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Foreign Account Tax Compliance Act (FATCA)
Overcoming challenges relating to operational implementation


In March last year, the US President signed the HIRE Act, thus paving the way for the implementation of the Foreign Account Tax Compliance Act (FATCA). In our first brochure “Mastering the challenges of the new US regulations”, we presented the fundamental considerations which were necessary following the introduction of the FATCA regulations. We also explained how FATCA works, and how participating foreign financial institutions (“participating FFIs”) will be affected as from 2013. Because the text of the HIRE Act functions within the meaning of a framework legislation and the specific guidance are still to be drawn up that there is considerable uncertainty among financial intermediaries. The focus is particularly on the question of whether or not a financial service provider consitutes an FFI as defined under the FATCA regulations and must make appropriate analysis. On the other hand, there are the issues of identifying customer and US accounts and the treatment of withholdable payments. Finally, there also appears to be widespread uncertainty concerning the question of what – if any – alternative strategic options an FFI has. The US Internal Revenue Service (IRS) shed some light on this issue by releasing Revenue Notice 2010–60. This notice deals in particular detail with the issues concerning the identification of customers and US accounts as well as the definition of the term FFI and measures which must be taken by participating FFIs. By publishing this second brochure on the issues surrounding the FATCA, we would like to provide an overview of the most important content of the regulations stipulated in the Revenue Notice 2010–60 and share our thoughts on strategic options available to FFIs. Another section of the brochure deals with considerations on the possibility of setting up and executing a project in the event that participation in the new FATCA system is considered. We also present initial findings from “impact assessments” which have been carried out. This second brochure naturally contains more technical information than our first publication, which focussed more closely on the fundamental issues. Should you have any questions about the FATCA, wish to discuss topics related to the FATCA or are planning a FATCA project, please do not hesitate to contact a member of our team.

Hans-Joachim Jaeger Partner

Bruno Patusi Senior Manager

Roger Walter Senior Manager

FATCA: open questions and uncertainties Specific definitions and instructions
Identification – what is required on the customer side? Exemptions from FFI status Annual reporting Business strategy put to the test FATCA and the fund industry

6 8
8 12 13 14 16


FATCA – views on the project
Project approach and procedures Initial project findings

19 22

FATCA: open questions and uncertainties

The wording of the FATCA has led to lots of heated debates in the banking, insurance and asset management sectors. Fundamental questions like “Which business units within our Group are in fact FFIs?” and “Can structured products also generate US source income?” were discussed. At the same time, considerable lobbying was directed at the IRS and Treasury, which is evidenced by the just under 80 “comment letters” received by these two institutions to date. The authors range from industry associations to large corporations and ambassadors of European countries in the US. And it is difficult to overlook the fact that implementing the FATCA regulations is considered extremely expensive by all types of financial service provider. Accordingly, there was a huge outcry in the financial sector demanding specific and practical instructions on what to do. The IRS held out the prospect of more detailed regulations in the course of 2011. However, in August last year, the IRS already issued Revenue Notice 2010–60 within the meaning of a declaration of intent, in which it deals with four subject areas and calls on the financial industry to make further comments.


Ernst & Young Foreign Account Tax Compliance Act (FATCA)

FATCA: open questions and uncertainties |

To the great disappointment of the insurance sector and the asset management industry, the notice gives no clues as to how these two industries should respond to pressing questions affecting them specifically. In this respect, it is particularly important to think about the issues concerning customer identification and identification of US accounts as well as the issue of “passthru payments”. In simple terms, the latter are payments of a participating FFI or a US withholding agent, insofar as they can be allocated to a “withholdable payment”. In the area of “passthru payments”, which are likely to play an important role in relation to the asset management and fund industry, there is, however, still a huge need for interpretation. Apart from these payments, the fund industry is also particularly concerned with the identification of US accounts. Within the European distribution system, the fund, which as an FFI should identify its customers, is unable to perform this duty, as it does not have access to the required information.

Instead, the notice is limited to four core areas: (1) grandfathered obligations, which even under the FATCA do not result in withholdable payments; (2) the distinction between FFIs and Non-Financial Foreign Entities (NFFEs); (3) the identification and collection of information on natural persons(“individual accounts”) and legal entities (“entity accounts”) as well as (4) the reporting of US accounts under the FATCA regulations. These four core areas already cover the vast majority of the obligations which participating FFIs must meet. These are elements of the FATCA, which we introduced in our first brochure based on the following diagram.

(I) (IV)
Punishment of recalcitrant account holders and nonparticipating FFIs Identification of US accounts

Obtain a waiver from US customers

The notice provides detailed information on sections (I) – Identification, (III) – Reporting and partially (IV) – Treatment of recalcitrant accountholders and non-participating FFIs.

Annual reporting to the IRS

Ernst & Young Foreign Account Tax Compliance Act (FATCA)


Specific definitions and instructions
Identification – what is required on the customer side?

When it comes to identifying US accounts, the participating FFIs are obliged to investigate both natural persons and in terms of US indications legal entities. In response to the justified complaint of the financial sector that it would be impossible to identify several million customers by contacting them all by 2013, the IRS made a proposal to simplify the identification process. For instance, the notice envisages that initially all account relationships with natural persons, which had already been treated as US accounts, must continue to be treated as such for FACTA purposes. For all other

account relationships, which are held directly by natural persons, stratification must be performed as early as 2012. A distinction needs to be made between deposit accounts with an average monthly balance of less than USD 50,000 (“small accounts”) and all other accounts. Basically, “accounts” constitute all deposit accounts and deposit relationships as well as – in certain cases – investments in the FFI. Whereas the “small accounts” can be treated by the FFI as non-US accounts, all other customer information relating to accounts must undergo a search for indicia.

Simplified to a certain extent
Existing individual accounts

Small depository acc. < $ 50,000 average monthly balance

Other accounts

Electronic search for indicia

Strong indicia

Medium indicia

Weak indicia

No indicia

Request W-9

W-9 or W-8 BEN and doc. evidence

W-9 or W-8 BEN or doc. evidence


Identified as a US account?


Treat as non-US account (interim basis!)

Average monthly balance of > $ 1 million


Option of treatment as a non-US account Treat as a US account Treat as new account and repapering until the end of 2017 Treat as new account and repapering until the end of 2014

Unless sufficient information has already been collected, assessed and held in electronic form by the FFI.


Ernst & Young Foreign Account Tax Compliance Act (FATCA)

Specific definitions and instructions |

As far as these other accounts are concerned, participating FFIs must conduct an electronic search in their static customer data (e.g. in the CRM system). The aim of the search is to find US indicia without initially having to personally contact the customer. In this respect, a distinction is made between the strength of the various pieces of indicia which are found during this search. Depending on how strong the indicia is, the FFI must request various documents within one year of entering into the FFI agreement and must have actually recieved it within another year. In concrete terms, the Revenue Notice requires, in the case of strong indicia, (e.g. US citizenship) the submission of a W-9 form. Medium indicia (born in the US or customer address there) will require the FFI to either request a W-9 or W-8BEN form and documentary evidence. In case of weak indicia (e.g. standing order to the US or submission of instructions from the US), on the other hand, detailed documents are sufficient. If the FFI does not receive the requested documentation, the customer is considered an uncooperative(“recalcitrant”) account holder, which results in the imposition of the 30% FATCA withholding tax. An FFI can generally rely on customer documents that it has already collected, provided that these contain the level of detail and the format demanded above. However, it should be noted that key data within the collected documentation would have to be stored

electronically. Whether this rigid demand will be maintained, or if an FFI can also rely on existing, but not electronically searchable data, requires explanation in greater detail in the regulations. Customer relations which are treated as non-US accounts on an interim basis and for which there is not yet sufficient documentation available require a further distinction: If the average monthly balance of the account relationship in the year before the FATCA agreement becomes effective exceeds USD 1 million, then checks are required regarding whether or not the account relationship may continue to qualify as a non-US account within two years of the implementation of the FATCA agreement (i.e. by the end of 2014 as a rule). Otherwise, the check must be carried out within five years (i.e. before the end of 2017 as a rule). In this respect, the check follows the rules for new accounts. If the search revealed that there was no indicia, the financial sector hoped that the customer would no longer have to be checked up on. As a result, there would no longer be any need to contact the customer in order to request additional information. The IRS obviously has a different opinion on this matter: Any accounts with no such indicia can be classified in the interim as non-US accounts, but according to the current state of knowledge they have to be reidentified by 2017 (“repapering”).

Ernst & Young Foreign Account Tax Compliance Act (FATCA)


| Specific definitions and instructions

As far as legal entities are concerned (“entity accounts”), identifying the account holders is far more complex. In general, participating FFIs must decide if the legal entities: (1) a US account, (2) another participating FFI, (3) a “deemed-compliant” FFI, (4) a non-participating FFI, (5) an uncooperative (“recalcitrant”) account holder, (6) an exempt NFFE or (7) a non-exempt NFFE. In the case of a US account (1), the FFI must establish whether the account holder is a “specified U.S. person”, who must be reported to the IRS. If the FFI has already treated this account relationship as a US account, the account holder will be given the opportunity to prove otherwise (e.g. that it is a listed company or a unit which is exempt in some other way). To that end, the particating FFI must search its databases electronically for any US indication. The same also applies to (2) accounts or counterparties that are FFIs. Insofar

as the electronic search reveals that it might be another FFI, it may provisionally also be treated as an assumed NFFE. However, the participating FFI must request documentation from its customer which confirms its FFI status. If such documents are not submitted within one year, this customer will then be considered a nonparticipating FFI. Such customers will be affected by the FATCA withholding tax. If the participating FFI finds no evidence of any possible FFI status, it must treat the customer relations as NFFE: (6) and (7). In this case, the FFI must make further inquiries to determine whether or not his customer is active in trade or business outside the finance sector. Such customers are exempt from the FATCA regulations. However, due to the fact that the relevant information is generally not systematically stored in-house, it will have to fall back on external databases or ask customers for additional documents. This makes the identification process more complex. If such information is not available or as long as it is not able to be obtained, the customer must be treated as a nonparticipating FFI. Conversely, if the banking documents give rise to the suspicion that it is a NFFE, then the customer will have the opportunity to prove that it is an exempt NFFE. Otherwise, all direct and indirect holders of the NFFE need to be checked to see if they qualify as a “specified U.S. person”. If this is also unknown, the customer must be treated as a recalcitrant.


Ernst & Young Foreign Account Tax Compliance Act (FATCA)

Specific definitions and instructions |

Describing all identification steps in detail would be beyond the scope of this brochure. The above diagram shows the different steps needed to identify existing “entity accounts”. At the very least, it clearly demonstrates that the identification process required under the FATCA is very complex for this type of customer relationship. It is the technical implication of and adherence to these regulations

that will place high attention on the system developers, relationship managers and compliance function of an FFI. FFIs considering participating in the FATCA system would therefore be well-advised to think about the redesign of processes and the availability of data at an early stage.

Ernst & Young Foreign Account Tax Compliance Act (FATCA)


| Specific definitions and instructions

Exemptions from FFI status

The definition of the term “FFI” was consciously made as broad as possible by IRS , with the result that, in future questions regarding what the term encompasses will inevitably be raised. Certain entities which would fall within the definition will nevertheless be released from the full obligations of an FFI for reasons concerning data collection. The notice refers in particular to the following cases: (1) Family trusts and other “small entities” – these are entities with only a small number of account holders or owners who are all natural persons or exempt NFFEs. These small entities will then be treated as NFFEs. However, if they identify and document the US persons and exempt NFFEs and report all US persons to the IRS, the small entities can be treated as deemed-compliant FFIs; (2) Holding companies whose investments are not in the area of financial services;

(3) Newly founded companies (“start-up companies”) in the non-financial services sector; (4) Companies in liquidation and recently restructured ones active in the non-finnacial services sector; (5) Hedging and treasury companies, insofar as they are part of a group of companies which is not active in the financial services sector; (6) Insurance companies, which do not run a so-called “cash value”business, i.e. in particular property insurance companies. The notice also provides for exemptions for pension funds and similar institutions, insofar as the retirement plans were set up under local law, they are financed by a non-US employer and US persons are prevented from participating in the plan. However, an exemption is made for US persons for the term of their employment with a foreign employer.


Ernst & Young Foreign Account Tax Compliance Act (FATCA)

Specific definitions and instructions |

Annual reporting

FATCA demands that the participating FFIs submit (at least) annual reporting on the financial investments of the identified US persons. It it currently unclear whether the IRS will stand by its original intention to be notified of the annual net inflows and outflows, in addition to the value of the financial investments. On the other

hand, it appears certain that the notifications must be submitted in electronic format. Reporting the total financial investments will probably have to continue to be done in such a way that the highest amount as per the customer reportings is sent to the IRS (“high water mark reporting”).

180 160 140 120 100 80 60 40 20 0 Jan Feb Mrz Apr May Jun Jul Aug Sep Oct Nov Dec

If, for instance, a bank informs its customers of the status of all their financial investments quarterly or monthly, it is expected that the highest quarterly or monthly notification, converted into USD, must be used for the reportings to the IRS. If the US account is an investment in a participating FFI (i.e. not an account relationship but a relationship with a investor or lender), then the highest of all notifications must be used, which were reported for other purposes. In this context, regular reporting to shareholders or information used for calculating the fees of an asset manager are

possible examples. Here, the IRS also reserves the right to request account statements and other reports for verification. Moreover, the IRS wishes to demand regular reporting showing the number and total volume of all financial accounts held by the participating FFI of recalcitrant account holders (cf. above). In this way, the IRS intends to identify situations in which US persons make above-average investments in participating FFIs, without wanting to disclose their activities appropriately.

Ernst & Young Foreign Account Tax Compliance Act (FATCA)


| Specific definitions and instructions

Business strategy put to the test

Issues surrounding the strategic direction of the business segments under the FATCA are currently the topic of frequent discussions. In this context, the focus is naturally on the question of whether or not a financial institution should sign the FATCA agreement in the first place. Secondly, there are the issues surrounding the target customer group and the products which should be offered to them: should US customers continue to be served or should the financial institution continue to offer US securities? The last issue is also related to the the financial institution’s own holdings. Possible answers to these questions depend greatly on the business segment of the financial service provider (private banking with

international clientele and global strategy of asset allocation as opposed to local retail banks with standard products and few or no US customers and US securities). All financial institutions which collect US withholding payments for themselves or their customers have one thing in common: all up-stream financial institutions must participate in the FATCA system, because otherwise the 30% tax penalty is imposed on payments. The following table provides an overview of the possible alternative courses of action.

US customer (accounts)
US securities 1 No US securities

No US customer (accounts)
US securities 2 Makes no economic sense Identification necessary to confirm that no US accounts are available 4 Reaction of the IRS? Reaction of the supervisors? 30% FATCA withholding tax “Punishment” of all customers 5 Complete withdrawal from the US market Makes no economic sense No US securities

Enter into FATCA agreement and become a participating FFI

Full compliance, identification, reporting & withholding 3

Become a nonparticipating FFI

30% FATCA withholding tax; “Punishment” of all customers; Reaction of the IRS? Reaction of supervisors?



Ernst & Young Foreign Account Tax Compliance Act (FATCA)

The two options 1 and 6 are at opposite sides of the spectrum. With Option 1, the financial service provider decides on full compliance and must carry out the entire identification procedure as well as reporting of US accounts and deduction of withholding tax. Option 6 requires complete renunciation of US customers and US securities. Accordingly, it is also not necessary to set up a reporting or withholding mechanism. From an economic point of view, Option 2 could also be worth considering: a participating FFI can convince the IRS that it does not and will never manage any US accounts but can continue to offer US securities to its non-US customers. An FFI of this type does not require a “reporting machine”, as it does not manage any US accounts which would entail a reporting obligation. If the FFI also guarantees that it does no business with non-participating FFIs, then it does not require a withholding mechanism. Options 3, 4 and 5 could prove to be more problematic. All of them involve not participating in the FATCA system. The imposition of the 30% FATCA tax penalty on US revenues would be the foreseeable consequence. Options 3 and 4, however, are associated with an additional risk: the FATCA was developed specifically so that the IRS gets information on US taxpayers, irrespective of whether or not these tax payers invest in US securities or in other securities.

This is in complete contrast to the existing QI system, which only collects information about US securities. Option 4 in particular removes the potential threat of a 30% FATCA withholding tax (due to a lack of investment in US securities), but it does give US persons the opportunity to invest without information being sent to the IRS. Although this may well be in line with the Swiss attitude on financial privacy, it is contrary to the intention of the FATCA. Therefore, only time will tell whether the Swiss Financial Market Supervisory Authority (FINMA) is favorable toward such cases, especially since the FINMA has already explicitly identified the FATCA as one of the risks of cross-border business, which needs to be managed and controlled. At the same time, FINMA says that foreign laws must also be complied with. In spite of this uncertainty, it should nevertheless be expected that participating FFIs will be intent on not having any non-participating FFIs in the chain of payment flow. Otherwise, the 30% FATCA withholding tax would become applicable up-stream. FFIs which do not want to build any infrastructure for the withholding will continue to refrain from doing business with non-participating FFIs or uncooperative customers. In this respect, it is by no means wrong to assume that the FATCA may well divide the financial system into participating and non-participating FFIs.

Ernst & Young Foreign Account Tax Compliance Act (FATCA)


| Specific definitions and instructions

FATCA and the fund industry

Due the fact that the instructions on what to do have yet to be provided for the asset management sector, the specific effects on the fund industry are currently still difficult to estimate. Investment funds will consitute FFIs under the FATCA regulations. This means that funds would have to check their investors for US indicia. Whereas this is theoretically still possible in the case of alternative investments (private equity and hedge funds), such identification in the European distribution system seems unrealistic: retail funds in particular do not know their investors. These funds could therefore

not meet their contractual obligations under the FATCA and would run the risk of the 30% FATCA withholding tax being deducted from their investments by US withholding agents or up-stream FFIs. The lobbying of the industry associations is hence currently also primarily aimed at ensuring that the funds are “deemed compliant” and can collect US revenues without FATCA deduction. Identification of the shareholders would then have to be performed by the investor’s custodian bank in the European system, provided that it is a participating FFI.

Data provider? Information about US and non-US sourced payments Information about US and non-US sourced payments

Fund management company 1

US withholding agent

Custodian of fund (PFFI)


Investor’s custodian bank (PFFI) – “closest to client“

2 US/non-US account? Recalcitrant?

Deemed-compliant FFI? (cannot identify the end investors)

However, this will then raise the following issue: in the event that the investor is an uncooperative customer, his or her custodian bank (2) must be given information by the fund itself or its custodian (1) as to whether the fund’s dividends that have been distributed contain any revenues from a US source. The customer’s custodian bank may only charge the 30% FATCA withholding tax on these payments in its capacity as a participating FFI. Such information is only likely to be able to be provided following great expense and effort on the part of funds, which if necessary reinvest profits or earn revenues from the sale of US shares – all of which are collectively referred to as “withholdable payments”. It can therefore be assumed that investment companies will consider restructuring their funds

in such a way that there are funds for (exclusively) US investments (the distributed dividends of which all constitute withholdable payments) and funds for non-US investments. Alternatively, an investment company could also urge its sales partners not to sell funds to uncooperative customers or other non-participating FFIs. In return, the distributor of the fund or a customer’s custodian bank can request that the fund management company discloses all information relating to the proportion of US source payments. If this does not occur, the customer’s bank could stop selling such funds. In this context, it would seem to depend on the specific wording of the FACTA instructions on how to act when it comes to determining which of the two sides will assert themselves.

Ernst & Young Foreign Account Tax Compliance Act (FATCA)

FATCA – views on the project

In order to be able to better assess the impact of the FATCA, it is necessary to examine this complex topic in great detail. As the final guidelines of the IRS on the new FATCA regulations are not yet available, there is great uncertainty within the entire financial sector on the one hand. On the other hand, however, time is running out, since the new provisions will already apply to payments from the beginning of 2013. In other words: initial decisions need to be made despite the circumstances being shrouded in uncertainty. Action is thus required based on assumptions; the FFI needs to make assumptions (e.g. relating to customer and product identification) and question these in the light of the way in which the available information changes, making any necessary adjustments. The different categories of affected FFIs would therefore be well-advised to study the FATCA regulations.

Ideally, this should occur as part of an internal project with the following stated objectives: 1) Validate the strategic opportunities and implementation scenarios, which facilitate cost-effective and targeted implementation; 2) Examine the possible effects of the FATCA on the organization, particularly consequences for customers, products and business processes; 3) Ensure effective internal and external communication.


Ernst & Young Foreign Account Tax Compliance Act (FATCA)

FATCA – views on the project |

Project approach and procedure

However, as far as the project is concerned, it would be advisable to adopt a risk-based yet pragmatic approach which is tailored to specific needs. The multi-phase approach can be divided into the following main steps: Phase 1: Mobilization Phase 2: Strategic considerations Phase 3: “Impact assessment” Phase 4: Implementation

Your starting point






Impact assessment



FATCA compliance

Below is a brief explanation of the individual project phases leading to “FATCA compliance”.

In the mobilization phase, the project is structured internally and the project organization determined in detail. This also includes identifying the internal resources and defining the areas in which they are used. In order to conduct a preliminary study in the parent company, it is essential to put together a broad, interdisciplinary team with specialists from the fields of business/front office, tax, legal, compliance and operations/IT. As a rule, an in-depth analysis of foreign locations or foreign subsidiaries is part of a subsequent phase.

Strategic considerations
At the beginning of the project, it is important to gain an insight into the materiality and complexity of the new regulations in order to understand the extent of the required changes. At the same time, “filters” can already be defined, which are to be applied to customers, products, processes and systems with regard to “impact assessment”. They are used to estimate quantity structures, which under FATCA regulations require treatment which differs from current practice. Based on the current state of knowledge and the assumptions made, the strategic and defined tactical guidelines are defined. These are particularly important in those areas in which the legislator leaves room for interpretation. It is important to document the underlying assumptions right from the start. Without such documentation, any subsequent validations or amendments will be virtually impossible to understand. Training courses and workshops are advisable in order to ensure that all project staff see the “big picture” and can then break down the requirements into those relevant to their departments.

Ernst & Young Foreign Account Tax Compliance Act (FATCA)


| FATCA – views on the project

Impact assessment
The “impact assessment” phase serves to estimate the necessary adjustment processes. During this phase, an in-depth analysis of the main processes will be carried out. The project is usually supported by a central team. In particular, the coordination and preprations for workshops and the consolidation of work results by the central team contribute to a successful project. A prerequisite for the impact assessment is exact planning involving all work streams and corresponding basic documents. Although by no means exhaustive, the following documents can serve as an important basis for making decisions: overview of customer segments and counterparties, processes, product/service catalog and applications for the individual booking platforms. Furthermore, documents from the QI rule set present helpful working bases.

In the workshops, the following issues are dealt with as examples: 1. Which customers might be affected? – “Current US person” without a securities deposit account, customers of “external asset managers” and US-owned foreign entities 2. Which business partners are affected? – Custodian banks, external asset managers, data suppliers, such as Reuters or Telekurs 3. Which main processes will be affected by the FATCA? – Establishing customer relations, entering master data for securities and settlement of securities 4. Which applications/systems may need to be adapated to the new regulations? – e.g. customer relationship management, corporate actions The requirements made of the main processes and applications and any amendments thereto can generally be divided into three areas. As an example, we will show the core requirements, main processes and applications for each area, which the banks focus on most strongly:

In this respect, the duties are divided into: 1) Identification of customer relations, 1) Identification Impact assessment 2) Withholding 2) Tax deduction and withholding and finally 3) Reporting. Possible punishment of uncooperative customers and non-participating FFIs automatically results from these steps.

3) Reporting


Ernst & Young Foreign Account Tax Compliance Act (FATCA)

FATCA – views on the project |

Identification Requirements

• Identification of FATCA-related customers and counterparties • Inclusion of new FATCA-related information for identification of •

US accounts (new standard fields e.g. dual citizens, substantial owners in case of “legal entities”) Customer classification from the point of view of the FATCA e.g. “recalcitrant account holder” (including management of master data on customers) Forms and templates Interaction with intermediaries e.g. external asset managers on customers (“CRM”)

This focus on the relevant main topics and the inclusion of the contacts (“stakeholders”) enables targeted and efficient execution of the project. At the same time, the drain on resources is minimized in ongoing operations. A preliminary study concludes the “impact assessment” phase. It summarizes the desired “business and operating model” and derives from it the necessary changes (“change requests” on the basis of the identified actual/target deviations) as well as the anticipated costs. Building on that, an initial implementation plan needs to be developed to ensure “FATCA compliance” status.


• Establishment of customer relations


• • • Various front office tools (KYC), management of master data • Legal & compliance tools (incl. document management) • e-banking

Tax deduction/withholding tax Requirements

• New classification according to FATCA relevance for securties • • • Order generation processes

master data Implementation of warning & blocking in case of stock market order entries Calculation and deduction in case of “withholdable payments” (purchases/subscriptions and sales/distribution of dividends) (settlement, corporate action)


• Processing securities transaction

• Management of master data on securities • Stock market order processing (order entry systems) • Settlement and corporate action • Annual IRS reporting on all assets • Adjustments to customer statements • Adjustments to specific tax reports
(e.g. copy of IRS reporting)

Reporting Requirements

Processes Applications

• Drawing up the stock exchange settlements • Preparation of IRS reporting • Data pool reporting • IRS e-reporting system
Ernst & Young Foreign Account Tax Compliance Act (FATCA) 21

| FATCA – views on the project

Initial project findings

Implementation: the final step on the road to compliance
The scope of implementation is primarily determined by working out the future “business and operating model” and the individual initial situation of the company. The crucial factor in this respect is whether or not the standard software providers, up-stream custodians or business partners (insourcing/outsourcing) can be included in the implementation phase. It is advisable not to start the implementation phase before there is clarity surrounding the final IRS implementation regulations. The findings from the “impact assessment” can be reexamined on the basis of the established regulations and – if necessary – adapted. The “impact assessment” lays out the initial situation for transferring the project to the “change the bank” organization and provides the basis for planning the required activities, milestones, and ressources for implementation.

Initial project experiences show that the FATCA – in spite of its name – is not just a topic relating to taxation law, but particularly also an operational one. An “impact assessment” creates the necessary transparency in relation to actions taken and implementation options and the associated cost drivers. It thus leads to increased assurance when dealing with the FATCA in one’s own company. Many financial institutions in Switzerland and abroad have started FATCA projects and are also investigating the required operational changes to their booking platforms. In this respect, the need for change is considered from the viewpoint of both participation in the FATCA system and the option of not participating. In addition to the process and system changes, the actual identification of customers (KYC) and follow-up documentation of existing ones are considered the greatest challenges. In order to match the internal processes with the new requirements, the following three principles are of significance. Firstly, financial institutions need a clear picture of the current and desired future business model. In principle, involvement as a participating FFI or obtaining the “deemed-compliant FFI” status can be considered. However, not taking part (“non-participating FFI”) may also be considered under certain circumstances. The question of whether or not to consolidate the existing US customer relations and the scope of the product range is still up for debate. Secondly, just as important is a modular and scalable system landscape, so that new requirements as well as additional forseeable country-specific requirements in the context of taxation (e.g. withholding tax) can be taken into account. In view of these facts, synergies need to be found between the different “change the bank” initiatives. Thirdly, a structured yet flexible approach to the project is of significance, because the regulations can continue to change as the goal posts are shifted. Implementation activities should therefore not (yet) be focussed on.


German-speaking Switzerland Dr. Hans-Joachim Jaeger, Partner Tax, Financial Services Telephone +41 58 286 3158 E-mail Iqbal Khan, Partner Head of Private Banking Center EMEIA Telephone +41 58 286 4254 E-mail Bernhard Böttinger, Partner Lead Financial Services Performance Improvement Switzerland Telephone +41 58 286 4692 E-mail Philippe Zimmermann, Partner Legal & Regulatory, Financial Services Telephone +41 58 286 3219 E-mail Cataldo Castagna, Partner Asset Management Sector Leader Switzerland Telephone +41 58 286 4757 E-mail Roger Walter, Senior Manager Performance Improvement Telephone +41 58 286 4697 E-mail Bruno Patusi, Senior Manager Financial Services Telephone +41 58 286 4690 E-mail French and Italian-speaking Switzerland Stéphane Muller, Partner Audit, Financial Services Telephone +41 58 286 5595 E-mail Mario Mosca, Partner Audit, Financial Services Telephone +41 58 286 5866 E-mail Pierre Balsiger, Executive Director Financial Services Telephone +41 58 286 5716 E-mail

Any US tax advice contained in the body of this document is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the US Internal Revenue Code or applicable US state or local tax laws.

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...Foreign Account Tax Compliance Act (“FATCA”). This document is not and should not be regarded as tax advice for financial institutions and their clients. If in doubt, individual institutions or clients should seek professional advice from their own tax or legal advisers. Information provided in this document will be updated according to the development regarding the signing of the IGA. Q 1: What is FATCA? Does this US tax legislation have any implication for Hong Kong? A 1: FATCA was enacted by the US in March 2010 aiming to combat tax evasion by US taxpayers. In brief, under FATCA, foreign financial institutions (“FFIs”) are required to sign agreements with the US Internal Revenue Service (“IRS”) to identify and disclose detail regarding their US account holders. These financial institutions will be required to withhold tax for relevant US account-holders who do not give consent to such disclosures, or to close such accounts. An FFI which does not sign or is not otherwise exempt will face a punitive 30% withholding tax on all “withholdable payments” derived from US sources, initially including dividends, interest and certain derivative payments. In addition, starting from 2017, gross proceeds such as sales proceeds and returns of principal derived from stocks and debt obligations generating US source dividends or interest will be treated as “withholdable payments”. -1- Q 2: What is an IGA under FATCA? A 2: The US Treasury announced...

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Fatma Reporting

...on this line; do not leave this line blank. 2 Business name/disregarded entity name, if different from above 3 Check appropriate box for federal tax classification; check only one of the following seven boxes: C Corporation S Corporation Partnership Trust/estate Individual/sole proprietor or single-member LLC Limited liability company. Enter the tax classification (C=C corporation, S=S corporation, P=partnership) ▶ Note. For a single-member LLC that is disregarded, do not check LLC; check the appropriate box in the line above for the tax classification of the single-member owner. 4 Exemptions (codes apply only to certain entities, not individuals; see instructions on page 3): Exempt payee code (if any) Exemption from FATCA reporting code (if any) (Applies to accounts maintained outside the U.S.) Other (see instructions) ▶ 5 Address (number, street, and apt. or suite no.) Requester’s name and address (optional) 6 City, state, and ZIP code 7 List account number(s) here (optional) Part I Taxpayer Identification Number (TIN) Enter your TIN in the appropriate box. The TIN provided must match the name given on line 1 to avoid backup withholding. For individuals, this is generally your social security number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see the Part I instructions on page 3. For other entities, it is your employer identification number (EIN). If you do not have a number, see How to get a TIN...

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Exchange on Information

...EXCHANGE ON INFORMATION AND ITS AD 1. BRIEF OVERVIEW ON NEED OF EXCHANGE OF INFORMATION & ITS MEANING: 1.1 With the increase in cross border transactions in the era of globalised world there has been increase in the number of cases tax evasion & avoidance. The problem of tax evasion in developing countries is therefore exacerbated, where evasion even by a wealthy few can have a comparatively large impact. The revenue needs of developing countries, in combination with the severity of corruption, tax evasion and fraud in many developing countries, highlight the importance of increasing global transparency concerning the location of untaxed wealth. Globalization and the liberalization of economic activity, resulting in the exponential increase in cross border commercial and financial transactions, has in effect converted the private sector into a world without borders. This has created a major problem for national tax authorities because globalization in the private sector has not been accompanied by similar changes in the reach and enforcement powers of national tax authorities. 1.2 In confronting the impact of globalization and liberalization of economies, national tax authorities face several problems. Some of them are...

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...Farooq Shah Business Accounting 1/14/13 The informative thoughts expressed in FATCA: A new era of financial transparency about privacy, oversea accounts and the new federal income tax laws are ones that I do not agree with. I don’t agree that we as Americans can work hard for our monies only to not have the privacy and courtesy to invest the way we choose wherever we choose. Under the FATCA act it requires all foreign financial institutions to give the US Internal Revenue Service information about financial accounts held by US taxpayers. Foreign financial institutions will be required to enter into a disclosure agreement with the US tax authorities to report on its US accounts if a foreign institution does not enter into an agreement with the IRS or comply with FATCA, all relevant US sourced payments, such as dividend and interest paid by US corporations, will be subject to a 30 per cent withholding tax. Banks are in the business of providing financial and investment services to its clients. All banks have a duty of care to their customers to treat their sensitive personal information with confidentiality, and to prevent its disclosure to any unauthorized people. This breach of duty occurred through the negligence of the bank or its employees, for whom the bank is ultimately liable. In this case the US government is forcibly attaining information. With this new act in place it will make it very hard to do global business as well as it will give a perspective of American...

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Tax Evasion Paper

...necessary for the United States to continue to monitor and implement laws to improve financial transparency globally in order to curtail tax evasion in addition, the integrity of the federal income tax system continues to be tested by individuals and entities in their attempts to defraud the United States Government. The United States Treasury, IRS, and Congress took a long hard look at the global financial system and determined that UBS, the Swiss bank giant sold tax evasion services to those who did not want to pay their taxes (http: A new law signed by President Barak Obama in March of 2010, the Foreign Account Tax Compliance Act (FATCA), which goes into effect January 1, 2014, is meant to expose billions of dollars in offshore tax evasion. FATCA is an instrument where foreign banks must spend millions of dollars to help the U.S. enforce its own tax law....

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...skills *Good Computer skills *Maintain program registers, data card and files * Excellent customer service Technical Qualifications: *Familiar with all financial and accounting terms * Specialised in Marketing and Sales. Personal Qualities: *Ability to work well as a team or autonomously *Good leadership abilities *Punctual and good attendance *Hardworking, honest and persevering ------------------------------------------------- QUALIFICATION & PROFESSIONAL DEVELOPMENT: *Passed Secondary School certificate 2005 – 89% *Bachelors in Business management – Specialised in Marketing and sales – 2008 - 65% *Master’s in Business Administration – Deakin University *FATCA and other regulations trained specialist Certificate Courses: Food Safety Handling -2015 Responsible Gambling Services - 2015 Responsible service of Alcohol - 2015 ------------------------------------------------- EMPLOYMENT HISTORY: 2008 - 2010 Worked as a Financial Analyst – ANZ Bank 2011 - 2012 Worked as Customer relationship officer – Diners Club Cards 2012 - 2015 Worked as Senior Associate KYC AML – HSBC Bank 2015 – Date Working at Fosberry Food Co as Cashier, Barista & Store...

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Investment Funds in Poland 2012

...Investment Funds in Poland The Polish experience – Regulatory, Political ans Economic Aspects Brussels, 8th November 2012 Leszek Jedlecki, Chairman of the Board of Chamber IZFiA President of the ING TFI 1. Development of the Polish market • Saving structure • Market leaders • Home bias • Asset structure evolution • AuM GDP Ratio ING Investment Management 2 Savings structure in Poland Households’ savings structure as of June 2012 Investment funds’ share modest but AuM raising Equities ( 4%) Unit-linked funds (3.8%) Domestic mutual funds (6.5%) Foreign mutual funds (0.4%) Open pension funds (24%) Bonds and bills (0.9%) Cash in circulation outside banking system (10.8%) Bank deposits (49.6%) 140000 Mutual funds and unit-linked funds account to 10,3% of households savings Total industry assets are rebounding and approaching the previous peak AuM in mio PLN 120000 100000 80000 60000 40000 20000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q3 2012 Source: Analizy Online ING Investment Management 3 Industry AuM – end of September 2012 (m PLN) Open-ended funds Nonpublic Close-ended funds Source: Analizy Online ING IM 4 Funds asset structure evolution since WIG highest level Fixed income funds’ share… Rose by +23 pp Aggressive funds’ share… Dropped by -46,6 pp Others Nonpublic assets Money market Mixed Source: Analizy Online, 4th July 2012 Absolute return ...

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Code Section 6038d – Reporting Foreign Financial Assets

...     General Rule and Overview Who Must File Information To Be Reported Section 6038D Penalty Repatriation of Funds      Code Section 6038D added to the Internal Revenue Code as part of the Foreign Account Tax Compliance Act (FATCA) in 2010. Code Section 6038D requires certain individuals to annually report to the IRS information about their interest in specified foreign financial interest (“SFFAs”). Filing obligation is dependent of the aggregate value for the year of SFFAs and the applicable threshold. Reporting is required for assets held in taxable years beginning after March 18, 2010 on Form 8938. Form 8938 is attached to the taxpayer’s annual income tax return and is due on the same date (including extensions). Code section 6038D(a): “Any individual who, during any taxable year, holds any interest in a specified foreign financial asset … if the aggregate value of all such assets exceeds $50,000 (or such higher dollar amount as the Secretary may prescribe).”  Specified Individual:  Dual Residents: ◦ U.S. citizens; ◦ Individuals who are U.S. residents for any portion of the relevant year; ◦ Nonresident aliens who are married to a U.S. citizen or U.S. resident and who elect under Code Section 6013(g) or Code Section 6013(h) to be treated as U.S. residents for certain federal tax purposes; ◦ Nonresident aliens who are bona fide residents of Puerto Rico; and ◦ Nonresident aliens who are bona fide residents of a so-called “Section...

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Sixth  Possible  Serious  Economic  Danger  for  2015  and  Beyond

...Sixth  Possible  Serious  Economic  Danger  for  2015  and  Beyond     A report by Sandeep Vete            1                               DANGER #6: Collapse  of  US  Dollar  as  world’s  de-­‐facto  currency   The  modern  US  currency  under  the  “Dollar  Standard”   is  a  FIAT  currency  but  the  underlined  reality  is  that  the   world  oil  trade  and  the  strength  of  US  military  backs   the  US  Dollar.     Source:  w   Demand  for  dollar  is  created  by  its  “Petro-­‐Dollar”  status  and  mitigates  the  inflation  to  a  large  degree  by   distributing  the  consequences  globally  and  not  merely  affecting  United  States.  Essentially  US  writes  the  hot   check  and  the  world  has  to  pay  the  bills.  (When  Will  The  Economy  Collapse?  2013,  July  24)  This  system  is  perfect  till  no  one   decides  to  twist  the  system  like  Iraq  did  in  2000  by  selling  oil  in  euros  or  Libya  did  by  try  pulling  most  of   Africa  off  the...

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Ucb Internship Report

...Introduction of United Commercial Bank (UCBL) United Commercial Bank Limited (UCBL) is a First-generation private commercial bank established in Bangladesh in the year 1983 under the Companies act. Since inception, it has committed to provide high quality financial services to the people of this country to accelerate economic development of the nation. As such, it has been working for stimulating trade and commerce, accelerating the pace of industrialization, boosting export, creating employment opportunity, alleviating poverty, raising standard of the living of the people etc. and thereby contributing to the sustainable development of the country. At present the bank has 148 branches in both rural and urban areas of the country. Since inception, the bank has been making significant profit every year and this has been possible due to significant growth of the bank. With its firm commitment to the economic development of the country, the Bank has already made a distinct mark in the realm of Private Sector Banking through personalized service, innovative practices, dynamic approach and efficient Management. The Bank, aiming to play a leading role in the economic activities of the country, is firmly engaged in the development of trade, commerce and industry thorough a creative credit policy. Corporate Slogan of UCB: "United we achieve" Mission: United Commercial Bank limited Always try to meet the demand of the customer and to Solve most of their expectations. Their...

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Swiss Private Banking

...Swiss Private Banking Table of Contents: I. Introduction: 1) Economy of Switzerland; 2) Overview of Swiss Private Banking Sector; II. Strengths and Opportunities of Swiss Private Banking: 1) Privacy; 2) Protection and Safety; 3) Stability and High Quality Standards; III. Weaknesses and Problems that Swiss Private Banking is facing: 1) Dependency on socio- demographic factors; 2) Shifting of wealth concentration; 3) Speed of recovery of markets; 4) Threat to offshore banking; 5) Hard to ensure sustained profitability; IV. Offshore banking in the light of current financial crisis V. Differences in the way different sized banks were effected: 1) Megabanks; 2) Small – medium sized banks; VI. Strategies adopted by private banks after financial crisis: 1) Credit Suisse; 2) UBS; VII. Conclusion Switzerland is one of the most stable, modern and highly developed economies in the world nowadays. Percentage of Swiss Workforce by Sector of Economy is as following: - 1960: Services (39%); Manufacturing (47%) ; Agriculture (15%) ; - 2008: Service (73%); Manufacturing (23%); Agriculture (4%). Economic history of Switzerland is characterized by steady movement to higher productivity industries and services. Traditionally, the Swiss economy used to ran as calmly and soundly as a Swiss clock, well-oiled by the money inflows to Swiss private banks. The country of Switzerland has a small territory compared to surrounding countries and...

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International Tax Policy 2012

...The  United  Nations’  Role  in  International  Tax  Policy   A Research and Policy Brief for the Use of the NGO Committee on Financing for Development Hamrawit Abebe, Ryan Dugan, Michael McShane, Julie Mellin, Tara Patel, and Linda Patentas Graduate Program in International Affairs, Milano School of International Affairs, Management, and Urban Policy, The New School March 7, 2012 TABLE OF CONTENTS EXECUTIVE SUMMARY BACKGROUND AND PERSPECTIVES BACKGROUND AND ANALYSIS THE OECD, G77, G20, AND EU ON UPGRADING THE UN TAX COMMITTEE KEY INSTITUTIONAL PLAYERS ARGUMENTS FOR AND AGAINST A UN TAX BODY 3 4 8 12 17 REFLECTIONS AND RECOMMENDATIONS RELATIONSHIP BETWEEN OECD AND UN TAX COMMITTEE GLOBAL TAX POLICIES POLICY RECOMMENDATIONS 20 28 38 APPENDIX GLOSSARY AND ACRONYMS REFERENCES 44 48 52 2 Executive Summary The report provides an analytical view on the role of the United Nations in tax policy, highlighting the interventions made by and challenges to key players in attempts to streamline global tax cooperation. The first section of the paper provides a background on the importance of tax related issues, emphasizing its importance within the Monterrey Consensus. Debates are introduced between two key institutional players regarding global tax cooperation, the OECD’s  Committee  on  Fiscal  Affairs  and  the  UN  Tax  Committee. Views from key players the OECD, Group of 77, Group of 20, and European Union are addressed in the areas of international tax cooperation...

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Banking Modules

...FINANCIAL SERVICES Optimizing banking operating models From strategy to implementation September 2012 KPMG INTERNATIONAL Contents Executive summary The challenges facing the banking sector Regulations and regulators Economic environment Changing customers The march of technology 3 3 3 1 2 2 How will these changes affect the universal banking operating model? The end of universal banking Disintegration of the value chain Cost efficiency is key in developing new operating models New IT architectures are essential 6 6 5 4 4 What banks need to do Seizing this once-in-a-life-time transformation opportunity Developing an innovative operating model to overcome loss of scale and cost issues Implementing long-term sustainable cost reduction measures Implementing an iterative and collaborative approach to a complex, multi-faceted problem 10 11 9 8 8 Making it to the finish line 13 © 2012 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved. Optimizing banking operating models | 1 Executive summary A s the world emerges from what has been described as the greatest crisis in the history of finance capitalism, banks must adapt to radical new regulations, technologies, customer expectations and economic environments. The current universal bank operating model...

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Testing an Age of Ban

...Contents Annual Report Annual Report ABN AMRO Group N.V. 2011 Notes to the reader Introduction This is the Annual Report for the year 2011 of ABN AMRO, which consists of ABN AMRO Group N.V. and its consolidated subsidiaries. The Annual Report consists of the Managing Board report, Supervisory Board report, and the Consolidated Annual Financial Statements. Presentation of information The financial information contained in this Annual Report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). This Annual Report is presented in euros (EUR), which is the presentation currency of ABN AMRO, rounded to the nearest million (unless otherwise stated). All year-end averages in the Annual Report are based on month-end figures. Management does not believe that these month-end averages present trends materially different from those that would be presented by daily averages. Certain figures in this document may not tally exactly due to rounding. In addition, certain percentages in this document have been calculated using rounded figures. As a result of the integration, the current segment reporting is still subject to minor changes. This report can be downloaded from For more information, please go to or contact us at ABN AMRO Group N.V. Gustav Mahlerlaan 10, 1082 PP Amsterdam P Box 283, 1000 EA Amsterdam .O. The Netherlands Telephone:...

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Private Banking 2012

...McKinsey Banking Practice McKinsey Private Banking Survey 2012 Finding a new footing July 2012 Contents 05 Introduction 19 06 12 Middle East: Attractive but increasingly competitive Western Europe: Fighting for sustainable profits 21 Priorities for finding a new footing North America: Expanding profitability, but no growth 26 27 Disclaimer 16 Authors Asia: Growing fast but at a cost McKinsey Private Banking Survey 2012 Finding a new footing 5 Introduction Private banking may be one of the most attractive segments within financial services in 1 terms of profitability, but it has not emerged unscathed from 4 years of financial crisis. Not only did the crisis hit the economics of the industry by slowing net inflows and squeezing margins, it has also led to structural changes. Following a difficult year in 2009, when net inflows in developed markets were negligible and margins and profits hit record lows, a modest improvement was seen in 2010. It seemed at first that this recovery would continue in 2011. But, after a good start, the industry suffered from a difficult second half: markets fell and profits stagnated at low levels. The situation has not yet improved in 2012; another good start was wiped out in the second quarter. Given the continued growth in global wealth, this implies that private banks are failing to capture their fair share of the market. The longer-term structural changes caused by the crisis are creating...

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