It’s a slow train, but it’s moving on. This line from a great old song by the Staples Singers feels very applicable not just to life, but also to the Foreign Account Tax Compliance Act (FATCA). After what feels like ages of drafting and delaying the regulations,
the first real implementation deadlines are now right around the corner. To meet the new account identification requirements that for most countries will come into force on 1 January 2014, foreign financial institutions should be in the process of implementing
solutions into their onboarding and overall compliance systems and processes.
This month, I will be posting some thoughts every week on how various types of systems are likely to be used, with particular attention to leveraging Anti-Money Laundering (AML) monitoring technology. After all, it did not take long for the financial industry
and its regulators to see that there are a lot of connections between FATCA and AML. For starters, tax evasion is a financial crime much like money laundering in that society is the victim, and often involves similar mechanisms like international money movement,
use of complex company structures and, of course, offshore jurisdictions.
Importantly, the connections between these domains extend into the organizations, processes, data elements and technologies that the regulatory requirements call for. It starts with the onboarding process, moves on to ongoing monitoring, involves remediation,
demands reporting to a regulator in a prescribed format and, as dictated by compliance best practices, requires a second or even third line of control. It’s AML all over again!
Most institutions I talk to are currently focused on expanding their data capture and arming their front line staff with the right forms and procedures. As well they should, just like AML started with Customer Due Diligence (CDD). However, a perception I’ve
run into is that once that is done, the rest of it is just a matter of pulling some reports from core systems or a data warehouse. And that is where our AML history will tell you otherwise. The job is not done when the CDD boxes have been checked. You need
tooling to check or double-check for accuracy, completeness, discrepancies and exceptions; you also need something to tell you if and when accounts change. You need technology to keep track of it all, and something that keeps records and audit trails for future
regulatory examinations that will surely come.
So that’s what I’ll be writing about in this space throughout June. How the AML monitoring concepts of detection, workflow, case management and reporting provide important and proven capabilities to help implement a sound and cost-effective compliance program
for FATCA or, if you are lucky, an Intergovernmental Agreement (IGA) struck between your country and the United States.
Next week, part 2 looks at different options to deal with self-certification of new individual accounts under IGA, and other ways in which AML detection logic can limit the scope of your initial and ongoing efforts.