Wolters Kluwer Financial Services Warns Industry to be Braced for Further FATCA and GATCA Complexity
Complexity of regulations means first adopters will gain competitive advantage, newly released white paper notes
The banking industry should be braced for further complexity when it comes to the US Foreign Account Tax Compliance Act (FATCA) and the looming Global FATCA (GATCA). And those institutions that move more quickly to implement technology solutions to meet external compliance requirements and generate greater internal transparency stand to gain competitive advantage. That’s according to a new white paper from Wolters Kluwer Financial Services, titled “From FATCA to GATCA: Bracing for the Next Wave of Compliance.”
FATCA requires foreign financial institutions to provide reports on US clients to the Internal Revenue Service (IRS). Meanwhile, GATCA, known officially as the Automatic Exchange of Information (AEOI), seeks a global standard for sharing tax-related data among institutions and the revenue authorities of different jurisdictions. The ultimate aim is to prevent tax evasion, with more than 60 countries committed to adoption by 2017 or 2018.
The FATCA and GATCA frameworks have enough in common that a united approach by banks to both, particularly in terms of technology, should be considered not just advisable, but essential, the white paper notes. Such an approach can go a long way towards relieving institutions of any unnecessary complexity, maximizing efficiencies in both GATCA and FATCA implementation plans.
“GATCA uses FATCA as a template for documentation, reporting and intergovernmental agreements; from the design perspective, there is a clear overlap,” notes Wouter Delbaere, Regulatory Reporting specialist at Wolters Kluwer Financial Services and author of the white paper. “The key design traits of a future-proof FATCA and GATCA-ready solution include a centralized information technology architecture capable of bringing together relevant data from the systems, platforms and models scattered throughout the organization. It should also be capable of incorporating automated and manual enrichments to ensure data quality and compliance with shifting regulations.”
Though seemingly onerous, the increased transparency GATCA brings to financial institutions’ client database and operations can prove to be a competitive advantage for them, says Delbaere. “By reducing regulatory risk and increasing the visibility and use of information by management, this heightened transparency can only enhance strategic decision-making,” he adds. “The best-positioned financial institutions will be those that upgrade their existing technology infrastructure to collect and report the additional information required by regulators under GATCA, while simultaneously consolidating and centralizing this information.”
