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Due Diligence

Your financial institution will need to enhance its customer on-boarding system to be responsive to FATCA for new accounts, while launching a separate work-stream to analyze pre-existing accounts to manage the tight deadlines and large volume of accounts to be reviewed. In addition, this process must also include current (“Chapter 3”) withholding requirements and the accompanying documentation requirements. Although the goal of each task is the same, to reach proper FATCA classifications for account holders, they are two separate tasks and should be treated as such because the processes and tools needed to complete each are different.

Updated on-boarding policies, procedures and systems should be fully operational by December 31, 2014. The goal of updating on-boarding policies and procedures to be FATCA compliant is to make FATCA a business as usual analysis within a reasonable time after July 1, 2014. Any potential new account holder that requests to open an account starting on or after either July 1, 2014 or after December 31. 2014 will need to be specifically classified for FATCA purposes.

The pre-existing account analysis is a one-time analysis of all accounts maintained at your financial institution either as of June 30, 2014 or December 31, 2014. In determining how to begin the pre-existing account analysis, it is important to remember that the process must be fully auditable because an FFI responsible officer will have to certify completion and results must be retained for six years for FFIs operating under the FATCA Final Regulations.

To successfully complete the pre-existing account analysis, FFIs should also develop workflows that follow the legal requirements to make sure all steps are accounted for during the planning stages of the analysis. When the pre-existing account analysis is complete, and the FATCA-related data points and documents are captured, FATCA classification and relevant information should be mapped and exported to the FFI's on-boarding systems. This ensures that customer information for new accounts opened with FATCA-compliant on-boarding procedures and pre-existing account information is consistent.

Financial institutions around the globe may rely on other parties to take on certain responsibilities. For example, the financial institution may outsource a portion of its compliance and regulatory functions, and/or transfer agency services. In this case, the FATCA compliance program will be required to work with internal partners as well as external partners. After the impact assessment for your financial institution is complete, you will need to plan a path forward that not only incorporates all of the information technology systems and policy changes, but also develops a working corporate governance structure and functioning compliance program.