Overview of technical challenges and possible solutions when

Overview of technical challenges and possible solutions when implementing FATCA requirements to the existing KYC process.

Ljubica Grgic, Detecon

Thomson Reuters GRC FATCA SeminarDubai, 11th June 2012

Content

1 FATCA general overview

2 Challenges at implementation

3 Holistic implementation approach

– 2 –

1 FATCA overview

To fulfill the imposed FATCA requirements, three ma in work packages are necessary:

1 FATCA overviewAccount Identifcation

(KYC Process)Account Identifcation

(KYC Process) ReportingReporting WithholdingWithholding

�

�

�

�

�

�

�

�

�

– 3 –

1 General FATCA challenges

There are three main challenges for FFI’s, when it comes to implementing FATCA.

Challenges for FFI’s

FATCAChallenges

Time

– 4 –

New & Complex

ChangingRegulation

Challenges

1 Working areas of an FFI at a FATCA implementation

An integrated implementation approach enables you t o address all FATCA requirements comprehensively.

Account Identifcation(KYC Process)

Account Identifcation(KYC Process) ReportingReporting WithholdingWithholding

FATCA

working

B

C

A

– 5 –

areasD

E

1 The relevance of the Account Identification proces s (KYC)

1. Early planning gives time to react and adapt.

2. Early -adapted KYC shows FATCA-compliance, and acts as a role model.

FATCA–compliant Account Identification is key for a successful implementation.

AccountIdentifcation

(KYC Process)


(KYC Process)ReportingReporting WithholdingWithholding

2. Early -adapted KYC shows FATCA-compliance, and acts as a role model.

3. Cost of compliance could be minimized using a standardized and tool-assisted approach.

4. Quality and costs of reporting and withholding strongly depend on a high-quality KYC process.

– 6 –

Content


1


FATCA general overview


– 7 –

2 Challenges of adapting the account identification process (I/II)

FFIs will face several challenges within the KYC pr ocess, especially when performing the review of existing accounts.

Challenges at implementation


(KYC Process)



� Adaption of existing KYC processes is highly complex and interdependent

� Significant impact on operations, client relationships and services

� Significant administration effort

� Constant monitoring of the different criteria, exceptions and requirements

B

C

D

A

E

– 8 –

� Requirements are complex and related to changes in business processes, systems and data

� Strict timeline leaves little scope for delayed action

2 Challenges of adapting the account identification process (II/II)

Implementing a FATCA-compliant KYC can bear challen ges and risks.


(KYC Process)



Challenges at implementation

� Reconciliation, upload and centralized preparation of data for review may lead to unforeseen work load

� Initial assessment of relevant data sources is prerequisite for the review of existing accounts and needs time

� Identification of beneficial owners in complex acco unt structures (trusts, foundations, entity accounts) require special knowledge and are more time consuming

B

C

D

A

E

– 9 –

knowledge and are more time consuming

� Potential negative impact on client relationships could result in client frustration

Content


1


FATCA general overview


– 10 –

3 Implementation approach – a selection

FATCA requirements impact a wide range of processes and applications. Therefore, a clearly structured approach is necessa ry, in particular for the KYC process.


(KYC Process)



– 11 –

3 Implementation approach – a selection

• Detection of all relevant accounts, e.g. trusts and joint accounts

• Identification of “sham” account structures

Beside the „simple“ cases, more complex situations must be handled properly, as well.


(KYC Process)



• Identification of “sham” account structures

• Identification of complex BO-structures

• Recognition and review of related accounts

• Handling of “joint accounts” for review and reporting

• Maintenance of valid waivers

• Combination of both reporting regimes : existing QI and FATCA

• Support for internal or external audit processes• Support for internal or external audit processes

• …

– 12 –

Contacts

For additional information please contact

Waiel Al-QaimiManaging Partner - MENA

Detecon International GmbH

Ljubica GrgicSenior Consultant

Detecon (Schweiz) AGLöwenstrasse 1

Dr. Wolfgang GöbHead of Business Development

Software Daten Service GmbH Rennweg 97-99

Detecon International GmbHHazaa Bin Zayed StreetP.O.Box 52612 Abu Dhabi, United Arab EmiratesPhone: +971 (2) 443 4778Fax: +971 (2) 445 3801Mobile : +971 50 811 [email protected]

– 13 –

Integrated management and technology consulting worldwide

Löwenstrasse 1CH-8001 Zürich, SwitzerlandPhone: +41 43 888 65 40Mobile: +41 79 360 04 [email protected]

Rennweg 97-99A-1030 Wien, AustriaPhone: +43 (1) 240 56 5203Mobile: +43 676 88241 [email protected]

Disclaimer

The information in this presentation is intended to provide only a general outline of the subjectscovered but it is not sufficient for making decisions, nor should it be used in place of professional advice.We do not accept any responsibility for loss arising from any action taken or not taken by anyone using thispresentation. If you need further assistance or advice, please contact us. We will be glad to support you.

– 14 –

Documents

Overview of technical challenges and possible solutions when