Jon Asprey, vice president, strategic consulting at Trillium Software looks at what institutions need to do now, to ensure their client data will support them to comply with FATCA
In January 2013, the United States Treasury Department and Internal Revenue Service (IRS) released the long-awaited final regulations for the Foreign Account Tax Compliance Act, commonly referred to as “FATCA.” While significant changes have been made, much remains the same with regard to client identification and data due diligence
requirements. At least nine nations have now signed or initialled Inter governmental Agreements (IGAs) with the US Treasury, including the United Kingdom, Ireland, Norway, Denmark, Spain, Switzerland, Italy, Germany and Mexico. With 50 or more countries engaging with the Treasury, more signatures will follow.
The deadline for ensuring client onboarding compliance is January 2014, pre-existing payees that are prima facie FFIs must be documented by 30th June 2014 and the first reporting deadline has been set at 31 March 2015. There is now limited time for the world’s foreign (non-US) financial institutions (FFIs) to assess their position and ability to comply.
For many FFIs, a significant risk to achieving compliance lies within their client data quality processes. In particular, client on boarding data capture is a point of concern as is the quality of existing client data.
Client identification problems
Under FATCA, FFIs must accurately identify, classify and report accounts held by US taxpayers or US majority owned corporations to the IRS. This is not an easy task and institutions would be well advised to urgently assess their ability to undertake this process effectively.They should not rely upon gut feel and assumptions regarding the client data they currently collect and hold.
To identify clients that should be investigated for potential reporting, FFIs need to search their electronic account data for indicia (indicators) suggesting they might belong to a US taxpayer. Such information could include US citizenship or residency status, a US birth place, correspondence address or telephone number. Of course, most firms will seek to use software-based tools to make such initial searches, before then approaching clients for documentary evidence proving one way or the other, their status under FATCA. But there’s a problem. Automated searches can only work effectively where the institution’s client data is complete, accurate and consistent. In reality institutions’ data is often of varying quality, full of gaps and is scattered across a web of disjointed systems. The search process is made even more difficult by the complexity of the client relationships that often exist for high-net-worth individuals and commercial entities.
As financial institutions get deeper into the practical application of FATCA guidelines, many are just starting to think about the complexities. These could include multiple account touch points resulting from “power of attorney” stipulations or different billing and mailing addresses. A private banking client may have several accounts with multiple addresses for correspondence and may also have nominated a signatory on a number of these accounts.
All of these contact details must be screened for FATCA indicia; the client should then be classified and corresponded with if further information is required. There may also be varying levels of data completeness across other important details such as nationality and place of birth, where different client onboarding systems are involved.
One important area of FATCA causing FFIs concern surrounds the requirement on them to determine the status of legal entities holding accounts. For example they must classify whether an entity is an FFI, non-financial foreign entity (NFFE), US Financial Institution (USFI) or Exempt/ Deemed Compliant. This obligation will require the business type of the entity to be identified first. Some organisations plan to rely on their existing standard industrial classification (SIC) coding of entity customers to drive FATCA classification. However, without any view on the completeness and accuracy of the SIC coding, it cannot be relied upon as a robust source of client business type.
Given these complexities, one global institution retained the Trillium compliance team to determine its ability to detect which of its many millions of client accounts held US indicia. Following an assessment, the team presented clear evidence that as many as 100,000 accounts appeared to have data issues requiring their further review. Either the data would need to be rectified, or each account would need manual investigation before it could be confidently verified as either subject to, or not subject to FATCA. Compliance for that institution will potentially involve many thousands of hours of work in account identification alone; work it hadn’t planned for.
Towards a solution
In order to plan their compliance programs, FFIs need now to certify whether their existing client data and client onboarding processes are fit for purpose for FATCA. They need to determine the scale of any data or process issues and where the gaps lie. They then need to remediate client data errors and apply improved controls in client onboarding.
To undertake such a data management programme effectively, the institution needs to first define and configure the rules by which it will assess records for indicia. It must also determine how it will profile data that might be held across a wide variety of systems in a wide variety of electronic formats. Pre-configured data profiling tools are the way to go here. They eliminate the need for custom coding—saving time, cost and unproductive maintenance effort. They also support accurate reporting. Such tools can also offer sophisticated matching technology to support client data alignment and be used to show complex customer entity relationships.
Accounts that are positive for FATCA indicia should then be put into a central repository in which client details can be linked together. A financial institution’s client service teams can then have the confidence to draw from this central repository of client information and centrally coordinate communications to affected clients. Reliable client information will also support accurate, consistent and timely communications with individual and commercial clients, ensuring they are not wrongly subjected to onerous FATCA related processes that could impact account retention.
The bottom line
With the final regulations published and key nations now swiftly signing up to IGAs, FATCA is sure to become a reality. With the deadlines for compliance looming, FFIs would be well advised to assess their existing client data and onboarding processes. In doing so now, they should then be able to scope, plan and resource necessary work in good time to ensure they possess the necessary high-quality client information to support compliance and ease the burden on their clients.
You can keep up with Jon Asprey’s thoughts via the Trillium Software Insights blog at http://blogs.trilliumsoftware.com/trilliuminsights/ or for more details on the importance of data quality to banking and compliance, visit www.trilliumsoftware.com/banking
Vice President, Strategic Consulting
Harte-Hanks Trillium Software
Jon leads the advisory consulting practice at Trillium Software where he is responsible for the delivery of best practice advice and guidance to Trillium’s many international clients. He has over 15 years’ experience in information management, data quality management, data governance and data analysis, gained through working for both global consultancies and software vendors across a variety of international financial services clients.
During the course of his work, Jon has advised senior business officers at a number of global financial services firms in support of Governance, Risk & Compliance (GRC) initiatives within credit risk and regulatory compliance engagements linked to FATCA, Dodd-Frank, Basel II, Solvency II, customer deposit guarantee (FSCS) and credit risk data assurance.
Prior to his role at Trillium, Jon has also held senior consulting positions at both HP Consulting and Deloitte LLP where he was the data quality lead within the Enterprise Risk practice.
U.S. inauguration turns poet Amanda Gorman into best seller
WASHINGTON (Thomson Reuters Foundation) – The president’s poet woke up a superstar on Thursday, after a powerful reading at the U.S. inauguration catapulted 22-year-old Amanda Gorman to the top of Amazon’s best-seller list.
Hours after Gorman’s electric performance at the swearing-in of President Joe Biden and Vice President Kamala Harris, her two books – neither out yet – topped Amazon.com’s sales list.
“I AM ON THE FLOOR MY BOOKS ARE #1 & #2 ON AMAZON AFTER 1 DAY!” Gorman, a Los Angeles resident, wrote on Twitter.
Gorman’s debut poetry collection ‘The Hill We Climb’ won top spot in the online retail giant’s sale charts, closely followed by her upcoming ‘Change Sings: A Children’s Anthem’.
While poetry’s popularity is on the up, it remains a niche market and the overnight adulation clearly caught Gorman short.
“Thank you so much to everyone for supporting me and my words. As Yeats put it: ‘For words alone are certain good: Sing, then’.”
Gorman, the youngest poet in U.S. history to mark the transition of presidential power, offered a hopeful vision for a deeply divided country in Wednesday’s rendition.
“Being American is more than a pride we inherit. It’s the past we step into and how we repair it,” Gorman said on the steps of the U.S. Capitol two weeks after a mob laid siege and following a year of global protests for racial justice.
“We will not march back to what was. We move to what shall be, a country that is bruised, but whole. Benevolent, but bold. Fierce and free.”
The performance stirred instant acclaim, with praise from across the country and political spectrum, from the Republican-backing Lincoln Project to former President Barack Obama.
“Wasn’t @TheAmandaGorman’s poem just stunning? She’s promised to run for president in 2036 and I for one can’t wait,” tweeted former presidential candidate Hillary Clinton.
A graduate of Harvard University, Gorman says she overcame a speech impediment in her youth and became the first U.S. National Youth Poet Laureate in 2017.
She has now joined the ranks of august inaugural poets such as Robert Frost and Maya Angelou.
Her social media reach boomed, with her tens of thousands of followers ballooning into a Twitter fan base of a million-plus.
“I have never been prouder to see another young woman rise! Brava Brava, @TheAmandaGorman! Maya Angelou is cheering—and so am I,” tweeted TV host Oprah Winfrey.
Gorman’s books are both due out in September.
Third on Amazon’s best selling list was another picture book linked to politics and projecting hope: ‘Ambitious Girl’ by Vice-President Kamala Harris’ niece, Meena Harris.
(Reporting by Umberto Bacchi @UmbertoBacchi, Editing by Lyndsay Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)
Why brands harnessing the power of digital are winning in this evolving business landscape
By Justin Pike, Founder and Chairman, MYPINPAD
Delivery of intuitive, secure, personalised, and frictionless user experiences has long been table stakes in digital commerce, well before the era of COVID-19. As businesses harness the revolutionary power of digital technologies, they have pursued large-scale change to adapt to evolving consumer preferences (some more successfully than others, but that’s a blog for another day). Digital transformation is a term we hear repeatedly, and it looks different for each organisation, but essentially, it’s about utilising technology and data to digitise, automate, innovate and improve processes and the customer experience across the entire business.
As I said, this was already well underway but then came 2020 and no industry escaped the disruption of the coronavirus outbreak, which has had an indelible impact on businesses performance, operations, and revenue. Regardless of whether the impact of COVID has been very positive or very challenging, it has forced organisations globally to re-evaluate and re-orient strategies to adapt.
As lockdowns and pandemic-related restrictions continue to change daily life, this raises the question of how we can balance a dramatic shift to digital and the benefits it brings, while ensuring business continuity and innovation both during and post-COVID, and protecting everyone against fraud?
Digital is an essential survival tool, and even more so in a COVID world
No one could have predicted the dramatic digital pivot that has taken place over this year. Indeed, within weeks of the COVID outbreak cash usage in the UK dropped by around 50%. Digital solutions including delivery applications, contactless payments, mobile commerce, online and mobile banking have become essential components of a touchless customer experience in the era of social distancing. It’s no longer just about an enhanced and superior customer experience, it’s also about health, safety and survival.
In store, businesses have benefited from contactless payments enabling faster throughput and reduced need for consumers to touch payment terminals (therefore requiring greater cleaning, which degrades the hardware much faster). Mastercard reported a 40% increase in contactless payments – including tap-to-pay and mobile pay – during the first quarter of the year as the global pandemic worsened. Digital has also become an essential sales channel for many B2C brands. Where brick and mortar stores have been required to close, digital commerce enables continuity of customer relationships and revenue. This channel also provides brands with rich customer data, which can be used to enhance and personalise the customer experience and typically results in greater levels of engagement and uplifts in revenue.
Industry forecasts estimate that worldwide spending on the technologies and services enabling digital transformation will reach GBP 1.8 trillion in 2023 – a clear indication that the process represents a long-term investment and a global commitment to digital-first strategy. The key point here is that digital brings significant benefits, and regardless of COVID, is here to stay.
The challenges that rapid digital transformation brings to businesses
Regardless of whether businesses are operating in developed or less-developed economies, these times of crisis have levelled the playing field in the sense that all businesses are facing similar issues. Access to products and supplies, maintaining customer relationships, accelerating sales for some and declining sales for others, health and hygiene are just a few of the unique challenges brought about by COVID.
Many businesses in physical environments have had to swiftly implement changes to significantly reduce safety risks for staff and customers, such as contactless payments, mobile ordering and delivery options. But with these changes come a host of other benefits of digitisation, such as faster transactions, and reduced human error at the point-of-sale.
The reliance on technology, however, can also expose organisations and consumers to certain vulnerabilities. In particular, the risks of fraud and cybercrime have dramatically increased since the onset of the pandemic as scammers have taken advantage of digital technologies to target both businesses and individuals.
As a McKinsey report illustrates, new levels of sophistication in the activities of fraudsters have placed more pressure on companies that have been previously slow to go digital, bringing “into sharp relief how vulnerable companies really are”, and damaging the financial health of small and large businesses. In fact, the Bottomline 2020 Business Payments Barometer reveals that only one in 10 small businesses across the UK report recovering more than 50% of losses due to fraud.
But take these stats with a grain of salt. While it is important to be aware of the risks and challenges this new business landscape brings, it’s equally as important to have a lens firmly across your own business, industry and audience, and to identify the changes you can make internally to mitigate risk as well as improve your customer experience. Where can you make some quick wins? Do you have the right skillsets internally to achieve what you need to achieve? What technology is out there that will enable your business goals? There are tech companies like MYPINPAD that are making huge strides in software development, which will transform businesses globally.
A digital world post-COVID
Almost a year in, the line between business success and failure remains fragile. However, an ongoing transition towards greater digitisation will be the difference between survival and the alternative.
There is a wide range of initiatives businesses can implement to weather this storm. If we look at the space MYPINPAD operates within, secure digital consumer authentication is crucial to the ongoing success and security of not only financial products but also identification and verification across a range of different industry verticals. Shifting the authentication of consumers securely onto mobile devices enables businesses to completely reshape their customer experiences. By bringing together a more seamless, frictionless customer experience, accessibility, privacy, security and access to consumer data, businesses are able to drive digital transformation across day-to-day activities.
Against this backdrop, software with stronger security standards continue to play an ever more vital role in supporting society, protecting consumers and businesses from the increase in risks that rapid digitisation brings. Already, merchants can deploy PIN on Mobile technology from companies like MYPINPAD, onto their smart devices to speed up the digitisation process many are now tackling.
Essentially, opening up universal payments and authentication methods that feel familiar, for both online and face-to-face transactions, will be key to opening up a world of possibilities when it comes to redefining how businesses engage with consumers.
Brexit responsible for food supply problems in Northern Ireland, Ireland says
LONDON (Reuters) – Food supply problems in Northern Ireland are due to Brexit because there are now a certain amount of checks on goods going between Britain and Northern Ireland, Irish Foreign Minister Simon Coveney said.
British ministers have sought to play down the disruption of Brexit in recent days.
“The supermarket shelves were full before Christmas and there are some issues now in terms of supply chains and so that’s clearly a Brexit issue,” Coveney told ITV.
The Northern Irish protocol means there are “a certain amount of checks on goods coming from GB into Northern Ireland and that involves some disruption,” he said.
(Reporting by Guy Faulconbridge; Editing by Tom Hogue)
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