21 September 2017
Reetu Khosla

Reetu Khosla

Reetu Khosla - Pegasystems

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How to turn new FATCA regulations into competitive advantage

25 February 2013  |  5829 views  |  0

Financial organisations are starting to sweat as the first deadline for FATCA compliance looms on the horizon. Next January 1st will see banks ringing in the New Year with  new account opening procedures to identify US account holders and classify them into a FATCA category. Moreover, by the end of next year, they will need to conduct look-back on pre-existing accounts and establish mechanisms for reporting certain information about US account holders to the Internal Revenue Service (IRS) or to the relevant tax agency within an IGA country.

This will require significant changes in existing KYC, on-boarding and AML systems, which can lead to longer on-boarding times and poor customer experience. As many organisations resort to manual KYC processes, this could result in human errors and inconsistent due diligence and classification across business lines, products and geographies.

While FATCA poses significant regulatory challenges to financial organisations, if implemented properly, it can be a driver for positive change. But how can financial organisations become compliant without slowing down on-boarding time and incurring huge financial costs? Here is a step-by-step guide to how FATCA can be turned into a competitive advantage:

Step 1: Perform an assessment of FATCA’s impact by product, line of business, client type and geography to determine whether there are reportable U.S. individuals and entities and how FATCA will affect existing policies and practices. Involve IT, legal counsel, business and consultants from the start.

Step 2: Review existing KYC and AML systems to identify the scale of the changes required and the re-use of existing due diligence for pre-existing accounts.

Step 3: Consider all applicable FATCA legal implications, local laws and cross-border requirements that will affect your FATCA compliance strategy. Work with global law firm to understand jurisdictional impact, IGA vs. non-IGA and conflicts with local law.

Step 4: Identify all core systems, how data should be integrated across multiple jurisdictions and lines of business and if the data should be aggregated. Are there conflicts and does the data exist?

Step 5: Implement technology to wrap around existing AML and on-boarding systems to automate FATCA compliance rules.

Step 6: Establish effective processes to govern, educate and communicate FATCA compliance by automating relevant work processes and operational tasks.

Step 7: Ensure that you can sustain long-term compliance by deploying flexible IT solutions that can be easily modified to incorporate new regulatory changes.

Step 8: Coordinate FATCA with AML, KYC and high risk customer screening processes as well as with other tax withholding and reporting requirements.

Step 9: Use FATCA as an opportunity to streamline KYC and on-boarding to automate existing KYC rules, including AML, and extend Suitability rules to drive product recommendations.

Step 10:  Create a competitive advantage for your organisation through a 360 degree customer view and faster time to on-boarding!

By using FATCA as a chance to enhance their KYC and on-boarding systems, financial organisations will be able to reduce time to on-boarding and improve customer experience. Moreover, the integration of FATCA into KYC systems that can be used for other applicable regulatory requirements such as Suitability will help organisations ensure long-term compliance with upcoming regulations while providing faster time to revenue. This will create a significant competitive edge, allowing financial organisations to stay at the very forefront of business leadership and innovation.

TagsRisk & regulationWholesale banking

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job title Sr. Director Risk, Compliance, and Onboarding
location Boston
member since 2012
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Reetu Khosla is Sr. Director Risk, Compliance, and Onboarding at Pegasystems. She has several years of regulatory experience in the banking and non-banking sectors, specialising in financial crimes, n...

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