Technology Must Bridge the Gap Between Your Financial Institution’s Existing KYC Software and the Requirements of FATCA

Jeffrey S. Freeman, J.D., LL.M

When a bank or financial institution develops its plan to ensure that its organization is FATCA compliant it must remember that the financial institution’s existing client information and technology sits as the cornerstone of complying with the law.

“KYC”, or “know your customer” software tools have long been used by banks and financial institutions companies to keep track of client/customer data and information, however, they are often ill-equipped to meet the various and often changing compliance and information requirements of the Foreign Account Tax Compliance Act (FATCA), this i why they also need to make sure to use other software programs, like CRM. What is CRM? Click here and get more details.

Many financial institutions are still not ready to deal with the onerous compliance obligations associated with this law because the organization does not have the proper tools in place to handle gathering organizing the information. As both U.S. financial institutions (USFIs) and foreign financial institutions (FFIs) transition into becoming FATCA compliant they need to create many organizational compliance procedures and technological changes to comply with the law to meet its varying requirements.

Understanding the Financial Institutions Needs

To comply with FATCA, as a first step, it is critical that the legal and technology teams work with the organization’s compliance department to do a comprehensive analysis to gain an in-depth understanding of the information is currently being collected with current systems. With proper legal analysis, the gaps of the current systems can be exposed, and a list of the missing data can be compiled that would enable an entity to understand what it needs to truly be in compliance with FATCA. Understanding the organization’s specific deficiencies will assist in determining the changes needed to be made in the collection of information, the processes, the procedures and the new tools that will be required within an organization to make FATCA compliance possible.

Accuracy is extremely important, along with completeness and transparency for compliance. The end user solution that compiles this vast array of information for the financial institution should be easy to use, be secure, and have the ability to collect, validate, interact and report compliance information to counter parties, clients, and government agencies.

1. Centralized Client Information

All client information and assets should flow through a central communication facility. Centrally stored data can be leveraged across multiple departments and locations. Communication with the customer is always logged centrally allowing for correct information to be used by all parties, at all times.

2. Strengthen Client Relationships

A strong communication link with the customer should provide them the ability to input history and information. The customer will be empowered and should be able to author content and grant access to different departments. This link will provide a strong connection for future compliance demands, improve the client experience, while reducing repetitive internal and external information requests.

3. Easy to Audit

Every action and outreach activity should be centrally tracked for easy auditing. Compliance status should be easy to monitor at any point in time and allow for non-responsive clients to be quickly identified and managed.

4. Future Flexibility while Complimenting Existing Systems

With constant regulatory changes, the solution needs to be flexible in design. The solution should easily be modified for organizational changes and regulatory changes without needing heavy IT involvement. Adding new clients and regulatory documents should be a simple process. Speed is also important as deadlines are imminent, so the solution needs to easily integrate with existing compliance systems and applications.

Investing in a solution that centrally manages customer assets can turn FATCA from a burden into a competitive advantage.

Freeman Tax Law and Newgen Software —Focused on our Client’s FATCA Needs

Freeman Tax Law (FTL) is a boutique law firm consisting of a multi-disciplinary team of tax professionals including tax attorneys, CPAs and a professional staff that have vast experience with foreign tax compliance and regulatory matters for financial institutions. FTL consults with both FFIs and USFIs with regard to Foreign Account Tax Compliance Act (FATCA) and related regulatory matters and assists them developing procedures on how to comply with these laws.

Compliance with FATCA needs a distinctive approach. A simple change of processes or leveraging new IT infrastructure may not suffice as a successful compliance strategy. Technology, regulatory compliance and law need to be interconnected in a way that they never have with FATCA and this is why Freeman Tax Law has partnered with Newgen Software (NGS) to offer a unique end to end solution for our clients to offer a comprehensive compliance strategy.

Newgen Software is a leading global provider of Business Process Management (BPM), Enterprise Content Management (ECM), and Customer Communication Management (CCM) solutions. With a global footprint of 1000 installations in over 50 foreign countries, the company is credited with large, mission-critical deployments at the world’s leading banks, insurance firms, BPOs, healthcare organizations, government agencies, telecom companies, and shared service centers.

Newgen offers FATCA compliance software for both FFIs and USFIs. The applications leverage Newgen’s two decades of domain expertise in Banking and Compliance along with its market leading BPM, Case Management, ECM and CCM applications. Newgen’s FATCA Compliance Software along with the creation of proper procedures and training offered by Freeman Tax Law of the financial organization staff, allows for the creation of systematized approach to negotiating the finer aspects of FATCA, such as the proper handling recalcitrant account holders.

Freeman Tax Law and Newgen understands that compliance with FATCA will need constant training, updating of knowledge of legal, technology and compliance teams, and modifications to the software in accordance with changes in the law. Freeman Tax Law and Newgen service teams are geared to assist in Post Implementation monitoring and Post implementation audits to ensure that their stay ahead of the game.

With FATCA, the stakes of non-compliance are simply too high. Contact us today for a consultation to discuss how to further integrate your technology with the legal requirements of FATCA.

Freeman Tax Law

(855) 935-5945

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