1 July 2014. Are you prepared?

EY services help you achieve FATCA compliance

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Since its enactment in 2010, the Foreign Account Tax Compliance Act has shaped the way regulatory bodies around the world approach tax reporting and withholding.

Although organizations may have FATCA programs in progress, we offer a suite of services that assess the current state of your FATCA program, address the most pressing issues and help you achieve FATCA compliance.

  • Entity
    classification and registration
  • Onboarding
  • Enhanced File Review
  • Reporting
  • Compliance Assessments
  • Change Management
  • Competent Authority Info Exchange

Entity classification and registration

EY - Services Overview

Entity classification and registration

A Foreign financial institution (FFI) complying with FATCA must be analyzed and classified for FATCA purposes and will have to register with the IRS. The FFI must register with the IRS no later than 25 April 2014 to ensure the entity is included on the first IRS FFI list and to substantiate compliance by the 1 July 2014 FATCA effective date.

Upon completion of the registration process, the participating FFI will be given a Global Intermediary Identification Number (GIIN), which is needed to demonstrate FATCA compliance. The registration process is complicated by the need to identify, classify and register the FFI’s expanded affiliated group members and the ongoing need to manage the list of expanded affiliated group members.

We will provide industry-specific guidance for legal entities, including a strategy customized for your organization’s structure and regulatory requirements.

EY’s legal entity database will help your firm’s FATCA compliance and capabilities by allowing you to:

  • Update and maintain legal entity information in a consolidated database on an ongoing basis
  • Generate draft IRS Forms 8957 for each legal entity
  • Enable entry of data attributes into IRS portal in order to finalize registration and obtain a GIIN

Our service offerings to help achieve FATCA compliance:

  • Analyze existing legal entity attributes and classify accordingly to prepare for FATCA registration
  • Assess, document and classify Expanded Affiliated Groups (EAGs) members
  • Develop protocol for registration of legal entities into the IRS portal
  • Help you implement processes to classify new entities and perform updates for entities that have been divested
  • Review and help you enhance existing systems to store additional FATCA data attributes
  • Recommend governance models to monitor ongoing compliance

Our tools used to support this service offering:

  • Legal entity analysis tool
  • Legal entity registration tool


Onboarding

EY - FFI Registration and Classification

Onboarding

One of the first compliance milestones requires a FATCA compliant onboarding process, which is broader than validating tax forms.

Developing a successful onboarding solution requires combining a tax technical understanding of FATCA, with an understanding of onboarding operations and the systems that are utilized to capture customer or counterparty information. Onboarding has far-reaching downstream implications for data collection and storage, since the information collected will be used both to support tax reporting and will be leveraged again during audits by a competent authority.

Platforms used to onboard accounts and counterparties need to be compliant with FATCA:

  • Organizations should review customer and counterparty onboarding processes, system and data sources for FATCA compliance
  • Organizations should identify key cross-functional activities, including anti-money laundering and know your customer

Our service offerings to help achieve FATCA compliance:

  • Deploy our onboarding service offering and tools, including system business requirements, operational procedures, functional requirements and testing
  • Help you implement a change management program, including assisting with communications to internal operations and external customers on the impact of FATCA
  • Develop processes around tax form validation, including the validation of self-certifications
  • Create a process for form and documentation maintenance
  • Assess onboarding solution and specifications for consistency with FATCA requirements and business or compliance decisions

Our tools used to support this service offering:

  • CPM Tool


Enhanced file review

EY - Onboarding

Enhanced file review

FATCA requires an FFI to review accounts over $50,000, and accounts of individuals over $1 million will have to undergo an enhanced review.

FATCA identifies seven data elements that are indicators of US status (US indicia), and these indicators are used to identify potential US accounts. Each type of US indicia has distinct documentation which customers must provide to clear the US indicia (cure documentation).

Our approach to enhanced review seeks to deliver the most value from a file review and can incorporate additional remediation content including AML/KYC.

Our extensive experience in file reviews means we understand the areas of complexity in enhanced review. We have proven global methodologies to address factors, including:

  • Aggregation
  • Complex client and account structures
  • Audit trail
  • Training
  • Consistency of reviews
  • Deployment
  • Progress and readiness reporting

Key issues that clients face when designing and executing their enhanced review:

  • Segmenting pre-existing accounts into:
    1. Prima facie FFIs
    2. High value individuals
    3. Other in scope individuals
    4. Non-Financial Foreign Entities
  • Identifying and communicating with relationship managers tasked with the enhanced review
  • Aggregating customer accounts across various business lines and systems
  • Challenges with administering an intensive paper-based review
  • Implementing internal controls, including an audit trail of procedures completed

Our service offerings to help achieve FATCA compliance:

  • Strategic planning and program management
  • Prioritization and workflow development
  • Development of internal controls framework for document review
  • Electronic data search tools used for identifying US indicia
  • OCR technology to assist with the review of paper files

Our tools used to support this service offering:

  • eDiscovery (optical character recognition tool)
  • CPM Tool


Compliance Assessments

EY - Enhanced File Review

Compliance Assessments

Global organizations are looking ahead at assessing their FATCA solutions prior to the 1 July 2014 effective date.

The primary aim of the assessment is to reduce the likelihood of FATCA non-compliance. Additionally, organizations are concerned with minimizing reputational and financial risks (including penalties) from being applied to both the organization and the Responsible Officer (RO).

Potential risks include failure to:

  • Deliver will have ramifications on the financial institution’s compliance
  • Comply with regulatory deadline
  • Demonstrate traceability between regulations and a country’s solution
  • Manage dependencies within the financial institution’s organization and authorized third parties
  • Identify business owners and leverage centralization services

Key client concerns and risks driving requests for compliance assessments:

  • FATCA project teams and the internal audit function are concerned with the cross-organizational impacts and the effectiveness of the program in meeting regulatory requirements
  • Risk and compliance functions are concerned with the adequacy of proposed process changes and are identifying operational and organizational risks
  • Organizations are requesting third-party assurance reports from service providers. Additionally, service providers are being asked to deliver third-party assurance reports on their service offerings compliance with FATCA

Our service offerings to help achieve FATCA compliance:

  • Program compliance check – rapid assessment of the current state of the FATCA program and identification of key risk areas
  • Readiness assessments – designed to increase an RO’s comfort that the FATCA solution and the related controls, processes, procedures and systems, of an organization are compliant with the FATCA Regulations or applicable Intergovernmental Agreements (IGAs)
  • BAU (business as usual) assessment – designed to focus on the ongoing controls, procedures and systems to reduce the likelihood of an entity becoming non-compliant
  • Third-party assurance – agreed-upon procedures or Service Organization Control (SOC) Reports on Controls at a Service Organization


Reporting

EY - Assurance

Reporting

As the tax regulatory landscape continues to evolve, the need for a reporting tool that is flexible in design to support current and future tax reporting requirements is essential. FATCA requires FFIs and US withholding agents to define, build and implement the capabilities to:

Key considerations when implementing a FATCA reporting tool:

  • Sensitive data should be protected and access rights monitored and well controlled
  • A FATCA reporting system should have appropriate application-level security
  • Highly configurable user security profiles should be used and should be manageable by functional groups or roles in the organization
  • Data validation and remediation functionality needs to be included to quickly and effectively address any identified data issues
  • The FATCA system should be able to generate auditable transmittal files, which should be flexible enough to change as needs arise
  • Collect significant volumes of data about their customers
  • Analyze and control the data received
  • Provide information to a local Competent Authority or directly to the IRS
  • Respond to and generate queries with financial institutions, taxpayers and tax authorities

To help achieve your goal of FATCA compliance, we offer a fully integrated set of services, including an IRS reporting tool that is easy to use, manage and maintain; secure, scalable and flexible enough to accommodate future reporting needs; and can be up and running quickly to meet the 2015 reporting deadlines.

Our service offerings to help achieve FATCA compliance:

  • Software as a Service (SaaS) solution, with a “Private Cloud” delivery model
  • Can be hosted remotely or within your own data center
  • Software updates for new regulatory changes and upgrades
  • Access via a web portal
  • Validation of GIINs real time via XML web services
  • Data file from source systems can be received in multiple formats, including: fixed-length, delimited and Excel
  • Provides data validation functionality for in-bound files
  • Standard management reports and analytical tools enabling custom built analysis and ad hoc report generation
  • Embedded controls and security functionality to authenticate users and restrict access
  • Application level security controls, such as data encryption, internet protocol address restrictions, configurable global security and security audit logs
  • Generation of transmittal files, audit files for data accuracy and seamless data transmission to the IRS or Competent Authority

The implementation will be facilitated by our team, including tax, technology architecture, process improvement, organizational change and program management professionals.

Our implementation model includes a strong program governance structure, current state analysis, business and functional requirements definition, design authority and technical architecture, full scale testing, data security testing and planning and business continuity planning.

In addition, we can help you address stakeholder readiness, engagement and adoption through our change management toolkit, which includes: training needs analysis, system and process training, communications, user manuals and operational guides.



Change management

EY - Reporting

Change management

Change management drives fast, sustainable adoption and reduces customer and operational disruption during FATCA implementations. EY leverages a proven FATCA change management tool kit including standard communications and training to help our clients accelerate their FATCA program.

Six key elementsdrive program success:

  • Leadership alignment
  • Stakeholder engagement and communications
  • Organizational alignment
  • People development and training
  • Deployment
  • Change planning

Our change management methodology uses a two-phase approach:

  • Phase 1, Change Mobilization, focuses on rapidly defining the change management strategyincluding communications, training and business deployment plans.
  • Phase 2, Change Delivery, executes the change management plan focusing on stakeholder engagement, business readiness and sustaining compliance over time.

Regulatory and compliance programs such as FATCA face significant change management hurdles:

  • Impressing the criticality of FATCA on leaders and managers who face many priorities
  • Addressing the broad scale of operational impacts in achieving compliance
  • Communicating with and managing change across many business units and locations
  • Simplifying the complexity of the regulations for a broad set of associates via training and communications

As a result, a dedicated change management team is a key component of any FATCA program. EY’s experience, FATCA change management tool kit and FATCA training allow our clients to achieve readiness and sustainable compliance quickly, effectively and efficiently.



Services to governments

EY - Government Programs

Services to governments

On 1 September 2015, Partner Jurisdictions that have entered into a Model 1 Intergovernmental Agreement (IGA) with the US will have to submit their first FATCA report to the IRS. The reporting requirements will require Competent Authorities to capture, store and transmit information to the IRS, and under Reciprocal IGAs receive the agreed-to information from the IRS.

We provide an end-to-end service offering from policy and regulatory support, to communications, technology design and implementation to help Competent Authorities to meet their IGA obligations in an efficient and cost-effective manner.

  • Single approach methodology for a Competent Authority’s automated tax information exchange process
  • Scalable approach that meets the initial US FATCA reporting requirements and will extend to include non-US IGAs and OECD AEOI reporting
  • Flexible approach that reflects the variations in the technical capability and volumes of data submitted by in-country financial institutions and provides a user-friendly portal

Although dates have not yet been set, it is anticipated that the proposed OECD Automatic Exchange of Information (AEOI) regime will require equivalent reporting starting in 2016.

For many Competent Authorities, this level of information exchange is a new responsibility, and significant effort will be required between now and 1 September 2015 to ensure they are in a position to meet their IGA obligations to the IRS. Further, any solution should include OECD requirements to reduce the overall effort and cost of the solution.

Competent Authorities will need to define, build and implement the capabilities to undertake the following:

  • Collect significant volumes of data from domestic financial institutions about their customers
  • Analyze and control the data received
  • Provide information to multiple foreign tax authorities
  • Where reciprocal agreements are in force, receive, analyze and act on data provided by multiple foreign tax authorities
  • Handle queries from multiple stakeholders
  • Data quality checks to ensure the quality of information exchanged meets international standards
  • Secure the data and maintain privacy throughout the reporting process