The Puzzle of FATCA – Slowly Coming Together

Actimize AML Product Team, Anti-Money Laundering

Can you believe FATCA is finally “here”? Recently the Internal Revenue Service finalized draft versions of three forms for complying with the Foreign Account Tax Compliance Act, or FATCA, signaling that all that planning, some of which may have been placed on the backburner, must be finalized in order to meet deadlines set for the end of the year.

While the IRS and the Treasury Department have been extending the timeline for implementation, FATCA is now on our horizon and the timelines have now become actual  objectives and deadlines – not just sketches on the back of a napkin.

Little by little, the remaining pieces of FATCA regulation are appearing in rapid succession. That means, not only that individuals and entities with foreign assets must now ensure they meet the reporting requirement, but also that now there is added timeline pressure on financial institutions. Firms must organize their in-house operations and technology solutions for fully implementing the mechanisms that will ultimately drive how successful they will be in achieving compliance with FATCA.

Along the road to FATCA, there has been back and forth throughout the process, with exchange and commentary between rule makers and private sector entities, in parallel to model International Government Agreements (IGAs) with subsequent adjustments to the FATCA rules articulating how they would ultimately be finalized. And while there are still some unknowns, guidance, and harmonizing to be articulated, for many financial institutions, nailing down direction is now a very real necessity.

For financial services organizations that have not yet completed their FATCA solution implementations, the time to act is now. There is no longer any question as to whether the regulation will be enforced, but rather how and to what extent.

Financial institutions should be proactive and look within their organizations to realize the synergies between FATCA requirements and other areas of compliance. In a similar way, firms with compliance technology partners can determine the cross-over between these rules and available solutions to shorten implementation time and streamline compliance processes.

In talking to our clients and prospects, there are some logical next steps that financial institutions can take to quickly lock-in their FATCA strategies and planning. First, if you have not already done so, leverage the knowledge, expertise, and headcount within your existing anti-money laundering compliance departments, especially those dealing with customer due diligence (CDD) or Customer Information Programs (CIP), in an effort to establish your platform.

Next, refresh your cheat-sheet of current FATCA timelines, processes, and budgets to determine if these still map to your organization’s ability to meet the final FATCA requirements.

As you examine the timelines and leverage the talent, it then seems logical to consolidate FATCA responsibilities into a single center of excellence, reducing the learning curve and time of training multiple, dispersed teams. You will thank yourself many times over for taking this necessary step as you begin to execute against the requirements of the legislation.

With respect to the technology and tools you select to support your FATCA compliance, keep in mind that “it’s all about the data” and partner with your solution providers to obtain guidance. They can work with you to ensure that technology and tools can be deployed to handle the complexities of FATCA indicia and data gathering.

Particularly, multi-national institutions dealing with differing IGA requirements need to work well in advance of the looming deadlines to ensure smooth implementation. Last, consider soliciting feedback from peer organizations, especially those who have or have nearly completed FATCA solution implementation, to “compare notes” on effectiveness and best practices.

Given the complexities around this regulation, and the lack of broad expertise, financial institutions should make a conscious effort to get up-to-speed on gaining knowledge and preparing for FATCA now, whether that means increasing executive focus, making FATCA a priority above other projects, or bringing in FATCA specialists to help plan the implementation and execution processes.

Content originally published by Joe Bognanno

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