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Author: Raman Suprajarama |10/01/14

Top 5 quality challenges affecting FATCA compliance

In May and June 2014, Gatepoint Research invited selected finance executives working in FATCA (Foreign Accounts Tax Compliance Act) to participate in a survey themed Strategies for Achieving FATCA Compliance. The survey examined the challenges risk, compliance and IT decision makers’ are facing in achieving FATCA compliance.

Key highlights:

  • 67% of surveyed finance executives report that the complexity of FATCA requirements is the top hurdle to achieving compliance
  • 49% of responders report that FATCA verification and due diligence procedures present a major business challenge
  • 42% report that keeping track of participating financial institutions and non-financial entities also presents a major challenge
Top 5 quality challenges affecting FATCA compliance

Source: Mindtree Gatepoint Research Survey – Strategies for Achieving FATCA Compliance

FATCA testing and quality assurance was highlighted among the top issues.

5 Key quality assurance challenges

Complying with FATCA and managing Quality Assurance within specified time frame is a complex task with multiple work-streams for the Program Office to deliver. Developing a quality assurance process, either internally or with a third party, will give the FFIs an independent assessment of the status and highlight any potential issue in time to take corrective action. The following are the key challenges banks and financial institutions encounter.

  1. Not identifying all impacted areas – It is important to understand the flow of information between different systems to ensure coverage of all impacted systems and applications.
  2. Poor understanding of business drivers – Surprising as it may sound, this is a major challenge. Changes in business process, integration of new Commercial off the Shelf (COTS) FATCA compliance products and third party applications need to be kept in mind.
  3. Not knowing compliance drivers – Banks need to understand the data flow of FATCA-related information between interface systems and analyze them to ensure coverage of all impacted systems and functionalities.
  4. Under developed QA approach for technology drivers – many banks fail to acknowledge the impact of new functionalities, feature enhancements, system upgrades and ongoing maintenance on QA. It is important to manage FATCA documents and different forms with details of requirements for different systems and consolidating them into a QA requirement document.
  5. Managing QA within limited timeframe and achieving FATCA compliance within US IRS timeframe.

In my next blog [give link], I will discuss the 3 stages of FATCA testing and quality assurance.

Recommended FATCA reading:

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