Doing FATCA Group Requests right: lessons learned and pitfalls to avoid - Banking blog

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With the 2009 protocol to the Swiss-US double tax treaty ratified (see our prior blog post), the IRS can submit group requests under FATCA and Swiss Financial Institutions (FIs) should expect to receive, at any time, production orders from the Swiss Federal Tax Administration (SFTA). All affected Swiss FIs should be preparing now to be in a position to respond within the 10-day deadline stipulated in the IGA and the Swiss FATCA Law.

In this blog, we highlight the main issues we have observed in the market, which include areas where unexpected issues can arise or the workload tends to be underestimated.

A. Areas where unexpected issues can arise

1. The scope and FATCA classification of pool-reported accounts may need to be re-assessed because of:

  • The initial decision of some Swiss FIs to not apply thresholds, which is now mandated by the recently published SFTA FAQs
  • The absence or insufficiency of the pool-reporting audit trail, e.g. which accounts were reported in which pool, for which reason
  • Uncertainties related to the application of presumption rules for entity accounts, which lead to the default classification as NPFFIs.

2. Repeating US indicia search efforts, in particular where the audit trail of indicia triggering pool-reporting is not sufficiently robust:

  • Swiss FIs must identify the strongest US indicium that led to the pool-reporting as well as a document showing the indicium – alternatively, all relevant US indicia may be reported
  • If a Swiss FI decides to report all relevant US indicia, extra work may be required for the indicia, from the “US bank program” which are not also FATCA indicia
  • Some indicia are not evidenced by any document (e.g. when the Swiss FI was informed via phone), which requires explanatory comments or supporting screenshots from IT systems.

3. The FATCA-XML generation may require additional work such as IT developments and/or data extractions. In particular, we see complexities in retrieving details about relevant income, gross proceeds and redemptions for non-consenting US accounts as the pool-reporting only required reporting of the aggregate account balances.

4. Data unavailability/inaccuracy may impact the workload and timing because:

  • The data required is extensive, including for example the personal details and (non-)US status of persons behind entities
  • Ensuring the level of reliability needed for the data to be produced may require cross-checking structured data against client documentation
  • When required information is not available in structured format, or not reliable, or when the supporting documentation is missing, the workload increases.


B. Areas where the workload tends to be underestimated

1. The SEI-XML generation requires data which is often not readily available and must be retrieved and pre-processed, which is very work-intensive, e.g.:

  • Mapping all persons associated with the accounts to the roles used in the reporting (e.g. FATCA Account Holder, FATCA Substantial Owner, Contracting Party, Beneficial Owner/Beneficiary, Controlling Person) is not trivial
  • Data extractions are burdensome because some data is complex to retrieve, namely for numbered accounts, and extracted data requires significant data cleansing/pre-processing work
  • When information is not available as structured data, or when the data is not reliable, populating the SEI-XML becomes fully manual, which may lead to inconsistencies, delays, and human error risks
  • Certain data elements will not be stored in the CRM systems (e.g., what due diligence procedures and definitions were applied), requiring input from a FATCA expert.

2. The PDF documentation preparation work is often more significant and slower than expected because:

  • Unless robust metadata allow identifying relevant documents automatically, manual reviews of large sets of documents are likely required
  • Some data items are complex to document
  • If a Swiss FI decides to redact personal information of employees and/or unrelated third parties, the associated workload may be significant.

3. Inconsistencies between prior data productions, in particular to US authorities e.g., under the Swiss bank program, and answers to FATCA group requests should be avoided; this is not only true for the accounts in scope, but also the associated roles, US indicia, and account classification.

Deloitte view

While reasonably straightforward in principle, the SFTA FATCA group requests technical specifications and the recently published FAQs require an adequate implementation. Some extra work is often required, in unexpected areas – as often, the devil lies in the details. A full understanding of the requirements, adequate assessments, and preparation is required to be able to answer such requests within 10 days and to avoid a last minute peak of workload with risks of incorrect reporting. In this context, we hope that you find the insights we shared in this blog useful.

By: Jérôme Jotterand , Director Financial Services Consulting; Robin King, Senior Manager Financial Services Tax.

Key contacts

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Brandi Caruso - Partner, Financial Services Tax 

Brandi heads the Tax Transparency offering within the Financial Services Tax practice across Switzerland, responsible for services related to QI, 871(m), FATCA, CRS, and DAC6. She is a technical advisor and a subject matter expert to a number of Swiss-based trust companies and banks and leads the Deloitte Trust Forum. She has more than 15 years of experience with Deloitte in the US, UK, and in Switzerland.

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Jérôme Jotterand - Director, Financial Services Consulting

Jérôme is a Director in the Financial Services Consulting practice. He has 15 years of experience in the financial services industry, with a focus on large regulatory projects, such as cross-border tax disputes or KYC, as well as internal investigations. He has led the end-to-end implementation of group request response processes at several large Swiss and international banks, including for FATCA.

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Karim Schubiger – Director, Financial Services Tax 

Karim leads the Tax Transparency team in the Suisse Romande and Ticino markets within the Financial Services Tax & Legal practice, responsible for services related to QI, FATCA, CRS, 871(m) and DAC6. He is a technical advisor and subject matter expert to financial institutions in the banking, trust, and insurance sectors. Prior to joining Deloitte, Karim worked for eight years in support teams of Swiss banks, in particular in areas such as operations, project and change management as well as operational taxes.

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Pascal Grange - Partner, Financial Services Consulting

Pascal is the Partner heading the Financial Services Consulting practice for the Romandie. He has almost 20 years of professional experience in banking. Pascal’s main experience and focus is within Wealth Management covering a broad spectrum ranging from strategy to operations and IT. Prior to joining Deloitte, he led a significant number of projects around US tax dispute and FATCA compliance.

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Christophe

Christophe da Silva - Director, Forensic technology

Christophe leads the Forensic technology team in the Suisse Romande. He has more than 15 years of experience in the financial services industry, leveraging forensic technology capabilities to enable efficient investigation and large remediation requiring review of structured and unstructured information. Prior to joining Deloitte, he worked for 9 years for large financial institutions leading implementation of large transformation to address regulatory requirements.

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