FATCA
Leveraging existing IT solutions for compliance
Jeroen Dekker, Senior Product Manager
Financial Crime Risk Management
SWIFT Poland National Member & User Group, December 11, 2013
Once upon a time, in a new land called AML…
Onboarding
Core
Banking
Monitoring
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Agenda
• Our Perspective
• Quick Introduction to FATCA
• What We’ve Been Seeing
• FATCA Team Functions
• Requirements Round-up
• Case Study
• Call to Action
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Fiserv International Today
Number 1supplier of software & services to
the FS industry for 6 years (FinTech100)
NASDAQ quoted (FISV)
Polish Customers:
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$4.42 bn Revenue 2012
Strong presence in Poland:
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$597m Free cash flow
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25+ years experience
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Poland
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Regional Internet and Mobile
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Solutions serviced in Poland
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ING Bank
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Core Banking application
Front End and Teller
applications
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Management applications
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of the payments mix to help
you create efficiency
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Processing Services
Solutions for managing account-based
transactions – reliably and securely
Risk and Compliance
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mitigation
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you transform data from
information to actionable
business insights
Fiserv offerings around SWIFT traffic
Risk / Financial Crime
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FATCA monitoring
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Today’s perspective
Solutions
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Fraud
AML
Sanctions
Corruption
FATCA
Data focus
Capabilities
• Customers
• Accounts
• Transactions
• Anomaly
detection
• Case
Management
• Reporting
Financial Crime
Risk Management
Software Platform
Behavioral
Monitoring
Industries
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Retail
Commercial
Private
Securities
Insurance
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Regions
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EMEA
ASPAC
LACC
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USA
Financial
Institutions
1000+ clients
Market leader
What is FATCA?
• Foreign Account Tax Compliance Act
• U.S. regulation to combat offshore tax evasion by U.S. taxpayers
• Regulations produced by U.S. Internal Revenue Service (IRS)
• Targeted mainly at financial institutions outside the U.S.
• Requirements to identify and report certain (U.S.) accounts
• Through prescribed onboarding, remediation,
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monitoring processes
Severe (withholding) penalties for non-compliance
U.S. institutions tasked with monitoring/enforcing
Final regulations published in February 2013
Phased implementation from 2013 through 2017
A new frontier in Financial Crime Risk Management
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How FATCA evolved… and spread
• FBI case against UBS
• HIRE Act passed in 2010
• Drafts & Notices
• IGA Models
• Final regulations
• Delayed implementation
• Guidance
• …?
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Global initiatives:
FATF
OECD
G8 / G20
EU
What we have been seeing
Tax
A typical FATCA project team
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The Team’s Current Focus
Onboarding
Primary processes:
• Additional data capture
• Forms & procedures
• Decentralized approach
CDD
Core Banking
Data warehouse
Task force > Standing central FATCA team
• Manage project phases
• Database reports for monitoring & control
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Fiserv Core Banking – FATCA Phase 1
Identification and Due Diligence
Phase 1 Changes
• Bank Level Parameterization of IRS issued GIIN
• Branch Level Parameterization of IRS issued GIIN
• Add additional Static Data pages
• Create new ‘Foreign Tax Compliance’ pages
• Modifications to Customer to Customer Relationships page
• Create new ‘Foreign Tax Compliance Exception’ report
• Modifications to Bank Profile Maintenance Report
• Modifications to Customer Information Maintenance Log
• Modifications to New Customer Information Report
New ‘Foreign Tax Compliance’ pages
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‘Foreign Tax Compliance Exception’ report
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A Central Back Office FATCA Team – For What?
CDD, Core, CRM and Payment systems
New
Accounts
Pre-existing
accounts
Payments
Your FATCA Team
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Reporting
Central FATCA Team Functions (1/2)
Act as a second
line of control
Handle exceptions
and escalations
• Avoid single points
of failure
• Detect and alert
what falls through
the cracks
• Assure process
consistency &
correct outcomes
• Use automated
(double) checking
of data
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• Workflow & case
management
remediation
• Holistic view of
final status for all
customers
Maintain central
oversight
• Understand,
manage, inform
• Produce lists,
metrics, special
cases
• Normalization
across all
operations &
systems
Prepare for future
examinations
• IRS or local
examiners,
internal audit
• Show and justify
how decisions
were made
• Audit trails,
recordkeeping,
reporting
Example 1 – New Individual Client Walks in
Self-certification
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US taxpayer
Not US taxpayer
Don’t know
Refuse to answer
(pending)
KYC data
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Address(es)
Phone number(s)
Nationality
Country of birth
Identification, etc.
FATCA Status
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© 2013 Fiserv, Inc. or its affiliates.
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Automated
Detection
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Does KYC data reveal any US
indicia to contradict a claim of
‘Not US taxpayer’?
Do we have enough KYC data to
verify such claims?
Did we receive Self-Certification,
and receive it on time? (90 days)
Alert ‘US taxpayer’ for second line
approval/classification
Alert ‘Don’t Know’/ ‘Refuse’ for
escalation
Once a year Report new US accounts whose
aggregated balance on December 31
exceeded $50,000
Example 2 – New Entity Client Walks in
• Determine Chapter 4 classification during onboarding
• Capture address, ownership and business type data
A tool for the back office FATCA team can provide:
Scenarios to verify Chapter 4 status against available data
Escalate classification issues to the FATCA team
Alert Passive NFFEs with owner(s) with US indicia
Daily alerts for changes in circumstances
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Central FATCA Team Functions (2/2)
Remediation of
pre-existing
accounts
• Project best led by
centralized back
office
• Ingest hits from
electronic/paper
searches
• Manage tasks,
documentation,
decisions
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Periodically
determine
reportable accounts
• FATCA status
and current
(aggregated)
balance
• Periodic
automated
selection & data
collection
• Prevent
duplicate/repeat
reporting
Prepare, validate,
generate, send
reports
Perform ongoing
monitoring
• IRS XML Form
8966 or local
equivalent
• On all new and
pre-existing
accounts
• Controlled and
auditable process
• Location,
structure,
ownership, their
location
• Don’t
underestimate
data and
workflow
• Payments to nonconsenting
accounts/FIs
Issues Not Tackled Today
• Forms required during onboarding/remediation
• Ongoing tax reporting to IRS
• Withholding (determination, calculation, execution)
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Example 3 – Existing Account Remediation
CRM
Core
System X
AML
Import US indicia hits as alerts
Case Management
Workflow
Tasks
Document capture
Classification
Reporting
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… and check against
balance thresholds and
exemptions for relevance!
Tooling Requirements Round-up
• Data on customers, accounts, balances, transactions, process
• Automated analysis, detection rules, alerting
• Workflow and case management
• Regulatory reporting
• Management reporting
• Audit trails
• Flexibility for future requirements (FATCA and copy-cats)
If only there were
such a system…
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© 2013 Fiserv, Inc. or its affiliates.
Client Case Study
• Global insurance and wealth management firm
• Agents, locations, business units as first line
• Corporate compliance as second line
• Leverage existing system used for AML, Fraud, Market Conduct
• Add first-line FATCA process outcomes as data feed
How they use it
• Detection scenarios for changes, inconsistencies, notifications
• Use of case management for remediation, approvals etc.
• Management reports for counts and lists
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© 2013 Fiserv, Inc. or its affiliates.
Monitoring, Control and Reporting for FATCA
Compliance
CDD, Core, CRM and Payment systems
New account
classification
Pre-existing
accounts
Ongoing
monitoring
Payments
withholding
Your FATCA Team
Data: AML, indicia, payments, FATCA process
Detection: verification & monitoring
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Automated checks
Exception handling
Approvals and audit
Central oversight
Case management: remediation & audit
Management Reporting
IRS XML
Reporting
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Call to Action
• Use your time wisely
• Learn from AML history
• Look and plan ahead
• Leverage proven capabilities
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© 2013 Fiserv, Inc. or its affiliates.