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), according to Wolters Kluwer Financial Services.
The risk management advisory and software provider adds that 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.
The finding is included in the group’s newly-published white paper, entitled ‘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 white paper notes that 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. Such an approach can go a long way towards relieving institutions of any unnecessary complexity, maximising 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,” said Wouter Delbaere, regulatory reporting specialist at Wolters Kluwer Financial Services and the white paper’s author.
“The key design traits of a future-proof FATCA and GATCA-ready solution include a centralised information technology [IT]architecture capable of bringing together relevant data from the systems, platforms and models scattered throughout the organisation. It should also be capable of incorporating automated and manual enrichments to ensure data quality and compliance with shifting regulations.”
While 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 centralising this information.”
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Regulatory technology - aka RegTech - should become a priority for bankers as regulators increasingly focus on risk data aggregation, argues a white paper from Wolters Kluwer.