and updates customer FATCA due diligence information.

16 Bank-BI FATCA Solution Features Features of the Bank-BI (FATCA): Includes a Customer centric information repository. Maintains and updates customer FATCA due diligence information. Powerful rules and search engines. Keeps historical data Generates reports, alerts and dashboards using built in Business Intelligence layer. Tracks tax collection process and reports default cases. Integrates with multiple data sources.

17 Bank-BI FATCA Solution Flow The FATCA solution lifecycle across the compliance unit: Asset Identification Client Due Diligence/ Classification Customer Information Management Analysis and Reporting Payment Withholding Define and classify the various types of assets as US sources of income and gross proceeds of US securities Standardize the asset coding and naming. Predefined rules for US Citizens and US Indicia Classification. Dynamically change the rules as needed thru the rules engine Review clients FATCA status and update as needed. Case management with related documentation ensure that clients static, KYC, AML, Scoring, counter party and financial data along with the evidencing documents are held in central repository. Generate list of incomplete info or documents. Track changes in customer FATCA status and info. understand the source of information, detect anomalies and define patterns.. set up reliable reporting process and predefined templates with automated submission. Generate FATCA standard reports. Apply withholding rules on subject accounts. Track withholding process and report defaults. Use calculation engine to apply formulas for Tax calculation.

18 Bank-BI FATCA Compliance Solution

and Monitoring Reports / Dashboard Data Mining and Analysis Review Approve System Engines

19 Bank-BI FATCA Compliance Solution Solution Overview Prebuilt Modules & Reports Compliance Unit Branches Customer on Boarding /KCY FATCA Compliance Report Information Delivery Tools Exception and Monitoring Reports / Dashboard Data Mining and Analysis Review Approve System Engines Collaborate Financial Modeler Transaction Tracking Parameterization Edit Version Information Management

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24 Bank-BI - Reference List

25 Thank you!

Newgen Solution for FATCA compliance. Built-on Dynamic Rules Driven BPM Suite

Newgen Solution for FATCA compliance Built-on Dynamic Rules Driven BPM Suite FATCA Foreign Account Tax Compliance Act. Overview The Foreign Account Tax Compliance Act (FATCA) was enacted by the United