AML/KYC Requirements as they Arise in the Context of FATCA Compliance

Transcription

1 AML/KYC Requirements as they Arise in the Context of FATCA Compliance May 15, :45pm 5:35pm Laurence Birnbaum-Sarcy, KPMG (Moderator) Irwin Nack, The Bank of Tokyo-Mitsubishi UFJ, Ltd. Salvatore LaScala, Navigant Consulting Inc. 1

2 High Level Overview of FATCA Why FATCA? What Does Compliance Look Like? (Requirements are still pending finalization) What are Some of The Impacts? Prevent offshore tax abuses by U.S. persons $100 Billion estimated current abuse annually The most common abuse is U.S. person forming an offshore corporation and making investments via the corporation Who: The burden of compliance is on U.S. and non-u.s. financial institutions that make and/or receive withholdable payments What: Impacted organizations will be required to adhere to complex customer identification, and due diligence requirements When: See slide 11 infra Why Comply: Non-compliance will result in a 30% withholding penalty being imposed on withholdable payments made to FFIs that do not conclude a disclosure agreement with IRS U.S. Client Identification: Organizations will have to identify clients that are U.S. persons Technology: Reporting requirements will require the capture and reporting of information that may not now be tracked and accessible Non-U.S. Client Identification: An organization s non-u.s. clients may need to certify that they are not U.S. persons Most organizations will require implementation of significant process and technology enhancements to become compliant with FATCA 2

3 FATCA Impact For Foreign (non-us) Banks What is the FATCA impact for FBs operating IN the US? What is the FATCA impact for FBs operating OUTSIDE the US? Subsidiaries v. Branches Big unknown as to whether Branches of non-us institutions will be a USWA or a FFI As per the Proposed Regulations, they can opt to be a USWA or a PFFI Industry preference is to be a USWA Determine if FB has direct or indirect (e.g. via fund) US investments If yes, determine whether or not FB decides to participate in the FATCA regime If not, is the FB prepared to absorb the 30% withholding penalties If yes, is the FB prepared to identify and report all US persons 3

4 FATCA Regulatory Update Date March 18, 2010 August 29, 2010 April 8, 2011 July 14, 2011 Description FATCA is enacted into law as part of the Hiring Incentives to Restore Employment (HIRE) Act A new Chapter 4 is added to impose information reporting requirements on Foreign Financial Institutions (FFIs) with respect to U.S. accounts Notice ( IRB 329) Provided preliminary guidance on the implementation of Chapter 4 and requested comments Notice ( IRB 765) Modified and supplemented the guidance in Notice Notice Modified Notice ; Established timeline for a phased implementation of FATCA (Corrected Notice issued on July 25, 2011) February 8, 2012 Proposed Regulations are released Summer 2012 IRS anticipates issuance of final regulations, and draft and final versions of FFI agreement and reporting forms 4

5 FATCA Popular Myths 1. This does not apply to us! 2. Since the rules are not final, we can wait to address FATCA! 3. Readiness and implementation will be easy! 4. This is a tax project! 5. Only organizations with U.S. accounts are impacted! 6. The U.S. government will back off and make these rules easy to comply with! 5

6 Leverage AML/KYC 6

7 Impact of FATCA on AML Requirements On March 5, FinCEN issued Advance Notice of Proposed Rulemaking (ANPR) on Customer Due Diligence (CDD) Goal - Enhance efforts to combat ML, TF, tax evasion and other financial crimes by facilitating reporting and investigations in support of tax compliance Will bring CDD aspects of AML regime in line with FATF recommendations Will align U.S. with international standards that will flow from FATCA On May 4, 2012, IIB Issued a Comment Letter on ANPR 7

8 FATCA and KYC: Generally A. FATCA s requires disclosure of U.S. tax status for the purpose of reporting it to the I.R.S. B. When not required by Tax, Operations or other areas, the tax status question might have been deemed most closely related to the body of knowledge captured relative to AML/KYC/CIP C. AML/KYC/CIP typically includes matters relevant to determining tax status, but obtained and compiled for different purposes 8

9 FATCA and KYC: How Did We Get Here? How did the solution evolve to leverage AMLKYC/CIP rather than Tax or some other compliance regime? A. Law enforcement and U.S. cases B. KYC is occasionally relationship focused for high net worth accounts C. AML transaction monitoring leverages indicia of and data queries D. There is precedent for international coordination and standards development E. Challenges of strenuously objecting 9

10 FATCA and KYC: The Indicia Identifying indicia of U.S. status by querying electronically searchable information and/or performing an enhanced review for: A. Identification of an account holder as a U.S. resident or citizen B. U.S. place of birth C. U.S. resident address or U.S. mailing address D. U.S. telephone number E. Standing instructions to transfer funds to an account maintained in the U.S. F. Power of attorney or signatory authority granted to a person with a U.S. address G. An in care of address or hold mail address that is the sole address the FFI has for the account holder 10

11 FATCA and KYC: Pre-existing Account Review Dates Assuming the FFI s FFI Agreement or participating FFI status goes into effect on 7/1/2013 signed by 6/30/2013: A. FATCA compliant onboarding should be completed and business as usual 7/1/2013 for all accounts. B. High Value Accounts must be completed by 7/1/2014 using balances as of 12/31/2012 C. Prima Facie Accounts must be completed by 7/1/2014 using balances as of 6/30/2013 D. All remaining pre-existing accounts by 7/1/2015 using balances as of 6/30/

12 FATCA and KYC: Getting Started Assuming you have already conducted a FACTA impact assessment, now is the time to develop the global plan for onboarding and pre-existing account reviews. Remember that this has at least two prongs: Onboarding and Pre-existing Account Reviews Challenges include developing processes or obtaining systems to: A. Execute a workflow to analyze hundreds of thousands or millions of accounts B. Query electronically searchable information C. Aggregate accounts and identify related accounts where necessary D. Make paper files and/or images of paper files available for review E. Communicate with and process data obtained from clients F. Archive the analyses for review and recordkeeping Keep the end game in mind, i.e., Reporting and Certification 12

13 Q&A Laurence Birnbaum-Sarcy Managing Director Forensic Services KPMG, LLP 345 Park Avenue New York, NY (212) Irwin Nack Chief Compliance Officer & General Manager Compliance Division for the Americas Bank of Tokyo Mitsubishi UFJ Ltd Avenue of The Americas New York NY (212) Salvatore LaScala Managing Director Global Investigations & Compliance Navigant 90 Park Avenue, 10th Floor New York, NY