the state of fatca compliance
TRANSCRIPT
1 1 © 2013, Confidential, Pegasystems Inc.
FATCA Update: The State of
FATCA Compliance
Gerald Francese, FATCA Regulatory Leader
Alan Granwell, FATCA Team Leader, of Counsel
Reetu Khosla, Global Director, Risk, Fraud and Compliance
Erick Christensen, Head of Compliance Practice
2 2 © 2013, Confidential, Pegasystems Inc.
Preparation for FATCA Compliance
Gerald Francese, FATCA Regulatory
Leader, DLA Piper LLP
Alan Granwell, FATCA Team Leader, of
Counsel, DLA Piper LLP
3 3
Foreign Financial Institutions(FFIs) Immediate Steps
FATCA will come into effect January 1, 2014, with specific reporting, withholding and certification requirements to phase-in through 2017, and potentially later
Global FFIs will need to assess the FATCA status of each of their Expanded Affiliated Group businesses and determine how those that are FFIs will become compliant
Requirements may differ depending whether a particular FFI is domiciled in:
A non-IGA country
A Model 1 IGA country
A Model 2 IGA country
Implementation of FATCA technology, processes, procedures and protocols
Identification of variances, particularly Model 1 local law variances
4 4
Preparation for FATCA Compliance
Milestones:
Project planning to minimize FATCA impact and optimize automation
Due Diligence New Account On-Boarding
Existing Account Due Diligence
Contracts and Transactional Agreements
Registration
Reporting
Withholding
Compliance and Verification Monitoring, Testing and Certification
Recordkeeping
Creation of comprehensive timeline for completion of milestones
5 5
Project Planning
Determine the FATCA status of entities /lines of business within your Expanded Affiliate Group
Identify conflicts of law for non-IGA countries and cross-border data management issues
Review FATCA impact on other regulatory and contractual requirements
Review opportunities to minimize FATCA impact (ring-fencing)
Determine where automation will drive cost/benefit efficiencies
Consider other opportunities for savings such as entity rationalization
Consider future-proofing for Evolving FATCA
Future FATCA-like laws
Business change
Other regulatory compliance and reporting requirements that leverage existing KYC and transactional systems
6 6
Due Diligence
Pre-existing accounts
Monetary exemptions
Low-value accounts
High-value accounts (enhanced due diligence)
New accounts
New on-boarding procedures
Waivers, where necessary
Contracts
Grandfathering
Collateral and other transactional Agreements
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Registration
Timely action to register
Obtain GIIN
Sign FFI Agreement(s), where necessary
Coordination among EAG
8 8 © 2013, Confidential, Pegasystems Inc.
FATCA Requirements: Integrating
Technology, Operations, and Legal
to Meet Pressing Compliance
Deadlines
Reetu Khosla, Global Director
Risk, Fraud and Compliance
Pegasystems Inc.
9 9
Compliance and Verification
Determine how EAG will comply
Appoint Responsible Officer(s)
Development of compliance program
Preparation of audit verification protocols
Develop systems to keep required information and
related procedures for prescribed periods
due to the evolving nature of FATCA, date stamping and
procedure capture for decisions
10 10
Headlines and Industry Concerns: FATCA
WHAT ABOUT LOCAL PRIVACY LEGISLATION?
Legal and Operational evaluation of current processes and systems enhancements required to
meet deadlines.
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FATCA: January 1st 2014 Impact on KYC & On-boarding Systems for January 1st, 2014
On-boarding
Data, systems, processes, channels, KYC/AML will need to be evaluated and
enhanced
For due diligence specifically, FSI must review and interpret:
Products (depositary accounts, custodial accounts, equity and debt instruments,
or cash value insurance accounts)
Clients (direct or indirect US account holders, review and categorize into FATCA
“Chapter 4” categories
Exemptions
Geographies (IGA jurisdiction, local laws, standard account terms and conditions,
new account opening docs, consents/waivers)
Define and create appropriate due diligence rules by LOB, product, customer
type etc.
Automate and change as required
What do new regulations mean for On-boarding /KYC processes? ?
Automation is the only way to minimize customer impact and
reduce on-boarding time.
12 12
Unifying KYC/Suitability/Sales Platform for FATCA Unified Rules and Processes
Multi-Channel Interaction Management
Servicing Backbone
Integration
Apply KYC: FATCA
Suitability Approval Activate
3rd Party Legacy Sys Legacy Sys Legacy Sys
Web Self Service Broker Phone Sales Officer
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Global Business: Managing KYC/FATCA Regulations Specialized Rules By Geography and Business Line
Risk-based approach to meet requirements
Common Practices
Differences:
Type of Customer
Product Type
Business Line
Customer Profile
Regulation
Business Rule Changes Regulations Change Risks Change
Wealth Securities
Canada
Europe
Common CDD/EDD/FATCA Policies and Procedures
Global Corporate Governance
North America FATCA
FATCA US UK
Asset Management Investment
Banking
Dodd-Frank IGA
Your bank FSI
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FATCA: Functionality & Legal Requirements What’s required to meet compliance requirements within technology?
Integrate with CIF, tax reporting, on-boarding systems
Master 360 degree customer view across LOB, for ‘customer’ reporting
Manage privacy rules
Data capture and management of relationships (direct/indirect)
Re-use of existing systems
Rules-driven due diligence based on indicia, customer type, product, geography, IGA
Complex relationship management: (Parent/Child) for US party indicia and majority ownership thresholds (i.e. >10% FATCA)
Managing change in US indicia through automation of re-reviews
Rules driving thresholds for diligence levels(i.e. >$1Million for enhanced due diligence)
Look-back automation and management including STP for exempt accounts, auto-case creation, applying the right FATCA type based on customer data (standard, alternate, enhanced, exempt)
Master Customer profile with FATCA data for compliance reviews reporting across LOB and geographies
Reporting & Withholding
Future-proofing: New requirements, products, M&A, new IGA’s
Managing legal requirements and operations within technology
Large FI’s are using FATCA as an opportunity to update their KYC and on-
boarding systems turning compliance into a business benefit.
15 15
FATCA: Pre-existing Look-backs(NFFE/FFI) Auto-Case Creation, Rules defining due diligence requirements,
exemptions US account or not?
US Citizenship/ Permanent Residence
US Mailing/Legal
Address
Underlying Party US Citizen/
Permanent Residence
Articles of Incorporation
Country of Incorporation
W-9 Form
No indicia of US or non-US
Underlying/ Related Party
CIF/
MDM
System of
Record
System of Record
On-Boarding
System(s)
Output
Tax Reporting System
Transaction Monitoring
ABC Corp Jane Doe John Doe
FOLDER
John Doe For future re-use of
data, compliance
reviews, reporting,
etc…
FOLDER
Joane Doe For future re-use of
data, compliance
reviews, reporting,
etc…
FOLDER
ABC Corp. KYC Requirements
-Account(s)
-Account holders (Jane
Doe, John Doe)
-FATCA classification
Legacy Systems
Integration
Decision
Auto-Resolve Report to Tax
Group
Classification
Recalcitrant US
Account Non-US Account
Due Diligence (By Type)
Documentation Due Diligence
Rules
Qualification
Value of Account (i.e. >50K)
Exempt
Auto-Case Creation
Master Folder Rules driving due
diligence
Know Your Customer System
US
Indic
ia
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On-boarding
Audit & Reporting
Rules-Driven Suitability/Product
Selection Age
Income
Risk Tolerance
Investment Experience
Investment Objectives
Products
Booking Location
Security Futures
• Higher Risk
Hedge Fund
• Higher Risk
Mutual Fund
• Lower Risk
System of Record
Tax Reporting System
Rules-Driven KYC Technology Relationship Management: 360 View
Unified KYC/FATCA/Suitability Auto-Case Creation, Rules defining due diligence requirements
CRM
Driver
Data
Multiple
Streams
Agility: As risks and requirements
change designated business users
should have the ability to update rules
and processes.
ABC Corp Jane Doe John Doe
ABC Corp
Jane Doe John Doe Bob Smith
Acme
Country Products Dynamic
Risk Rating
Driver Data
• Type
• Risk
• Legal/Mailing
SDD Requirements
EDD
Requirements
Screening Integration
Existing Client
Legal Entity/
Booking Entity
Underlying Parties
Suitability Requirements
• FINRA
• MiFid
FATCA Requirements
Web Self Service
Broker
Phone
Sales
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Only way to ensure compliance:
Legal, Technology and Operations
Legal interpretation for each line of business, product and geography
Legal interpretation implemented and maintained in KYC/FATCA technology
Leveraging existing infrastructure
Lending privilege protection and confidentiality to the FATCA program (tech & ops)
Issues will be resolved under the cloak of legal privilege extended to all partners
Ability to confidentially resolve FATCA and other regulatory compliance issues with direct regulator contacts
A risk-based strategy and roll-out on a jurisdictional, product and client type basis
Automation of exemptions and pre-existing account due diligence and verification will provide further efficiency, and cost reduction
Agility to ‘future proof’ your technology
100% Auditability
FATCA can become a benefit by streamlining on-boarding and manual processes
What approach are complex FI’s following to ensure compliance while
saving costs? ?
18 18
Ensuring FATCA Compliance: Legal, Technology
& Consulting Three World-Class Organisations
-Managed Service: legal, technology and operational approach
-Evaluation of existing infrastructure, data management, systems and operations
-Implementation and maintenance of legal advice into Pega KYC solution
-Risk-based approach
-Remediation of look-back
-Proprietary IP legal advice on top of Pega KYC customizable software that facilitates product, client and geographic compliance with FATCA
-Privilege to client
-Future-proofing and monitoring for legal changes
-Pega KYC/FATCA Technology
-Legal Advice Implemented by Client’s specific products, LOB, exemptions into Pega technology
-FI’S IP layer maintained by Capgemini and DLA Piper as regulations change, new products & geographies added
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What does this mean?
100% Compliance & Audit history based on product, country, LOB
70% Faster On-boarding and time to revenue
Customer Centricity: 360 degree view of a client
60% reduction in manual processing
Ability to extend to full on-boarding, suitability end-to-end sales platform
Agility to manage new risks and regulatory requirements in days vs. months
FATCA
from
burden to
benefit.
Why are FI’s and Insurance company’s following this approach? ?
20 20 © 2013, Confidential, Pegasystems Inc.
Capgemini: Integration and
Configuration Services
Erick Christensen, Head of Compliance Practice
Capgemini
21 21
Capgemini Integration and Configuration Services
22 22
Capgemini – ‘Compliance Operationalisation’
Analysis guidelines
Customer data extraction and review
Review of the data gathering process and annual review of accounts
Governance and implementing change
Customer Due Diligence Review – pre-existing accounts and new accounts
Tracking of documentation and evidentiary information
Quality assurance of original KYC info
Legal Advisory and Compliance support
Validation of existing process and procedures against FATCA , the Regulations and
IGA requirements
Develop (in conjunction with DLA Piper) training programs to ensure employee
coordination
Update FATCA compliance requirements
Future proofing for business change, regulatory change, additional FATCA changes
and any other regulatory changes
23 23
Capgemini – Business Process Management
Capgemini can assist RBS with the following specific tasks regarding the FATCA Process
Segmentation and classification of pre-existing account holders
Segmentation based on account size, geographies, products and clients
Carrying out the cleaning, enhancing and normalisation of the customer database
Gap identification, Verification of documentation and request for FATCA specific documentation from account holders
Review of the data gathering process and annual review of accounts
Gap Analysis and compliance
Validation of existing process and procedures against FATCA requirements
Definition and Assessment for purpose of IRS reporting and system audits
Implementation of verified, replicable, consistent processes
Supported by an ‘industrialised’ change management methodology
Customer Due Diligence Reviews
Collection of customer information, classification
Tracking of documentation and evidentiary information
Ongoing review and verification of customers
Transactional compliance review
Validation of transactional data to ensure compliance to FATCA requirements
Define a process for managing and monitoring control activities ensuring compliance
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Capgemini Data Management
Using Accurate Data to Create Meaningful Information is key
Underlying Data
A customer – centric view is essential to ensure compliance
Integration of diverse applications to provide a single view is challenging
Data Governance & Data Quality standards need to be set and managed with clear ownership
Data sources and new applications require a robust support model for ongoing delivery
Data Analysis & Reporting
On the underlying data there needs to be the right mechanisms to analyze the data
Integration of Pega and other analytical tools are key
Clear definition of reporting requirements to HMRC / IRS, with in-house MI Dashboards
25 25
Capgemini Data Management
Capgemini has a track record of System Integration and Database Development/Data Warehousing within the RBS Group
Capgemini has specialists within the Business Information Management discipline covering:
Master Data Management
Building or Enhancing Data Governance
Data Analysis and Modeling
Database Design and Construction
Extract Transfer & Load (ETL)
Development of Analytical tools
Reporting Requirements and Dashboard development
Example:
Underlying
Customer Data
Store(s)
Applications/
Analytical Tools
Source
Systems
Reporting
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Verification and Validation
Acquire
Training
Existing documents
FATCA experts
Build
FATCA Test
Repositories
Knowledge documents
Reusable Test Assets
Accelerate
& Excel
Innovations
FATCA specific test
workbench
Competency building
programs for FATCA
The Capgemini FATCA Test Workbench is
a combination of: quality assurance
artifacts; best practices; and technologies,
which have been developed to provide a
head start in testing FATCA Regulation for
the banks
Our approach on capability building for
FATCA Workbench
The information contained in this presentation is proprietary.
© 2013 Capgemini. All rights reserved.
www.capgemini.com
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Q & A
29 29
Appendix
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Capgemini Group Overview (2011 full year)
Canada
United States
Mexico
Brazil
Argentina
All over Europe
Morocco
Australia
People’s Republicof China
India
Chile
Guatemala
Singapore
Philippines
Taiwan
Vietnam
UnitedArab Emirates
Malaysia
UK & Ireland 8,977
France 21,307
Benelux 10,391
Nordic Countries
4,538
North America 9,505
Central & Eastern
Europe 8,962
Morocco 431
Italy 2,381
Iberia 4,942
India 35,727
Latin America 9,176
Asia Pacific 3,370
Revenue 2011: €9,693 million
Operating margin: €713m
Operating profit: €595m
Profit for the period: €404m
Net cash and cash equivalent: €454m
Group workforce
119,707 Working offshore
44,467
5.3%
41.5%
37.5%
15.7%
Outsourcing
Services
Local
Professional
Services
Consulting
Services
Technology
Services
Revenue by Business
Energy, Utilities &
Chemicals
Financial
Services
Other
Public Sector
Telecom,
Media &
Entertainment
Customer products,
retail, distribution &
transportation
Manufac-
turing
10.8%
4.4%
24.3%
9.3%
17.7% 20.8%
12.7%
Revenue by Industry
Cap Gemini S.A.” is a member of the
CAC40, listed in Paris
ISIN code: FR0000125338
Note: Our brand name is “Capgemini” but
the name of our share on the stock
exchange is “Cap Gemini S.A.”