1. T r u s t
t h e
E x p e r t s
No Choice but to Comply
A FATCA Case Study
As a Project Manager at one of the largest Banks in Europe, Andre Volker had the unenviable task of aligning the
bank’s IT Systems and Applications with the new compliance requirements as specified by FATCA. There were fast
approaching deadlines to be met. Before plunging into the task he wanted to refresh his fundamentals. An executive
brief that he had commissioned was now on his table.
Executive Brief
The Foreign Account Tax Compliance Act (FATCA) necessitates that US taxpayers, Foreign Financial Institutions (FFI) or
any Non-Financial Foreign Entity (NFFE) report information about financial accounts held by U.S. taxpayers directly to the
Internal Revenue Service (IRS).
Information about accounts held by foreign entities in which U.S. taxpayers hold a substantial ownership interest also
comes under the purview of the act. Withholding tax of 30% will apply to withholdable payments made to FFIs and NFFEs
not complying with FATCA.
The Banks and Financial Institutions were required to update the IT systems to be compliant with FATCA by 1st Jan 2014.

2. All FFIs are required to comply and carry out:
• Acquisition of the Global Intermediary Identification Number (GIIN) from IRS by signing the due agreement with IRS
• Classification of products as per FATCA definition
• Capturing customer (Individuals, Entities) information in the W8/W9 forms FATCA requirement, by obtaining
W8/W9 forms
• Classification of existing customer portfolio for reporting under FATCA
• Compliance with enhanced payee documentation requirements
• Obtaining non-disclosure waiver from customers to disclose information to IRS under intergovernmental agreements (IGAs)
• Handling withholding exemptions allowed by the Act
• Withholding certificate issuance
• Refunds, credits and reimbursements
• Annual Reporting of US taxpayers to IRS
• Withholding 30% as tax on any “withholdable payment” made to its proprietary account for failing to comply with FATCA
Compliance with FATCA would have a major impact on:
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KYC process and systems
Payments & Transaction Process and Systems
Reporting systems
Changes to existing products
Documentation process and record maintenance
Going through the report Andre realized that the requisite
changes towards compliance with acts and regulatory bodies
such as FFEIC, FATCA and Dodd Frank would have a
manifold impact on the existing system. Consequently the
changes may have to be implemented in two phases.
Business assurance of such changes would require the
services of an expert testing partner with strong domain
knowledge, not only to test the changes but to also contribute
in analyzing their cross implications. The partner would also
have to identify high risk areas and design scenarios to ensure
TGSL (CS) 11 - A FATCA Case Study
compliance by effectively mapping them to the regulatory
framework.
Following a thorough search Andre zeroed in on Thinksoft
Global Services Ltd (TGSL) a specialist pure play testing
house. He was impressed with TGSL’s framework that was
developed in consultation with domain experts and industry
practitioners, specifically for compliance testing and
implementation.

3. Summary of TGSL framework and process:
• Identify High Risk banking areas
(products, services, customers,
entities) impacted by FATCA
• Derive and agree on Project Scope
• Understand KYC Procedures /
Customer Identification, Payments
and
Transactional
process,
Reporting systems, Monitoring,
product
changes,record
maintenace
• Business scenarios designed to
ensure optimum coverage
• Data selection to validate Boundary
value
and
negative
testing
scenarios
• Functional
coverage
matrix
to
• Risk based execution based on
business criticality and functional
complexity (e.g. customer due
(diligence)
• Structured
reporting
Testing
and
Timely
highlight
• Agile Planning methods ensuring
faster delivery
Three easy steps for standardized delivery
The TGSL Advantage
• Ready to go: Testing Partner: Thorough knowledge of the
impact of regulatory changes on financial systems
coupled with having a time tested and mature delivery
model in place to jump start the project and meet the
bank’s objectives and timelines
• Proven track record: Domain focused test
methodologies/automation techniques to deliver value to
the client
• Risk focused testing: Risk categorization of test objects
based on criticality and probability of occurrence, in
consultation with the bank for optimization of total cost
of ownership and to minimize the time to launch without
compromising quality.
• First time right: TGSL’s internal review processes geared
to being ensure ‘First Time Right’ on project
deliverables.
TGSL (CS) 11 - A FATCA Case Study
• Single stop testing service provider: With capability to
provide both functional and non-functional testing
services, against all the testing requirements
Challenges Faced by TGSL:
Immediately on taking up the assignment, TGSL was
faced with the onerous task of:
• Understanding the flow of FATCA related information
between interface systems and analyzing them to
ensure coverage of all impacted systems and
functionalities
• Managing the innumerable FATCA documents with
details of requirements for different systems and
consolidating them into a cohesive test requirement
document
• Managing testing within limited time frame

4. • Resolving FATCA related issues despite the limited
experience of the bank in clarifying such matters
• Test data preparation with all the possible combinations
that helped in test coverage of all the functional
requirements.
Highlights:
• Preparation of the detailed test scope covering all
functionalities
• Verification and validation of new business fields
included in the application
• Testing of Indicia and FATCA classification/
reclassification for new and existing customers
• Validation of account servicing & maintenance
(Individual/Entities)
• Testing of Account/Policy remediation for existing
customers and customer communication &
documentation
• Validation of withholding of tax (Payments to NPFFI’s/
Recalcitrant’s) and internal reports & reports to IRS.
• Regression testing done due to introduction of New
FATCA fields/Changes
Testing outcomes:
The achievements in the course of the successful
completion of the assignment: • Near 100% test coverage ensuring availability of a
robust system for production roll-out
“
• Identification of 25% of the defects as high severity
defects and about 40% as medium severity defects
• Tracing 35% of the defects to the critical functionalities,
thus averting any major post production negative
impact
• Regression testing to confirm that the impact on the
existing systems was due to the new changes.
Rectification of defects so identified
• Completion of all the testing activities within the allotted
time frame
Value adds:
• Development and maintenance of a Test Coverage
Matrix with different combinations of test data to ensure
the coverage of all functional requirements
• Introduction of a structured test process
• Identification of critical defects during the early stages of
the project through Risk Based that helped in adherence
to the test schedule
• Effective prioritization, tracking and root cause analysis
of defects that helped the bank in their quick resolution
Customer Speak:
My personal experience with the Thinksoft Testing Team:
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Excellent test analysis: requirements analysis, decomposition of test scope
Good management of cost and planning; in line with budget; transparent estimation
Structured test analysis and planning
Complete test scope: including testing error/warning, negative testing
Excellent reporting in quality center and willing to and able to do the job
Project Manager
Application Development and Management Team
A Major Bank in Europe
T r u s t t h e E x p e r t s
For more details, visit www. thinksoftglobal.com
”
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TGSL (CS) 11 - A FATCA Case Study