ACFS and BAE Webinar - The Rise of GATCA 7-29-14

The Rise of GATCA

Preparing for the new reality of global tax compliance and account reporting systems

The Rise of GATCA

Preparing for the new reality of global tax compliance and account reporting systems

ACFCS WebinarJuly 29, 2014

Presented ByBrian Kindle - ACFCS

Laurie Gentz – BAE Systems Applied Intelligence

Brian KindleExecutive Director

Association of Certified Financial Crime SpecialistsMiami, FL

Certification, News, Guidance, Training, Networking

The Credential That Demonstrates Competency and Skill Across the Financial Crime Spectrum

CFCS Certification

Laurie GentzSenior Business Solutions Consultant

BAE Systems Applied IntelligenceSend questions/requests for Laurie to: [email protected]

WHAT IS FATCA?• Foreign Account Tax Compliance Act, a US law enacted in 2010

• Wide array of non-US financial institutions must identify accounts they hold for US persons, report them to Internal Revenue Service (or their domestic tax authorities under certain intergovernmental agreements, or IGAs)

• Non-US institutions are generally required to:• Implement new onboarding procedures • Review pre-existing accounts and classify based on FATCA status• Collect data and documentation to verify US personhood• Report certain data on accounts and account holders• Monitor accounts on ongoing basis• Close non-consenting or recalcitrant accounts• Apply 30% withholding, although US withholding agents will bear primary

responsibility

• Model I and Model II IGAs laid groundwork for GATCA system

WHAT IS GATCA?

Global Account Tax Compliance Act Dubbed global FATCA or GATCA

Goal is to have a single global standard

on automatic exchange of information

Each country will need to enact the necessary domestic legislation and entered into appropriate international agreements to allow exchange of information

WHO IS THE OECD?

Organization for Economic

Co-operation and Development

• Mission – to promote policies that will improve the economic and social well-being of people around the world

• Provides a forum in which governments can work together to share experiences and seek solutions to common problems

• The common thread of our work is a shared commitment to market economies backed by democratic institutions and focused on the wellbeing of all citizens.

• The OECD goal: make life harder for the terrorists, tax dodgers, crooked businessmen and others whose actions undermine a fair and open society

Est. 1961, Membership: 34 Countries

Enhanced Tax and Financial Transparency

US FATCA

Qualified Intermediary

Program

FATCA “pilot” between 5 EU

nations

OECD CRS

UK tax exchange with

territories, Crown

Dependencies

Other national efforts - China

and Hong Kong, France

and territories

Existing tax treaties and information

exchange agreements

• Are staff, from client relationship managers to AML team, prepared to spot activity indicative of tax evasion?• Red flags, EDD for higher-risk customers, questions to ask new prospective customers

• Example - Customer closes accounts just before GATCA reporting deadline• Create exception report?• File a suspicious activity/suspicious transaction report?

• Enable lines of communication and internal reporting structures for customers with potential violations – GATCA “grey lists”

• For law enforcement, unprecedented new information on offshore accounts, but access likely to be very limited in many jurisdictions

• For institutions, deeper understanding of customer’s tax status may improve AML assessment and lead to fuller understanding of risks

GATCA as Financial Crime Tool

• 45 countries already in “Early Adopters Group” – commits them to timetable with reporting by 2017

• More than 20 others have publicly committed to adoption

• Late October – OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes • 122 nations and jurisdictions will meet • More commitments expected in lead-up to event, may be signing

ceremony for multilateral agreements

• http://www.oecd.org/ctp/exchange-of-tax-information/standard-for-automatic-exchange-of-financial-information-in-tax-matters.htm

What’s Next for GATCA Adoption?

http://www.oecd.org/ctp/exchange-of-tax-information/standard-for-automatic-exchange-of-financial-information-in-tax-matters.htm




Copyright © 2014 BAE Systems. All Rights Reserved.BAE Systems is a trade mark of BAE Systems plc 12

The Rise of GATCAThe new reality of global tax compliance

and account reporting systems

Laurie Gentz


DISCUSSION TOPICS

Cha

lleng

es

KNOW THE HURDLES Det

ails

, Dat

es STANDARDS …REQUIREMENTS …DUE DATES …

Get

ting

Rea

dy

RECOMMENDATIONS


KEY CHALLENGES

How to ensure consistency across jurisdictions …

Interpretation by country may vary …

The US will not be an early adopter …

Rules for tax residency are different for each country …

Complying with both reciprocal model one IGAs & bilateral agreements


NEED TO KNOW

OECD has adopted the FATCA model

Designed to create a single global reporting standard (CRS)

Published full details on July 21, 2014

Standard for Automatic Exchange of Financial Account Information in Tax Matters

Subsequent changes may become necessary as jurisdictions gain more experience with the implementation of the standard.

More detailed commentary that is being developed

http://www.oecd.org/tax/exchange-of-tax-information/automaticexchange.htm





OVERVIEW - COMMON REPORTING STANDARD

WHO WHAT

Banks Custodians Brokers Certain collective investment

vehicles Certain insurance companies Etc.

Investment income Including interest, dividends,

income from certain insurance contracts and other similar types of income

Account balances and sales proceeds from financial assets

Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations)

The standard includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.


OECD CRS DATES

For all New Account Openings Capture and Record tax residence Report in 2017

Due diligence procedures need to be in place for

identifying high-value pre-existing individual accounts

The first exchange of information in relation to new accounts

and pre-existing individual high value accounts will take place

Perform Due Diligence for low-value pre-existing

individual accounts and entity accounts

Information about pre-

existing individual low

value accounts and entity

accounts

- by the end of Sept 2017

or Sept 2018


FATCA / GATCA – WHAT IS THE SAME?

Checking existing customers to see if more data is necessary

Setting up new customer onboarding procedures to capture critical identifying data

F

G


FATCA / GATCA – WHAT IS DIFFERENT?

FATCA GATCA

• FATCA taxes on the basis of citizenship

• US tax law

• Non-compliant entities - significant tax withholding rate of 30%

• Exemptions for small local institutions, charities, pensions and collective investment entities

• GATCA / CRS taxes on the basis of residence

• Non-compliant entities – penalty unknown

• Multi-lateral jurisdictions

• KYC - Increased data

collection

• Exemptions are still being assessed –

but expected to be less than FATCA


HOW WE CAN HELP

Consolidated view of customers and accounts

from multiple systems

Ongoing monitoring should the data

change

Supplied classification of citizenship

Delivered workflow process for data &

document collections

Will prepare an upload file on their behalf to the IRS

Provided aggregation of the accounts they

needed to report


RECOMMENDATIONS

Start internal discussions now• Regulatory dates will be here

before you know it

• Will you expand existing FATCA processes?

• Will new processes/ procedures need to be implemented?

• Who will own the OECD CRS process?

Collect Data • Does your institution collect all

relevant data points?

• Do processes need to change to collect more data/documents?

Select the right technology partner

• Complicated tax laws require a technology enabled solution

• US Financial Institution may end up reporting to several different tax authorities


The Rise of GATCAQuestions?


The Rise of GATCAThanks for Attending!


BAE Systems Applied IntelligenceSurrey Research ParkGuildfordSurreyGU2 7YPUnited Kingdom

T: +44 (0)1483 816000F: +44 (0)1483 816144

Copyright © 2014 BAE Systems.

All rights reserved. BAE SYSTEMS, the BAE SYSTEMS Logo and the product names referenced herein are trademarks of BAE Systems plc.

BAE Systems Applied Intelligence Limited registered in England & Wales Company No.1337451 with its registered office at Surrey Research Park, Guildford, England, GU2 7YP.

No part of this document may be copied, reproduced, adapted or redistributed in any form or by any means without the express prior written consent of BAE Systems Applied Intelligence.


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ACFS and BAE Webinar - The Rise of GATCA 7-29-14