FATCA Leveraging existing IT solutions for compliance Jeroen Dekker, Senior Product Manager...

FATCALeveraging existing IT solutions for compliance

Jeroen Dekker, Senior Product ManagerFinancial Crime Risk Management

SWIFT Poland National Member & User Group, December 11, 2013

© 2013 Fiserv, Inc. or its affiliates. 2

Once upon a time, in a new land called AML…

Core BankingOnboarding

Monitoring


Agenda

• Our Perspective• Quick Introduction to FATCA• What We’ve Been Seeing• FATCA Team Functions• Requirements Round-up• Case Study• Call to Action


Fiserv International Today

25+ years experience

70+ countries and multiple languages

Number 1supplier of software & services to the FS industry for 6 years (FinTech100)

19,000 employes

Polish Customers:• ING Bank• BZWBK• Millennium Bank • Santander Consumer Bank

Strong presence in Poland:• Local office since 1993• Regional Internet and Mobile

Warsaw Competency Centre• Regional 24/7 HelpDesk

Solutions serviced in Poland• Core Banking application• Front End and Teller

applications• Fraud and Reconciliation

Management applications• Custom development services

17000 clients worldwide

40+ employees in Poland

NASDAQ quoted (FISV) – $4.42 bn Revenue 2012– $597m Free cash flow


Technology Solutions Across the Institution

Processing ServicesSolutions for managing account-based

transactions – reliably and securely

Customer and Channel ManagementSolutions for attracting, retaining and growing customer relationships

Insights and Optimization

Solutions that help you transform data from information to actionable

business insights

PaymentsSolutions for optimizing all aspects of the payments mix to help you create efficiency and drive growth Risk and Compliance

Solutions for proactive risk prevention and mitigation


Fiserv offerings around SWIFT traffic

Sanctions Screening

AML monitoring

Fraud Prevention

Reconciliation

Trade Processing

Payments processingFATCA monitoring

Risk / Financial Crime Control / Processing


Today’s perspective

Solutions

• Fraud• AML• Sanctions• Corruption• FATCA

Data focus

• Customers• Accounts• Transactions

Capabilities

• Anomaly detection

• Case Management

• Reporting

Industries

• Retail• Commercial• Private• Securities• Insurance

Regions

• EMEA • ASPAC• LACC• NA• USA

Financial Crime Risk Management

Software Platform

Behavioral Monitoring

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,

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


How FATCA evolved… and spread

• FBI case against UBS• HIRE Act passed in 2010• Drafts & Notices• IGA Models• Final regulations• Delayed implementation• Guidance• …?

Global initiatives:

FATFOECD

G8 / G20EU


What we have been seeing

Tax

A typical FATCA project team


The Team’s Current Focus

Primary processes:

• Additional data capture• Forms & procedures• Decentralized approach

Onboarding

Core Banking

Data warehouse

CDD

Task force > Standing central FATCA team

• Manage project phases• Database reports for monitoring & control

Fiserv Core Banking – FATCA Phase 1Identification 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


‘Foreign Tax Compliance Exception’ report


A Central Back Office FATCA Team – For What?

CDD, Core, CRM and Payment systems

New Accounts

Pre-existing accounts

Payments Reporting

Your FATCA Team

?


Central FATCA Team Functions (1/2)

Act as a second line of control

• Avoid single points of failure

• Assure process consistency & correct outcomes

• Use automated (double) checking of data

Handle exceptions and escalations

• Detect and alert what falls through the cracks

• 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

• US taxpayer• Not US taxpayer• Don’t know• Refuse to answer

(pending)

KYC data

• Address(es)• Phone number(s)• Nationality• Country of birth• Identification, etc.

FATCA Status

AutomatedDetection

• 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


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

Periodically determine

reportable accounts

• FATCA status and current (aggregated) balance

• Periodic automated selection & data collection

• Prevent duplicate/repeat reporting

Prepare, validate, generate, send

reports

• IRS XML Form 8966 or local equivalent

• Controlled and auditable process

• Don’t underestimate data and workflow

Perform ongoing monitoring

• On all new and pre-existing accounts

• Location, structure, ownership, their location

• Payments to non-consenting accounts/FIs


Issues Not Tackled Today

• Forms required during onboarding/remediation• Ongoing tax reporting to IRS• Withholding (determination, calculation, execution)


Example 3 – Existing Account Remediation

CRM Core System X AML

Case ManagementWorkflow

TasksDocument capture

ClassificationReporting

Import US indicia hits as alerts

… 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…


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


Monitoring, Control and Reporting for FATCA Compliance

Data: AML, indicia, payments, FATCA process

Detection: verification & monitoring

Case management: remediation & audit

Management Reporting

IRS XMLReporting

New account classification

Pre-existing accounts

Ongoing monitoring

Payments withholding

• Automated checks• Exception handling• Approvals and audit• Central oversight

Your FATCA Team

CDD, Core, CRM and Payment systems


Call to Action

• Use your time wisely• Learn from AML history• Look and plan ahead• Leverage proven capabilities

FATCA Leveraging existing IT solutions for compliance Jeroen Dekker, Senior Product Manager...

Documents

Transcript of FATCA Leveraging existing IT solutions for compliance Jeroen Dekker, Senior Product Manager...