As we fast approach the stipulated deadlines associated with FATCA enterprises worldwide need to quickly get their acts together and redesign processes to adhere to various regulatory mandates. This enterprise wide change has to be planned meticulously, ensuring business as usual doesn’t suffer any major jolts in the process. While it affects organizations across all industries, financial sector will be the one bearing maximum impact of this paradigm shift in the world economic order. FFIs that do not enter into an agreement with the IRS, termed as non-participating FFIs will bear a 30% withholding tax on all relevant US-sourced payments.

Hence, it becomes imperative for them to understand FATCA intricacies in detail and build a robust strategy around it. FFIs need to invest heavily in reengineering processes around three core areas -documentation, account management and reporting. Approaching FATCA as just another reporting exercise is a short-sighted approach that may lead to complexities in future. Achieving compliance in a comprehensive manner will require specialized roles and processes to be created, facilitated by an extended information gathering mechanism built on an efficient information management system.

Following are some of the best practices that can help you fine-tune your FATCA compliance strategy-:

Analyze FATCA and its far reaching implications– FATCA is an all encompassing regulation that will impact your entire value chain, necessitating a revamp of the organizational structure, processes and systems. More importantly it requires streamlining of all data flowing in from multiple sources. Organizations can register online on the IRS FATCA portal and obtain a Global Intermediary identification Number (GIIN) to experiment and understand how to use the website, besides getting their FAQs answered.

Evolve your strategy as FATCA assumes greater clarity and focus – FATCA is a long term regulation that has many dynamic requirements. It is advisable to have flexible and agile compliance and architecture strategy to minimize operational costs and unnecessary project delays.

Establish Accountability and Ownership– Organizations should determine a leader within their central compliance department to supervise the creation and implementation of FATCA compliance plan, with all deviations clearly noted and rectified in due time.

Initiate Internal and External Communication Process – It is very important to communicate the various changes that will be brought in to all affected teams, preparing them to efficiently manage new requests. Customers should be in the loop too, apprising them of the new regulations and how they can affect them – utilizing aCCM (Customer Communications Management) solution

Update all On-boarding and Data gathering processes– Centralization of critical processes at various direct and indirect customer touch points will put a structure to the information collected. Operational areas most likely to be affected include customer on-boarding, payment processing, tax withholding and deposition and regulatory reporting. As FATCA related documentation requirements become a core component of your new customer on-boarding process, FFIs looking ahead should also scope out solutions for Mobile Capture of these documents as well as a robust butflexible business process or workflow platform that will allow rapid changes to processes to stay in tune with regulatory demands

Maintain repositories for all historical data– This is the basic rule for all compliance related strategies. Organizations need to maintain a well sorted and easily accessible information bank essential from a long term perspective – given the audit and archival requirements related to FATCA, it is imperative for companies to utilize a sophisticated ECM (Enterprise Content Management) solution.
Organizations thus need to plan ahead and channelize necessary resources well in advance to mitigate any risks associated with the new compliance regime. A well laid out strategy will also go a long way in helping them reduce any unnecessary cost burdens and enhance customer experience significantly.
Our team at Newgen Software Technologies has taken an early lead, incorporating the best practices to develop a framework for addressing the FATCA requirements of the Banks, Trusts and FFIs – broad outlined in the Newgen FATCA Compliance Solution. The Newgen team is also partnering with management consulting companies like KPMG and Ernst & Young to deliver this solution seamlessly out of the box with built-in guarantees to incorporate any regulatory changes coming down the pipe one year from the implementation.

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