Pega, Capgemini and partner DLA Piper (a global law firm with extensive experience on FATCA regulations) explore how global financial institutions can fulfill their legal obligations to become FATCA compliant and navigate operational issues and technology requirements.
Presenter Information:
Alan W. Granwell, FATCA Team Leader, of Counsel, DLA Piper LLP
Gerald Francese, Partner, DLA Piper LLP
Reetu Kholsa, Global Director, Risk, Fraud and Compliance, Pegasystems
Erick Christensen, Vice President, Head of Compliance Practice Financial Services BU, Capgemini
This presentation was used as part of a live webcast. You can watch the full recording (with audio) at: http://www.pega.com/resources/webcast-the-state-of-fatca-compliance?utm_source=ss
3. 33
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. 44
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. 55
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. 66
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
9. 99
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. 1010
Headlines and Industry Concerns: FATCA
WHAT ABOUT LOCAL
PRIVACY LEGISLATION?
Legal and Operational evaluation of current processes and systems enhancements required to
meet deadlines.
11. 1111
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. 1212
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 BrokerPhoneSales Officer
13. 1313
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 bankFSI
14. 1414
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. 1515
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
USIndicia
16. 1616
On-boarding
Audit & Reporting
Rules-Driven Suitability/Product
SelectionAge
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
17. 1717
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. 1818
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
19. 1919
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??
22. 2222
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. 2323
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
24. 2424
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. 2525
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
26. 2626
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
30. 3030
Capgemini Group Overview (2011 full year)
Canada
United States
Mexico
Brazil
Argentina
All over Europe
Morocco
Australia
People’s Republic
of China
India
Chile
Guatemala
Singapore
Philippines
Taiwan
Vietnam
United
Arab 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.”