FATCA Compliance using Business Process and Rules Managament
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Foreign Account Tax Compliance Act remediation using Business Process and Rules Management. Presentation featured at the IBM IMPACT 2012 Global Conference in Las Vegas.
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FATCA Compliance using Business Process and Rules Managament
- 1. 1 FATCA and Decision Management: Turn Compliance into a Competitive Differentiator! Francis Friedlander, IBM Pan-Europe BPM and Decision Management Garry Gomersall, Cognizant Head of BPM Competency (EMEA) Session #2995
- 2. 2 The Foreign Account Tax Compliance Act FATCA is a new US law aimed to prevent tax evasion by US citizens and US residents through use of offshore accounts Foreign financial institutions (FFIs) outside the US may enter into an agreement with US tax authorities Participating FFIs must Identify US accounts, account holders and entities Withhold on recalcitrant account holders. Report to the IRS FATCA becomes effective in 2013 Identification of US persons must be effective on July 1rst, 2013
- 3. 3 Your Challenges with FATCA Apply FATCA procedures Huge impact on workload Upgrade the existing processes Specific due diligence procedures Need to automate complex decisions Cope with a business logic that is ... Complex Ambiguous Ever changing Need transparency and agility Keep a good relationship with your client Negative presumption, investigation Reporting to the l’IRS Withholding Need to understand and justify Ensure compliance FATCA compliance Comply with local regulations Comply with your best practices Need for transparency and adaptability Integrate in your IT landscape Integrate in the existing applications: Account opening, payments, etc Need for a service oriented approach WebSphere Operational Decision Management and IBM BPM are key enablers for achieving these challenges WebSphere Operational Decision Management and IBM BPM are key enablers for achieving these challenges
- 4. 4 WebSphere Operational Decision Management Principles and Benefits Deploy business services U.S. Client Account opening Identification Identification batch Shared services Platform agnostic Consistency and traceability Externalize & centralize the business logic if the account is required to be treated as a US account then for each individual holder the FFI should collect a Form W- 9 if the account is required to be treated as a US account then for each individual holder the FFI should collect a Form W- 9 Rule Repository Controlled access Decoupled from the application logic Agility Bring the IT and the lines of business together Rule Designer Decision Center One single view on rules Test, simulation, versioning Cooperative governance Express the business logic as rules Business language 1 business rule = 1 WODM rule Transparency
- 5. 5 Where Do BPM and Decision Management Add Value? Indicia, thresholds, etc Individual and entity Orchestrate due diligence processes and automate decisions Eligibility and calculation #1 priority Decision Management BPM and Decision Management Screen the transactions! Decision Management
- 6. 6 FATCA Specs and the Rule Repository Have an Identical Structure
- 7. 7 Specification Specification f rfroomm t hthee I RIRSS WWeebbSSpphheerree O Oppeerraatitoionnaal lD Deeccisisioionn M Maannaaggeemmeennt tR Ruulele if the account holder is a documented U.S. person then the account holder shall be treated as a specified U.S. person because "Notice 2010-60 Section III B2a2, page 26" ; Each FATCA rule becomes a WODM rule, expressed in a natural and declarative language if the account holder is a documented U.S. person and the account is a financial account then the account shall be treated as a U.S. account because "Notice 2010-60 Section III B2a2, page 26" ; if the account holder is a documented U.S. person and the account is a financial account then the account shall be treated as a U.S. account because "Notice 2010-60 Section III B2a2, page 26" ; From among accounts not addressed in step 1, all account holders already documented as U.S. persons for other U.S. tax purposes (e.g., for purposes of chapters 3 and 61 of the Code) will be treated as specified U.S. persons, and those account holders’ financial accounts will be treated as U.S. accounts. From among accounts not addressed in step 1, all account holders already documented as U.S. persons for other U.S. tax purposes (e.g., for purposes of chapters 3 and 61 of the Code) will be treated as specified U.S. persons, and those account holders’ financial accounts will be treated as U.S. accounts. From among accounts not addressed in step 1, all account holders already documented as U.S. persons for other U.S. tax purposes (e.g., for purposes of chapters 3 and 61 of the Code) will be treated as specified U.S. persons, and those account holders’ financial accounts will be treated as U.S. accounts. From among accounts not addressed in step 1, all account holders already documented as U.S. persons for other U.S. tax purposes (e.g., for purposes of chapters 3 and 61 of the Code) will be treated as specified U.S. persons, and those account holders’ financial accounts will be treated as U.S. accounts. if the account holder is a documented U.S. person then the account holder shall be treated as a specified U.S. person because "Notice 2010-60 Section III B2a2, page 26" ; Understand and explain to the customer
- 8. 8 The FATCA Dictionary The bottom-up construction of rules based on a FATCA vocabulary ensures consistency The contextual filtering of the vocabulary guides rule authoring Translate this vocabulary to any of the 15 supported languages, and you will be able to see and change the rules in these languages
- 9. 9 Demonstration – Identification of U.S. Clients U.S. Client Other than U.S. Client Potentially U.S. Client New account opening process Core banking application client & account data client & account data identification engine identification rules identification service
- 10. 10 Demo – Updating the Rules 2011: Rule Analyst wrote indicia rule compliant with previous specs 2012: FATCA expert updates rule to add indicia introduced in new specification (Feb. 8, 2012) U.S. indicia include: (1) identification of an account holder as a U.S. person; (2) a U.S. place of birth; (3) a U.S. address; (4) a U.S. telephone number (5) standing instructions to transfer funds to an account maintained in the United States; (6) a power of attorney or signatory authority granted to a person with a U.S. address; or (7) a U.S. “in-care-of” or “hold mail” address that is the sole address the FFI has identified for the account holder.
- 11. 11 Turn FATCA into a Competitive Advantage Inform your clients they have to prove they are not U.S. persons Inform your clients they have to prove they are not U.S. persons
- 12. 12 Turn FATCA into a Competitive Advantage Take advantage of if WODM traceability and justify your actions the transaction is a passthru payment to a recalcitrant holder then withold 30% because "Notice 2010-60 Section III B2a2, page 26" if the transaction is a passthru payment to a recalcitrant holder then withold 30% because "Notice 2010-60 Section III B2a2, page 26" Take advantage of WODM traceability and justify your actions Take advantage of WODM simulation to predict and plan your due diligence effort Take advantage of WODM simulation to predict and plan your due diligence effort Germany Spain if the client is a US expatriate then propose an EXPAT appointment if the client is a US expatriate then propose an EXPAT appointment Turn the facts FATCA processes tell you about your client into insight and into cross-sell opportunities Turn the facts FATCA processes tell you about your client into insight and into cross-sell opportunities
- 13. Take Advantage of FATCA to Build a Resilient and Extensible Risk and Compliance Architecture RRisiskk & & C Coommpplilaiannccee A Apppplilcicaattioionnss FFrroonntt--EEnndd A Apppplilcicaattioionnss Customer Classifications 13 Customer Onboarding Customer Onboarding Account Opening . .. .. . Account Opening PPrroocceessss D Deefifninitiitoionnss FATCA Documentation Processes FATCA Documentation Processes Customer Onboarding Processes Customer Onboarding Processes Account Opening Processes Account Opening Processes MMiFiFIDID P Prroocceesssseess Other Generic Processes Other Generic Processes . .. .. . BPM Framework for Risk & Compliance based on IBM Business Process Manager BPM Framework for Risk & Compliance based on IBM Business Process Manager Customer Classifications Customer Classification Customer Classification KKYYCC o obblilgigaatitoionnss RRisiskk A Asssseessssmmeenntt RRuulelesseetsts Portfolio Healthcheck . .. .. . Portfolio Healthcheck Operation Authorization Operation Authorization AAMMLL FATCA screening FATCA screening MMiFiFIDID FATCA withholding FATCA withholding Basel II & Basel III Other FATCAs Basel II & Basel III Other FATCAs Decision Framework for Risk & Compliance based on WebSphere Operational Decision Management Decision Framework for Risk & Compliance based on WebSphere Operational Decision Management BBaacckkeenndd B Baannkkiningg S Syysstteemmss Reference Datamodel CCuurrrerennt tA Accccoouunntsts TTraraddiningg A Accccoouunntsts DDeeppoossitists LLooaannss & & M Moortrgtgaaggeess CCuusstotommeer rD DBB
- 14. 14 Our Unique Value Proposition Packaged approaches Solution built with IBM BPM and WODM FATCA as a commodity An agile, tansparent, and managed FATCA FATCA Due Diligence Comply! Time KYC, AML Other FATCAs Compliance Architecture Leverage! Turn FATCA into an advantage Smart FATCA Differentiate!
- 15. 15 Thank You!