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The case for a robust FATCA solution: WKFS

Nurdianah Md Nur | Dec. 16, 2014
Such a solution can be extended to comply with GATCA or other regulations with less complexities, thus future-proofing the financial institution.

Wouter Delbaere
Wouter Delbaere, Asia Strategy Manager at WKFS

By January 2017, financial institutions (FIs) around the world are expected to be fully compliant with the US Foreign Account Tax Compliance Act (FATCA). However, FIs might continue to face compliance issues as the Automatic Exchange of Information regulation, or better known as Global FATCA (GATCA), is expected to be effective from September 2017.

Developed by the Organisation for Economic Co-operation and Development (OECD) and G-20, GATCA is the common global reporting and due diligence standard for the automatic exchange of tax information between countries. According to Wolters Kluwer Financial Services (WKFS), as of October 2014, 90 countries have publicly committed to the standard, of which 12 of them are from the Asia Pacific (APAC) region.  The early adopters - -56 of them-- have agreed to implement GATCA by 2017 while the others will implement it by 2018.

Sharing the same concept as FATCA, GATCA requires FIs to obtain information to properly identify foreign accounts before applying verification, due diligence and on boarding procedures on them. It also demands FIs to report the account details, holder details, balance and movements of each foreign account, as well as provide additional information to tax authorities as requested.

Since FATCA and GATCA share similar key requirements, one could assume that simply reusing a FATCA solution could easily enable FIs to comply with GATCA. However, this may not be the case. "It depends on how well the FATCA solution is designed," said Wouter Delbaere, Asia Strategy Manager at WKFS in an exclusive interview with bankITasia. "If the FATCA design only focussed on the problem at hand, trying to incorporate GATCA requirements afterwards could potentially lead to a costly redesign. However, if the solution was designed in a robust and future-proof manner, extending the solution to comply with GATCA could be a relatively straight-forward exercise."

Delbaere went on to explain that a robust FATCA and GATCA solution needs to provide a single data management framework for both standards; feature consolidated remediation, classification and monitoring tools; and enable consistent regulatory reporting.  Moreover, the solution must allow business rules to be changed as needed to cater to regime-specific and country- specific differences, as well as evolving regulations. "The best solutions are those that are robust enough to not only meet the requirements at hand, but also the ones yet to come," he asserted.

 When asked about the benefits of having a single automated solution for FATCA and GATCA, Delbaere said that doing so will help minimise regulatory risk while increasing internal transparency. This is because the consolidated and centralised information will be used for both internal and external purposes.  Other advantages of using a single solution include enabling FIs to avoid unnecessarily duplicating data and processes, and providing consistent control framework across tax regimes, he added.

 

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