AML

Report
FATCA
Leveraging existing IT solutions for compliance
Jeroen Dekker, Senior Product Manager
Financial Crime Risk Management
SWIFT Poland National Member & User Group, December 11, 2013
Once upon a time, in a new land called AML…
Onboarding
Core
Banking
Monitoring
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Agenda
• Our Perspective
• Quick Introduction to FATCA
• What We’ve Been Seeing
• FATCA Team Functions
• Requirements Round-up
• Case Study
• Call to Action
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Fiserv International Today
Number 1supplier of software & services to
the FS industry for 6 years (FinTech100)
NASDAQ quoted (FISV)
Polish Customers:
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$4.42 bn Revenue 2012
Strong presence in Poland:
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$597m Free cash flow
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17000 clients worldwide
70+ countries and multiple languages
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25+ years experience
19,000 employes
40+ employees in
Poland
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Local office since 1993
Regional Internet and Mobile
Warsaw Competency Centre
Regional 24/7 HelpDesk
Solutions serviced in Poland
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ING Bank
BZWBK
Millennium Bank
Santander Consumer Bank
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Core Banking application
Front End and Teller
applications
Fraud and Reconciliation
Management applications
Custom development services
Technology Solutions Across the Institution
Payments
Solutions for optimizing all aspects
of the payments mix to help
you create efficiency
and drive growth
Customer and
Channel Management
Solutions for attracting,
retaining and growing
customer relationships
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Processing Services
Solutions for managing account-based
transactions – reliably and securely
Risk and Compliance
Solutions for proactive
risk prevention and
mitigation
Insights and
Optimization
Solutions that help
you transform data from
information to actionable
business insights
Fiserv offerings around SWIFT traffic
Risk / Financial Crime
Sanctions Screening
Control / Processing
Reconciliation
AML monitoring
Trade Processing
Fraud Prevention
Payments processing
FATCA monitoring
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Today’s perspective
Solutions
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Fraud
AML
Sanctions
Corruption
FATCA
Data focus
Capabilities
• Customers
• Accounts
• Transactions
• Anomaly
detection
• Case
Management
• Reporting
Financial Crime
Risk Management
Software Platform
Behavioral
Monitoring
Industries
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Retail
Commercial
Private
Securities
Insurance
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Regions
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EMEA
ASPAC
LACC
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USA
Financial
Institutions
1000+ clients
Market leader
What is FATCA?
• Foreign Account Tax Compliance Act
• U.S. regulation to combat offshore tax evasion by U.S. taxpayers
• Regulations produced by U.S. Internal Revenue Service (IRS)
• Targeted mainly at financial institutions outside the U.S.
• Requirements to identify and report certain (U.S.) accounts
• Through prescribed onboarding, remediation,
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monitoring processes
Severe (withholding) penalties for non-compliance
U.S. institutions tasked with monitoring/enforcing
Final regulations published in February 2013
Phased implementation from 2013 through 2017
A new frontier in Financial Crime Risk Management
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How FATCA evolved… and spread
• FBI case against UBS
• HIRE Act passed in 2010
• Drafts & Notices
• IGA Models
• Final regulations
• Delayed implementation
• Guidance
• …?
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Global initiatives:
FATF
OECD
G8 / G20
EU
What we have been seeing
Tax
A typical FATCA project team
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The Team’s Current Focus
Onboarding
Primary processes:
• Additional data capture
• Forms & procedures
• Decentralized approach
CDD
Core Banking
Data warehouse
Task force > Standing central FATCA team
• Manage project phases
• Database reports for monitoring & control
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Fiserv Core Banking – FATCA Phase 1
Identification and Due Diligence
Phase 1 Changes
• Bank Level Parameterization of IRS issued GIIN
• Branch Level Parameterization of IRS issued GIIN
• Add additional Static Data pages
• Create new ‘Foreign Tax Compliance’ pages
• Modifications to Customer to Customer Relationships page
• Create new ‘Foreign Tax Compliance Exception’ report
• Modifications to Bank Profile Maintenance Report
• Modifications to Customer Information Maintenance Log
• Modifications to New Customer Information Report
New ‘Foreign Tax Compliance’ pages
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‘Foreign Tax Compliance Exception’ report
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A Central Back Office FATCA Team – For What?
CDD, Core, CRM and Payment systems
New
Accounts
Pre-existing
accounts
Payments
Your FATCA Team
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Reporting
Central FATCA Team Functions (1/2)
Act as a second
line of control
Handle exceptions
and escalations
• Avoid single points
of failure
• Detect and alert
what falls through
the cracks
• Assure process
consistency &
correct outcomes
• Use automated
(double) checking
of data
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• Workflow & case
management
remediation
• Holistic view of
final status for all
customers
Maintain central
oversight
• Understand,
manage, inform
• Produce lists,
metrics, special
cases
• Normalization
across all
operations &
systems
Prepare for future
examinations
• IRS or local
examiners,
internal audit
• Show and justify
how decisions
were made
• Audit trails,
recordkeeping,
reporting
Example 1 – New Individual Client Walks in
Self-certification
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US taxpayer
Not US taxpayer
Don’t know
Refuse to answer
(pending)
KYC data
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Address(es)
Phone number(s)
Nationality
Country of birth
Identification, etc.
FATCA Status
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© 2013 Fiserv, Inc. or its affiliates.
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Automated
Detection
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Does KYC data reveal any US
indicia to contradict a claim of
‘Not US taxpayer’?
Do we have enough KYC data to
verify such claims?
Did we receive Self-Certification,
and receive it on time? (90 days)
Alert ‘US taxpayer’ for second line
approval/classification
Alert ‘Don’t Know’/ ‘Refuse’ for
escalation
Once a year Report new US accounts whose
aggregated balance on December 31
exceeded $50,000
Example 2 – New Entity Client Walks in
• Determine Chapter 4 classification during onboarding
• Capture address, ownership and business type data
A tool for the back office FATCA team can provide:
Scenarios to verify Chapter 4 status against available data
Escalate classification issues to the FATCA team
Alert Passive NFFEs with owner(s) with US indicia
Daily alerts for changes in circumstances
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Central FATCA Team Functions (2/2)
Remediation of
pre-existing
accounts
• Project best led by
centralized back
office
• Ingest hits from
electronic/paper
searches
• Manage tasks,
documentation,
decisions
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Periodically
determine
reportable accounts
• FATCA status
and current
(aggregated)
balance
• Periodic
automated
selection & data
collection
• Prevent
duplicate/repeat
reporting
Prepare, validate,
generate, send
reports
Perform ongoing
monitoring
• IRS XML Form
8966 or local
equivalent
• On all new and
pre-existing
accounts
• Controlled and
auditable process
• Location,
structure,
ownership, their
location
• Don’t
underestimate
data and
workflow
• Payments to nonconsenting
accounts/FIs
Issues Not Tackled Today
• Forms required during onboarding/remediation
• Ongoing tax reporting to IRS
• Withholding (determination, calculation, execution)
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Example 3 – Existing Account Remediation
CRM
Core
System X
AML
Import US indicia hits as alerts
Case Management
Workflow
Tasks
Document capture
Classification
Reporting
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… and check against
balance thresholds and
exemptions for relevance!
Tooling Requirements Round-up
• Data on customers, accounts, balances, transactions, process
• Automated analysis, detection rules, alerting
• Workflow and case management
• Regulatory reporting
• Management reporting
• Audit trails
• Flexibility for future requirements (FATCA and copy-cats)
If only there were
such a system…
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© 2013 Fiserv, Inc. or its affiliates.
Client Case Study
• Global insurance and wealth management firm
• Agents, locations, business units as first line
• Corporate compliance as second line
• Leverage existing system used for AML, Fraud, Market Conduct
• Add first-line FATCA process outcomes as data feed
How they use it
• Detection scenarios for changes, inconsistencies, notifications
• Use of case management for remediation, approvals etc.
• Management reports for counts and lists
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Monitoring, Control and Reporting for FATCA
Compliance
CDD, Core, CRM and Payment systems
New account
classification
Pre-existing
accounts
Ongoing
monitoring
Payments
withholding
Your FATCA Team
Data: AML, indicia, payments, FATCA process
Detection: verification & monitoring
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Automated checks
Exception handling
Approvals and audit
Central oversight
Case management: remediation & audit
Management Reporting
IRS XML
Reporting
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© 2013 Fiserv, Inc. or its affiliates.
Call to Action
• Use your time wisely
• Learn from AML history
• Look and plan ahead
• Leverage proven capabilities
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© 2013 Fiserv, Inc. or its affiliates.

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