The Foreign Account Tax Compliance Act (FATCA) aims to target and tax non-compliant U.S. taxpayers holding certain foreign financial accounts and offshore assets.  On Thursday, February 6, 2014 at the Association of Certified Financial Crimes Specialists Conference, held in New York City, experts Kelvin Dickenson, Ron King, Allen Love, and Ed Sander came together to present the topic of: “Scaling FATCA’s Data Mountain”.  The panel discussion covered the development of strong partnerships with foreign financial institutions (FFI’s) containing accounts held by U.S. taxpayers and/or foreign entities in which U.S. taxpayers hold substantial interest.

In an effort to solve these new and immerging issues, the expert panel identified new and innovative technologies for best practices in an effort to streamline FATCA-relevant data collection and reporting amongst financial institutions.  The experts recommended that banks focus on both  “know your customer” (KYC) practices as well as tax withholdings.   U.S. financial institutions are being forced to act as tax withholding agents, and foreign financial institutions are busy revisiting their customer due diligence (CDD) programs.

Kelvin Dickenson of Dunn & Bradstreet suggests financial institutions need to work together to maintain an up-to-date database available for everyone’s use. Best practices require the marriage of a FATCA identification number with an existing customer due diligence verification.

In addition to a unified identification process, it is imperative for all financial institutions to encapsulate data management through “dynamic question and answer sessions,” during the client on-boarding process.  This can be achieved by first verifying a client’s identity (example: home and business address, telephone numbers, email address, passport, and drivers license), determining there are no discrepancies in the information provided by the client, and then monitoring client accounts, including customer status changes and the inflow and outflow of monies.

It is imperative to leverage an institution’s CDD investments for FACTA because it is the cornerstone of any AML program.  Improving customer-centric approaches that are centralized, comprehensive, and include a “single-customer-view”, will create more streamlined data.

All the experts stressed that data solutions need to be flexible: running different models & business rules depending on the business and location.  Real-time services, which are FATCA-specific, such as data verification across all jurisdictions and automated including US IRS indicia checks, are imperative.

In closing, the panel reminded the audience that it is important to remember FATCA determination status is an ongoing process, and the consolidation and enrichment of data utilizing multiple sources will in fact increase operational efficiency, simplify ongoing client reviews, and create an automated reporting process, which will capture the information necessary to remain FATCA compliant.

Anna J. Rasmussen is currently studying at the Monterey Institute of International Studies, focusing on a M.A. in Public Administration with a concentration in Criminal Finance and Development.   She will be graduating from the institute in May 2014.