Many financial institutions expect FATCA client identification to be moderately or extremely difficult due to data issues.

In a new report published by Fenergo, the provider of client onboarding, client due diligence and FATCA solutions, it was revealed that 65 per cent of financial institutions are struggling to complete the client identification process efficiently due to gapped, siloed, semi-structured or unstructured client data. The report, The Road To FATCA, is based on a survey conducted with financial institutions running the full spectrum of financial services, including investment, corporate, retail and private banks.

According to the findings, the biggest impact of FATCA will be felt in the area of customer due diligence or know your customer processes, with a 79 per cent of institutions expecting FATCA to have either a high or medium impact on CDD/KYC processes (where processes will have to be rewritten, reviewed and/or amended). Report author, Fiona Cummins, Fenergo’s FATCA subject matter expert, asserts that institutions that have commenced their journey are in a better position than those that haven’t simply by knowing the size of the data challenge facing their organisations. “Our survey points to some good news and some bad news. It’s heartening to note that some financial institutions are making real progress in certain areas like client identification and classification, with up to two-thirds of responding institutions claiming to have already commenced these processes. However, some institutions have already identified serious gaps in their data that will have a knock-on effect on compliance with new FATCA regulations. Client information lying in various repositories right across the institution makes the process of identifying, classifying, evidencing and reporting on US persons/entities with account balances that exceed the FATCA thresholds exceedingly difficult.”

The survey also illustrates how financial institutions will expect to collect additional data and documentation as part of the self-certification process, revealing that: 30 per cent of FFIs expect between 5 – 49 per cent of their client base to have to complete self-certification; 17 per cent expect over 50 per cent of their client base to complete it; 53 per cent anticipate less than four per cent of their client base having to self-certify that they are or are not US persons/entities; Up to 42 per cent of institutions are either using or plan on using an online portal to collect W-8 and W-9 forms.

“Our advice to financial institutions is to start your FATCA journey as soon as possible,” says Cummins. “FATCA is very much an exercise steeped in data quality which can impact the ability of the institution to identify, classify and evidence clients displaying U.S. indicia over the monetary thresholds dictated by FATCA. The sooner this is done, the better prepared the institution will be for FATCA, giving them sufficient time to gain compliance with other classification-based regulations using the same technologies.”

Share Story: