The Foreign Account Tax Compliance Act, better known as FATCA, was created to prevent US taxpayers from evading tax payments by hiding money outside of the country. In order to do so, FATCA works to create increased transparency through improved data reporting and compliance. The Act created specific rules that apply to the process of documenting and reporting income, and created specific criteria for what constitutes withholding on a payee. Not only do these rules impact those in the financial services sector, but they also affect organizations that aren’t a part of the traditional financial services sector. They can affect organizations both inside and outside of the US.


A Brief History of FATCA

The Foreign Account Tax Compliance Act was initially extended by the IRS as just one component of the HIRE Act of 2010, which was created to force financial organizations in other countries to report on the assets of US taxpayers. Not abiding by FATCA has serious penalties: up to 30% of a person’s income can be administered.


Complying with FATCA

FATCA implementation begins with understanding the requirements for compliance. To meet compliance, companies should:

  • Align all key stakeholders, which includes technology, legal, operations, risk, and tax. Ensure all are complying with FATCA regulations. Any multinational corporation, whether a financial institution or nonfinancial, should take steps to ensure they’re in compliance.
  • Analyze the legal entity structure and take necessary steps to ensure FATCA implementation, including preparing withholding certifications and registering FFIs, if necessary.
  • Conduct gap analyses to investigate systems and locate processes that should be updated.
  • Develop plans for implementing FATCA compliance.
  • Take a look at preexisting account holders. Remediate any accounts that are not in compliance with FATCA.
  • Review at any controls related to FATCA compliance.

FATCA and Document Management Software

The implementation of document management software (DMS) and enterprise content management (ECM)  makes it much easier for organizations to meet FATCA compliance. DMS helps organizations report to the IRS, makes it easy to quickly gather information when it’s needed, and ensures that proper data trails are in place. With the stiff penalties for noncompliance set out by FATCA, it’s no wonder organizations are turning to DMS and ECM to facilitate FATCA transition.

Meeting FATCA Compliance with DMS & ECM

DMS provides a wealth of services that are relevant to achieving FATCA compliance, including:

  • Mobile access to all documents. Companies are moving away from brick and mortar, 9-5 style jobs. And in the financial industry it’s more important than it’s ever been to provide customer service when customers need it, and that’s often before and after typical banker’s hours. A DMS offers financial institutions instant, encrypted access to their documents from virtually any internet-enabled device.
  • True document management. One of the most common misconceptions about DMS is that it’s just another form of cloud storage. The reality is that it offers much more than just a place to store documents, though of it will allow you to meet your storage needs. However, DMS includes a wide range of tools that help organizations mange workflows, audit trails, client communication, file sharing, and data disposition. It makes offices more effective, more efficient, and more easily FATCA compliant.
  • Audit trails can make all the difference. Audit trails provide transparency to an organization’s operations and are vital to compliance. These days companies don’t have to train their employees on how to keep track of who handled what, and they don’t have to rely on their employee’s word that they did. Instead, DMS offers built-in audit trails that automatically track every document. Administrators can easily see who accessed a document, when it was accessed, and what changes were made.
  • Specialized compliance tools. If compliance with the SEC / FINRA is a concern, then invest in a DMS. Built-in compliance takes out the guesswork and ensures companies stay on the right track.
  • Role-based security. Financial institutions trying to ensure compliance with FATCA have several considerations are required to limit access to sensitive data. Role-based security makes that simple by allowing administrators to set levels of security for specific types of documents.

Compliance with FATCA is essential for a wide range of companies both in and out of the U.S. Implement DMS today to ensure your organization is equipped to meet FATCA compliance with ease.