Unravelling the Complexities of Tax Compliance
Creating policy, a classification system and a compliant customer journey for the eighth oldest bank in the world, the Queen's bank
Coutts UK is the private banking and wealth management arm of Natwest’s wealth management group.
When the US announced they were to make non-US financial institutions report on any assets held by their U.S account holders, nearly every financial institution globally was left to decipher over 500 pages on a regulation called FATCA (Foreign Accounting Tax Compliance Act) that introduced a new customer journey and onboarding process to identify each of their clients and their client accounts as one of several classifications, which had specific criteria to be met.
We were brought in to put in place a process for classifying clients and a process to do the work required for reporting back to the IRS (US Inland Revenue Service).
This was a huge change for Coutts as it introduced an entirely new business process to classify all clients and accounts within their existing customer journey.
It was clear that an internal FATCA policy had to also be developed for Coutts to follow in practice.
This involved weeks of reading through each page of the regulations and structuring it into phases that would follow a customer journey to really identify which parts of Coutts’s existing onboarding and client workflow would be impacted.
We interpreted each paragraph in order to break down in simple terms what needed to be done operationally and within the systems, looking at all the data that had to be captured to classify an account correctly.
As with all our projects, we spent time drawing out all the tasks that currently took place within Coutts for their customer journey and onboarding workflows.
Working with operations teams, technology and the offshore Jersey Trusts team, we had to very quickly understand the concept of Trusts and the operational process in place.
A current state workflow was developed, that acted as our starting point to identify the tasks and teams whose processes would be impacted by changes due to the regulatory requirements and data that needed to be captured as well as reported.
It was key to identify each piece of data that had to be captured and at what point it could be captured in order to be able to determine a classification, so we looked at the full suite of onboarding forms across the firm and the fields within the systems first to find any gaps.
A significant piece of analysis work was also needed to ensure the process worked not only for clients and accounts opened after the FATCA go live date, but for clients and accounts that existed before it.
Overlaying the new requirements over the existing process formed our target state and once drawn out, we set to work on creating detailed business requirements to be signed off by the heads of the respective business divisions and working with technology to start build.
Creating test cases and looking at the feasibility of the functionality was critical to enable reporting to the IRS in a timely manner.
In parallel, we developed a FATCA policy for Coutts UK along with updating operating procedures for the teams in London and Jersey and created a training schedule for all relationship managers delivered by us to understand the new regulations, how their client process would change and what they needed to do.
Working with multiple teams on such an intense subject helped to ensure a smooth transition into the new processes across the bank and that there was a consistent understanding amongst everyone on what they needed to do to maintain compliance.
And it was a privilege to be asked to come back and help them do the same on the Common Reporting Standard. This was a global expansion of the US FATCA regulations, driven by the G-20 and co-ordinated by the OECD (Organisation for Economic Cooperation and Development) to combat tax evasion amongst the countries who had signed up to it.
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