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FATCA and Decision Management: Turn Compliance into a Competitive Differentiator!
Francis Friedlander, IBM
Pan-Europe BPM and Decision Management
Garry Gomersall, Cognizant
Head of BPM Competency (EMEA)
Session #2995
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The Foreign Account Tax Compliance Act
FATCA is a new US law aimed to prevent tax evasion by US citizens and US residents through use of offshore accounts
Foreign financial institutions (FFIs) outside the US may enter into an agreement with US tax authorities
Participating FFIs must
Identify US accounts, account holders and entities
Withhold on recalcitrant account holders.
Report to the IRS
FATCA becomes effective in 2013
Identification of US persons must be effective on July 1rst, 2013
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Your Challenges with FATCA
ApplyFATCAprocedures
Huge impact on workload
Upgrade the existing processes
Specific due diligence procedures
Need to automate
complex decisions
Cope with a business logic that is ...
Complex
Ambiguous
Ever changing
Need transparency and
agility
Keep a good relationship with your client
Negative presumption,
investigation
Reporting to the l’IRS
Withholding
Need to understand and
justify
Ensure compliance
FATCA compliance
Comply with local regulations
Comply with your best
practices
Need for transparency
and adaptability
Integrate in your IT landscape
Integrate in the existing
applications: Account opening,
payments, etc
Need for a service
oriented approach
WebSphere Operational Decision Management and IBM BPM are key enablers for achieving these challenges
WebSphere Operational Decision Management and IBM BPM are key enablers for achieving these challenges
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WebSphere Operational Decision Management Principles and Benefits
Deploy business services
U.S. ClientIdentificationIdentification
batchIdentificationbatch
Shared services
Platform agnostic
Consistency and traceability
AccountopeningAccountopening
Controlled access
Decoupled from the application logic
Agility
Externalize & centralize the business logic
Rule Repository
Bring the IT and the lines of business together Rule Designer Decision Center
One single view on rules
Test, simulation, versioning
Cooperative governance
Express the business logic as rules
Business language
1 business rule = 1 WODM rule
Transparency
if the account is required to be treated as a US accountthen for each individual holder the FFI should collect a Form W-9
if the account is required to be treated as a US accountthen for each individual holder the FFI should collect a Form W-9
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Where Do BPM and Decision Management Add Value?
Indicia, thresholds, etcIndividual and entity
Orchestrate due diligence processes and automate decisions
Eligibility and calculation
BPM and Decision Management
#1 priorityDecision Management
Screen the transactions! Decision Management
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FATCA Specs and the Rule Repository Have an Identical Structure
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if the account holder is a documented U.S. person and the account is a financial accountthen the account shall be treated as a U.S. account because "Notice 2010-60 Section III B2a2, page 26" ;
if the account holder is a documented U.S. person and the account is a financial accountthen the account shall be treated as a U.S. account because "Notice 2010-60 Section III B2a2, page 26" ;
From among accounts not addressed in step 1, all account holders already documented as U.S. persons for other U.S. tax purposes (e.g., for purposes of chapters 3 and 61 of the Code) will be treated as specified U.S. persons, and those account holders’ financial accounts will be treated as U.S. accounts.
From among accounts not addressed in step 1, all account holders already documented as U.S. persons for other U.S. tax purposes (e.g., for purposes of chapters 3 and 61 of the Code) will be treated as specified U.S. persons, and those account holders’ financial accounts will be treated as U.S. accounts.
From among accounts not addressed in step 1, all account holders already documented as U.S. persons for other U.S. tax purposes (e.g., for purposes of chapters 3 and 61 of the Code) will be treated as specified U.S. persons, and those account holders’ financial accounts will be treated as U.S. accounts.
From among accounts not addressed in step 1, all account holders already documented as U.S. persons for other U.S. tax purposes (e.g., for purposes of chapters 3 and 61 of the Code) will be treated as specified U.S. persons, and those account holders’ financial accounts will be treated as U.S. accounts.
if the account holder is a documented U.S. personthen the account holder shall be treated as a specified U.S. person because "Notice 2010-60 Section III B2a2, page 26" ;
if the account holder is a documented U.S. personthen the account holder shall be treated as a specified U.S. person because "Notice 2010-60 Section III B2a2, page 26" ;
Understand and explain to the customer
Each FATCA rule becomes a WODM rule, expressed in a natural and declarative language
Specification from the IRSSpecification from the IRS WebSphere Operational Decision Management RuleWebSphere Operational Decision Management Rule
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The contextual filtering of the vocabulary guides rule authoring
The bottom-up construction of rules based on a FATCA vocabulary ensures consistency
Translate this vocabulary to any of the 15 supported languages, and you will be able to see and change the rules in these languages
The FATCA Dictionary
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Demonstration – Identification of U.S. Clients
U.S. Client
Other than U.S. Client
Potentially U.S. Client
New account opening processNew account opening process
Core banking applicationCore banking application
client &account data
client &account data
identificationengine
identificationrules
identification service
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Demo – Updating the Rules
U.S. indicia include: (1) identification of an account holder as a U.S. person; (2) a U.S. place of birth; (3) a U.S. address; (4) a U.S. telephone number (5) standing instructions to transfer funds to an account maintained in the United States; (6) a power of attorney or signatory authority granted to a person with a U.S. address; or (7) a U.S. “in-care-of” or “hold mail” address that is the sole address the FFI has identified for the account holder.
2011: Rule Analyst wrote indicia rule compliant with previous specs
2012: FATCA expert updates rule to add indicia introduced in new specification (Feb. 8, 2012)
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Turn FATCA into a Competitive Advantage
Inform your clients they have to prove they are not U.S. persons
Inform your clients they have to prove they are not U.S. persons
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if the transaction is a passthru payment to a recalcitrant holderthen withold 30% because "Notice 2010-60 Section III B2a2, page 26"
if the transaction is a passthru payment to a recalcitrant holderthen withold 30% because "Notice 2010-60 Section III B2a2, page 26"
Turn FATCA into a Competitive Advantage
Take advantage of WODM traceability and justify youractions
Take advantage of WODM traceability and justify youractions
Take advantage of WODM simulation to predict and plan your due diligence effort
Take advantage of WODM simulation to predict and plan your due diligence effort
if the client is a US expatriatethen propose an EXPAT appointment
if the client is a US expatriatethen propose an EXPAT appointment
Turn the facts FATCA processes tell you about your client into insight and into cross-sell opportunities
Turn the facts FATCA processes tell you about your client into insight and into cross-sell opportunities
Germany Spain
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BPM Framework for Risk & Compliancebased on IBM Business Process Manager
BPM Framework for Risk & Compliancebased on IBM Business Process Manager
Decision Framework for Risk & Compliancebased on WebSphere Operational Decision Management
Decision Framework for Risk & Compliancebased on WebSphere Operational Decision Management
RulesetsRulesets
Front-End ApplicationsFront-End ApplicationsRisk & Compliance ApplicationsRisk & Compliance Applications
Customer Classifications
Customer Classifications
PortfolioHealthcheck
PortfolioHealthcheck . . .. . .
Backend Banking SystemsBackend Banking Systems
Current AccountsCurrent Accounts Loans & MortgagesLoans & MortgagesDepositsDepositsTrading AccountsTrading Accounts Customer DBCustomer DB
Customer Onboarding
Customer Onboarding
Account Opening
Account Opening . . .. . .
CustomerClassification
CustomerClassification
OperationAuthorization
OperationAuthorization
KYC obligationsKYC obligations Risk AssessmentRisk Assessment
AMLAML
FATCA screening
FATCA screening
MiFIDMiFID
FATCA withholding
FATCA withholding
Basel II & Basel III
Basel II & Basel III
Other FATCAs
Other FATCAs
Process DefinitionsProcess Definitions
Customer OnboardingProcesses
Customer OnboardingProcesses
Account Opening Processes
Account Opening Processes
FATCADocumentation Processes
FATCADocumentation Processes
MiFID ProcessesMiFID Processes
Other Generic Processes
Other Generic Processes
. . .. . .
Reference Datamodel
Take Advantage of FATCA to Build a Resilient and Extensible Risk and Compliance Architecture
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Our Unique Value Proposition
Packaged approaches
Solution built withIBM BPM and WODM
FATCA asa commodity
An agile,tansparent,and managedFATCA
FATCA Due Diligence
Comply!
TimeKYC, AMLOther FATCAs
Compliance Architecture
Leverage!
Turn FATCAinto an advantage
Smart FATCA
Differentiate!
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Thank You!
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