1. FATCA Leveraging existing IT solutions for compliance
Jeroen Dekker, Senior Product Manager
Financial Crime Risk Management
SWIFT Poland National Member & User Group, December 11, 2013
Quickly introduce myself incl ACAMS, ACFCS, SIBOS experience

2. Once upon a time, in a new land called AML…
Core Banking
Onboarding
Monitoring

3. Agenda Our Perspective Quick Introduction to FATCA
What We’ve Been Seeing
FATCA Team Functions
Requirements Round-up
Case Study
Call to Action

4. Fiserv International Today
25+ years experience
70+ countries and multiple languages
Number 1supplier of software & services to the FS industry for 6 years (FinTech100)
19,000 employes
Polish Customers:
ING Bank
BZWBK
Millennium Bank
Santander Consumer Bank
Strong presence in Poland:
Local office since 1993
Regional Internet and Mobile Warsaw Competency Centre
Regional 24/7 HelpDesk
Solutions serviced in Poland
Core Banking application
Front End and Teller applications
Fraud and Reconciliation Management applications
Custom development services
NASDAQ quoted (FISV)
$4.42 bn Revenue 2012
$597m Free cash flow
17000 clients worldwide
40+ employees in Poland

5. Technology Solutions Across the Institution
Processing Services
Solutions for managing account-based transactions – reliably and securely
Payments
Solutions for optimizing all aspects of the payments mix to help you create efficiency and drive growth
Risk and Compliance
Solutions for proactive risk prevention and mitigation
One of largest technology providers to financial services industry in the world
Core banking systems helping with FATCA by expanding for U.S. indicia and other FATCA data
Being U.S. company gives us deep knowledge of U.S. regulations and regulators
Within Risk & Compliance, I’m in the financial crime risk management space
Insights and
Optimization
Solutions that help you transform data from
information to actionable business insights
Customer and Channel Management
Solutions for attracting, retaining and growing customer relationships

6. Fiserv offerings around SWIFT traffic
Risk / Financial Crime
Control / Processing
Sanctions Screening
Reconciliation
AML monitoring
Trade Processing
Fraud Prevention
Payments processing
FATCA monitoring

7. Today’s perspective Solutions Data focus Capabilities Industries
Fraud
AML
Sanctions
Corruption
FATCA
Data focus
Customers
Accounts
Transactions
Capabilities
Anomaly detection
Case Management
Reporting
Financial Crime Risk Management
Software Platform
Behavioral Monitoring
Financial Institutions
1000+ clients
Market leader
Industries
Retail
Commercial
Private
Securities
Insurance
Regions
EMEA
ASPAC
LACC NA
USA
Not presenting today from a legal, tax or financial perspective
AML heritage and connections to FATCA
Operations & technology for dedicated financial crime risk management teams
Broad and deep experience

8. A new frontier in Financial Crime Risk Management
What is FATCA?
Foreign Account Tax Compliance Act
U.S. regulation to combat offshore tax evasion by U.S. taxpayers
Regulations produced by U.S. Internal Revenue Service (IRS)
Targeted mainly at financial institutions outside the U.S.
Requirements to identify and report certain (U.S.) accounts
Through prescribed onboarding, remediation, monitoring processes
Severe (withholding) penalties for non-compliance
U.S. institutions tasked with monitoring/enforcing
Final regulations published in February 2013
Phased implementation from 2013 through 2017
Consider re-working
A new frontier in Financial Crime Risk Management

9. How FATCA evolved… and spread
FBI case against UBS
HIRE Act passed in 2010
Drafts & Notices
IGA Models
Final regulations
Delayed implementation
Guidance …?
Global initiatives:
FATF
OECD
G8 / G20 EU

10. What we have been seeing
Tax
Compliance (AML)
Legal
Operations IT
Run through exposure to clients & prospects, build-up since 2011
A typical FATCA project team

11. The Team’s Current Focus
Onboarding
CDD
Primary processes:
Additional data capture
Forms & procedures
Decentralized approach
Core Banking
Data warehouse
Decentralized: branches, agents, countries, business units, online
Experience: panic, analyze, influence, wait, scramble, wait
Relate current thinking and AML compliance
Task force > Standing central FATCA team
Manage project phases
Database reports for monitoring & control

12. Fiserv Core Banking – FATCA Phase 1 Identification and Due Diligence
Phase 1 Changes
Bank Level Parameterization of IRS issued GIIN
Branch Level Parameterization of IRS issued GIIN
Add additional Static Data pages
Create new ‘Foreign Tax Compliance’ pages
Modifications to Customer to Customer Relationships page
Create new ‘Foreign Tax Compliance Exception’ report
Modifications to Bank Profile Maintenance Report
Modifications to Customer Information Maintenance Log
Modifications to New Customer Information Report
Phase 1 Changes
Bank Level Parameterization of IRS issued GIIN
Branch Level Parameterization of IRS issued GIIN
Add additional Static Data pages
Create new ‘Foreign Tax Compliance’ pages
Create new ‘Foreign Tax Compliance Exception’ report
Modifications to Customer to Customer Relationships page
Modifications to Bank Profile Maintenance Report
Modifications to Customer Information Maintenance Log
Modifications to New Customer Information Report

13. New ‘Foreign Tax Compliance’ pages
The FFI must also investigate the FATCA status of non-personal customers. If the non-personal customer is a U.S. person/entity the FFI is obligated to report information to the IRS. Additionally, although the non-personal customer may not be a U.S. person/entity the FFI may still be obligated to report information to the IRS if the customer is ‘substantially owned’ by a U.S. person or entity (i.e. more than 10% owned by a U.S. person/entity).
The ‘Foreign Tax Compliance’ page for personal customers contains the following fields:
Verification complete – Options for this field are ‘Y’ and ‘N’. During investigation this field should be set to ‘N’, indicating that the investigation is underway. Once the investigation is complete, this field should be set to ‘Y’, indicating that you have determined the FATCA status of the customer as either being a U.S. person, not a U.S. person or a recalcitrant customer.
Country of tax reporting – The country to which the customer must report tax information.
Self certification – As part of the account opening process (or subsequent to account opening for existing customers), if you have asked the customer if he/she is a U.S. person, then this field should be set to ‘Y’. If you have not asked the customer to ‘self certify’ as a U.S. person, then this field should be set to ‘N’.
Certification response – The customers response to being asked to ‘self certify’ as a U.S. person. Options include:
Blank
IDK – I don’t know
NTR – Not a U.S. tax resident
P – Pending
R – Refuse to respond
TR – U.S. tax resident
Other user defined options
Privacy Waiver – Some jurisdictions that do not have an ‘International Governmental Agreement’ may not allow PFFIs to report information to foreign tax agencies without the customers consent. This Yes/No field indicates if the customer has submitted a privacy waiver, consenting to having the PFFI report tax information to foreign entities.
Recalcitrant – If the customer fails to provide the information required to determine whether the account is a U.S. account, the customer is considered ‘recalcitrant’. Enter ‘Y’ into this field if the customer is recalcitrant or N if the customer is not recalcitrant.
Social security nbr – The customers social security number. This field shares the same value as the field on the Static Data page. Any changes made on the Static Data page will update on the FTC page and vice versa. However, an edit on the FTC page limits the data length to 9 characters.
Tax ID flag – The type of TIN. Options include:
Blank (indicates SSN)
F – Foreign customer
T – Tax identification number
Tax information code – The customers tax identification code.
National ID number – The customers national ID number.
Tax certificate type – The type of tax certificate filed with a foreign tax agency. Options include:
1 – W-9
2 – W-8
3 – W-8BEN
4 – W-8BEN-E
5 – W-8ECI
6 – W-8EXP
7 – W-8IMY
Recipient Type – The recipient type as indicated on the tax certificate. Options include:
I – Individual
C – Corporation
E – Exempt
O – Organization
P – Partnership
T – Trust
Effective Date – Date the tax certificate is effective.
Expiration Date – Date the tax certificate expires.
Foreign customer type – Identifies the non-personal customer as being either an FFI or NFFE
1 – NFFE
2 – FFI
FFI – If the non-personal customer is an FFI, this field indicates the type of FFI. Options include:
00 – Not applicable
01 – Participating FFI (PFFI)
02 – Non-Participating FFI (NPFFI)
03 – Prima-Facie FFI
04 – Registered Deemed-compliant FFI
05 – Certified Deemed-compliant FFI
06 – Owner Documented FFI
07 – Territory FFI
FFI GIIN – If the non-personal customer is a Participating FFI (PFFI), the assigned GIIN may be entered in this field. This GIIN may be compared with the IRS published list of Participating FFIS to confirm that the FFI is considered a Participating FFI by the IRS.
Once the investigation is complete, the ‘Foreign tax compliance required’ field on the first static data page should be set to the appropriate option. If your investigation results determine the customer is a U.S. person/entity, then the ‘Foreign tax compliance required’ field should be set to ‘Y’. If the customer is not a U.S. person/entity, then the ‘Foreign tax compliance required’ field should be set to ‘N’.
If the investigation is complete and the ‘Verification complete’ field is set to ‘Y’ and customer is a U.S. person/entity and the ‘Foreign tax compliance’ field is set to ‘Y’, then Signature requires that certain fields on the ‘Foreign tax compliance’ page be complete. These required fields support the determination that the customer is required to report tax information to a foreign tax agency. The following fields are required when both the ‘Verification complete’ and the ‘Foreign tax compliance required’ fields are set to ‘Y’:
Country of tax reporting
Self certification
Self certification response
Privacy waiver
Recalcitrant
FFI
FFI GIIN
This page is available from the Create, Change and Display functions.

14. ‘Foreign Tax Compliance Exception’ report
A new report labeled ‘Foreign Tax Compliance Exception’ has been created to assist with identification of potential exception conditions. A item will be added to this report in the following conditions:
FATCA requires PFFIs to apply a 30% punitive withholding to all withholdable payments to recalcitrant customers. If a customer is a U.S. person that has been identified as recalcitrant (i.e. the ‘FTC required’ and the ‘Recalcitrant’ field are both set to ‘Y’) and the Withholding Code (Static Data page) is blank, the system will write an item to the FTC Exception report with the message: “Recalcitrant customer with no customer withholding”. (Note: The actual withholding requirements will be addressed in Phase 2)
FATCA requires that the FATCA status be determined within 90 days of opening a new customer account. For new customer accounts that have been open more than 90 days, if the ‘FTC required’ field is set to ‘Y’, the ‘Recalcitrant’ field is set to ‘N’ and the ‘FTC Documentation Verified Date’ is blank, the system will write an item to the FTC Exception report with the message: “Customer 90+ days old with no verified documentation date” . This will identify all accounts that you have determine FTC reporting is required and the customer is not recalcitrant, but you have not entered the ‘document verified date’.
If the customers record is older than 90 days (i.e. ‘Date Opened’ is more than 90 days ago), the ‘Foreign tax compliance required’ field is set to ‘Yes’ and the ‘Verification complete’ field is set to ‘No’ a message is displayed: “FTC has not been verified”. This indicates that you have identified a customer as being required to comply with FATCA, but you have not yet completed your investigation.
The columns on the report are:
CIF KEY – The customers CIF Key
SHORT NAME – Customers short name
DATE OPENED – The date the customer account was opened
BRANCH – The branch associated with the customer account (i.e. Branch number field on the Static Data page)
OFFICER – The primary officer number associated with the customer account (i.e. Primary officer number field on Static Data page)
EXCEPTION DETAILS – The message output based on the conditions outlined above.
The report is primarily sorted by ‘Branch’, secondarily sorted by ‘Officer’, then tertiary sorted by ‘Date Opened’. The report will be configured to run on a daily basis.

15. A Central Back Office FATCA Team – For What?
CDD, Core, CRM and Payment systems
New Accounts
Pre-existing accounts
Payments
Reporting
Simplified to show main business domains, to avoid already discussing FATCA team functions
Your FATCA Team ?

16. Central FATCA Team Functions (1/2)
Act as a second line of control
Avoid single points of failure
Assure process consistency & correct outcomes
Use automated (double) checking of data
Handle exceptions and escalations
Detect and alert what falls through the cracks
Workflow & case management remediation
Holistic view of final status for all customers
Maintain central oversight
Understand, manage, inform
Produce lists, metrics, special cases
Normalization across all operations & systems
Prepare for future examinations
IRS or local examiners, internal audit
Show and justify how decisions were made
Audit trails, recordkeeping, reporting
Could consider removing bullet lists to discuss verbally – but these slides (10 and 13) are the heart of our pitch

17. Example 1 – New Individual Client Walks in
Self-certification
US taxpayer
Not US taxpayer
Don’t know
Refuse to answer (pending)
Does KYC data reveal any US indicia to contradict a claim of ‘Not US taxpayer’?
Do we have enough KYC data to verify such claims?
Did we receive Self-Certification, and receive it on time? (90 days)
Alert ‘US taxpayer’ for second line approval/classification
Alert ‘Don’t Know’/ ‘Refuse’ for escalation
Automated Detection
KYC data
Address(es)
Phone number(s)
Nationality
Country of birth
Identification, etc.
Explain data capture, manual vs. automated, types of questions to answer,
Second line verification vs. initial classification
Once a year -
Report new US accounts whose aggregated balance on December 31 exceeded $50,000
FATCA Status

18. Example 2 – New Entity Client Walks in
Determine Chapter 4 classification during onboarding
Capture address, ownership and business type data
A tool for the back office FATCA team can provide:
Scenarios to verify Chapter 4 status against available data
Mention legal form, industry code etc. as regular (AML) onboarding data to check against
Escalate classification issues to the FATCA team
Alert Passive NFFEs with owner(s) with US indicia
Daily alerts for changes in circumstances

19. Central FATCA Team Functions (2/2)
Remediation of pre-existing accounts
Project best led by centralized back office
Ingest hits from electronic/paper searches
Manage tasks, documentation, decisions
Periodically determine reportable accounts
FATCA status and current (aggregated) balance
Periodic automated selection & data collection
Prevent duplicate/repeat reporting
Prepare, validate, generate, send reports
IRS XML Form or local equivalent
Controlled and auditable process
Don’t underestimate data and workflow
Perform ongoing monitoring
On all new and pre-existing accounts
Location, structure, ownership, their location
Payments to non- consenting accounts/FIs
Could consider removing bullet lists to discuss verbally – but these slides (10 and 13) are the heart of our pitch

20. Issues Not Tackled Today
Forms required during onboarding/remediation
Ongoing tax reporting to IRS
Withholding (determination, calculation, execution)
Quick slide to explain that there is more to FATCA than what I am listing
Clean slide to give the audience a break from visual overkill

21. Example 3 – Existing Account Remediation
CRM
Core
System X
AML
Import US indicia hits as alerts
Case Management
Workflow
Tasks
Document capture
Classification
Reporting
… and check against balance thresholds and exemptions for relevance!
Clarifies proposition for centralized handling of existing account hits

22. Tooling Requirements Round-up
Data on customers, accounts, balances, transactions, process
Automated analysis, detection rules, alerting
Workflow and case management
Regulatory reporting
Management reporting
Audit trails
Flexibility for future requirements (FATCA and copy-cats)
Summarize technology requirements
Make quick link to our technology to set up case study
If only there were such a system…

23. Client Case Study Global insurance and wealth management firm
Agents, locations, business units as first line
Corporate compliance as second line
Leverage existing system used for AML, Fraud, Market Conduct
Add first-line FATCA process outcomes as data feed
How they use it
Detection scenarios for changes, inconsistencies, notifications
Use of case management for remediation, approvals etc.
Management reports for counts and lists
Ok to use Manulife name/logo?
Verbally discuss benefits of holistic customer view, single investment in data/system

24. Monitoring, Control and Reporting for FATCA Compliance
CDD, Core, CRM and Payment systems
New account classification
Pre-existing accounts
Ongoing monitoring
Payments withholding
Your FATCA Team
Data: AML, indicia, payments, FATCA process
Detection: verification & monitoring
Case management: remediation & audit
Automated checks
Exception handling
Approvals and audit
Central oversight
Management Reporting
IRS XML
Reporting

25. Call to Action Use your time wisely Learn from AML history
Look and plan ahead
Leverage proven capabilities
End on an informal note