17 October 2017

Majority of FIs expect Fatca client identification woes - survey

08 January 2013  |  2393 views  |  0 Source: Fenergo

In new research published today by Fenergo, the leading provider of client onboarding, client due diligence and Fatca solutions, it was revealed that 65% of financial institutions are struggling to complete the client identification process efficiently due to gapped, siloed, semi-structured or unstructured client data.

The report, The Road To FATCA, is based on a survey conducted with financial institutions running the full spectrum of financial services, including investment, corporate, retail and private banks.

According to the findings, the biggest impact of FATCA will be felt in the area of customer due diligence or know your customer processes, with a whopping 79% of institutions expecting FATCA to have either a high or medium impact on CDD / KYC processes (where processes will have to be rewritten, reviewed and/or amended).

In exploring the findings, the author, Fiona Cummins, Fenergo's FATCA Subject Matter Expert, asserts that institutions that have commenced their FATCA journey are in a better position than those that haven't simply by knowing the size of the data challenge facing their organisations. "Our survey points to some good news and some bad news. It's heartening to note that some financial institutions are making real progress in certain areas like client identification and classification, with up to two-thirds of responding institutions claiming to have already commenced these processes. However, some institutions have already identified serious gaps in their data that will have a knock-on effect on compliance with new FATCA regulations. Client information lying in various repositories right across the institution makes the process of identifying, classifying, evidencing and reporting on U.S. persons/entities with account balances that exceed the FATCA thresholds exceedingly difficult."

The survey also illustrates how financial institutions will expect to collect additional data and documentation as part of the self-certification process, revealing that:
• 30% of FFIs expect between 5% - 49% of their client base to have to complete self-certification
• 17% expect over 50% of their client base to complete it
• 53% anticipate less than 4% of their client base having to self-certify that they are or are not U.S. persons/entities
• Up to 42% of institutions are either using or plan on using an online portal to collect W-8 and W-9 forms.
"Our advice to financial institutions is to start your FATCA journey as soon as possible," explains Cummins. "FATCA is very much an exercise steeped in data quality which can impact the ability of the institution to identify, classify and evidence clients displaying U.S. indicia over the monetary thresholds dictated by FATCA. The sooner this is done, the better prepared the institution will be for FATCA, giving them sufficient time to gain compliance with other classification-based regulations using the same technologies".

The report recommends a four-point plan for financial institutions beginning their FATCA journey:
1. Use FATCA as a stepping stone to other classification-based regulations (such as LEI, Dodd-Frank, EMIR, MiFID II, Basel III, 4th EU Money Laundering Directive, and other jurisdictional flavours of FATCA that are expected to emerge)
2. Try to create links between client data and documentation already lying in various repositories by interfacing internal systems to create a more holistic client profile
3. Use this data to pre-classify clients to reduce the number of clients that will have to be contacted for self-certification
4. Automate as much of the process as possible and use this opportunity to collect additional data pertaining to other regulatory obligations e.g. CDD / KYC. 

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