Phy-gital Roundtable: Breakfast Roundup from Germany and Netherlands

02 May '15 | Debjyoti Paul

German Shoppers: Meet Them in the Fast Lane to Phy-gital

15 January '15 | Ralf Reich

Shoppers Will Share Personal Information (But They Don’t Want to be “Friends”)

15 January '15 | Anil Venkat

Modernize or Perish: Property and Casualty Insurers and IT Solutions

14 January '15 | Manesh Rajendran

Benelux Reaches the Phy-gital Tipping Point: Omnichannel Readiness is Crucial

13 January '15 | Anil Gandharve

The New Omnichannel Dynamic: Finding Core Principles Across Industries

13 January '15 | Debjyoti Paul

Technology does not disrupt business – CIO day 2014 Roundup

02 December '14 | Anshuman Singh

Apple Pay – The Best Is Yet To Come

02 December '14 | Indy Sawhney

Digital transformation is a business transformation enabled by technology

01 December '14 | Amit Varma

3 Stages of FATCA Testing and Quality Assurance

06 October '14 | Raman Suprajarama

3 Reasons why Apple Pay could dominate the payments space

18 September '14 | Gaurav Johri

Beacon of Hope: Serving Growth and Customer Satisfaction

05 August '14 | Debjyoti Paul

The Dos and Don’ts of Emerging Technologies Like iBeacon

30 July '14 | Debjyoti Paul

What You Sold Us On – eCommerce Award Finalist Selections

17 July '14 | Anshuman Singh

3 Steps to Getting Started with Microsoft Azure Cloud Services

04 June '14 | Koushik Ramani

8 Steps to Building a Successful Self Service Portal

03 June '14 | Giridhar LV

Innovation outsourced – a myth or a mirage or a truth staring at us?

13 January '14 | Ramesh Hosahalli

What does a mobile user want?

03 January '14 | Gopikrishna Aravindan

IT Challenges of FATCA compliance

Posted on: 16 July '14

The incidence of US citizens holding unreported financial assets overseas is increasing. The United States government is losing substantial amount of revenue each year due to citizens owning and operating financial accounts in foreign jurisdictions and not paying tax on incomes generated from them.

To curb this problem, the US government enacted The Foreign Account Tax Compliance Act (FATCA) which requires citizens, including individuals who live outside the United States, to report their financial accounts held outside of the United States, and requires Foreign Financial Institutions (FIIs) to report to the Internal Revenue Service (IRS) about their US clients.

Preparing for FATCA compliance is quite challenging for FIIs as:

  • Verification and due diligence procedures that accurately identify US accounts and further determine if FATCA is applicable have to be implemented.
  • Financial institutions have to ensure the existing IT systems are geared to handle FATCA requirements without disturbing the operational efficiency.
  • Complex scenarios have to be tackled with precision. Examples include:
    • Handling several accounts and product types of an individual within the FFI, each related to a different type of product
    • Handling multiple accounts spread across multiple branches, subsidiaries and business units
    • Consolidating customer data collected across various systems
    • Tweaking on-boarding procedures and systems to ensure that the missing KYC requirements are captured for both existing and new customers
  • FATCA regulations with multi-layered requirements need to be converted into unambiguous business rules and implemented.

A healthy solution should enable banks to comply faster and not roil them. Banks must invest in a solution with robust data model that supports both current and future business requirements, be flexible to accommodate enhancements and add-ons in the future, improve efficiency and cause least disruption.

As the first step, banks should thoroughly assess their existing IT systems with respect to FATCA compliance. The systems have to be analysed against FATCA on-boarding, account identification, reporting and withholding requirements, and a detailed report identifying the business and IT gaps has to be prepared.

A webinar by my colleagues Subhasis Bandopadyay, Siddharth Sakhardande and Chiradip Ray in which they explain the four steps for effective FATCA compliance is quite comprehensive. They also give a live example of how a leading commercial bank in the US achieved the same.