By Ras Sipko (pictured), Koger USA – For the past four years, alternative fund managers with US investors have been coming to terms with the far-reaching effects of the Foreign Account Tax Compliance Act or FATCA. Some 60-plus countries have signed up to cooperate with the IRS in order to enforce FATCA and this year the compliance burden is set to grow yet again for international fund managers.
On 31 May 2017, fund managers will have to submit their first filing under the OECD Common Reporting Standards initiative, which can best be thought of as global FATCA or ‘GATCA'.
This additional wave of compliance introduces a whole new set of requirements and responsibilities to fund managers and a whole new market and business opportunity to fund administrators.
Verifying whether or not their existing account holders meet the IRS criteria for US persons receiving US-sourced income – for which they must be taxed – requires intense scrutiny into their own records and collection of information from clients who may, or may not be, cooperative, was difficult in its own rights. But now having to concern yourself with US citizens for FATCA, and, also review the residence of all other investors, and create one of the different report types necessary to comply with the OECD's effort for the automatic change of information, will at a minimum create twice the effort of identifying idicia and classifying investors.
Creating an internal programme to comply with FATCA and GATCA is the first massive hurdle for many firms. This includes, at a minimum, creating business procedures for the following critical items:
Collection of data & documents
- Organising and gathering all relevant account holder information, to include citizenship for FATCA and residency for GATCA.
- Tracking and storing government documentation for various countries.
Categorisation of in-scope accounts
- Tracking aggregate balance of the account holder and underlying beneficial owners to determine if they exceed the high value requirements for a full electronic search, or if a lower level of due diligence can be applied.
- Incorporating depository accounts, custodial accounts, equity or debt instruments, and certain insurance and annuity contracts.
Further review and reporting
- Internal reporting on all types of acquired data.
- Reporting to governmental agencies.
Against this complex backdrop of increased global regulation and compliance, KOGER USA has developed an efficient, scalable cure to remedy the solution known as KURE (KOGER Universal Regulatory Engine). It helps clients to coordinate the management of all aspects of compliance, providing an automated approach that reduces many labour intensive manual tasks.
Using KURE, clients can easily track, record, review and report on critical indicia in lockstep with new regulatory standards such as CRS, as they continue to be introduced into the alternative funds industry.
KURE is able to increase efficiency by offering:
- Complete tracking of underlying investments and beneficial owners, in even the most complex fund structures.
- Automatic extraction of indicia such as citizenship details, Tax IDs, Entity type, and other relevant fields from existing holder records.
- Automatic storing of all parameters and data from government forms.
- Dynamic adjustment of compliance status based on indicia documents' expiration dates and real-time monitoring of asset levels for breach warnings when used with one of our TA systems (NTAS, PENTAs, PTAS).
KURE is also an exceptional reporting and data analysis tool with a suite of queries and internal reports that allows you to extract exactly the information you need, and XML reporting that allows the end-user to report directly to government agencies in accordance with established standards of the IRS for the US, HMRC for the UK, and All of the various permutations in existence for country by country exchange to adhere to common reporting standards..
Koger has recently introduced additional functionality to comply with EU AML IV and soon to be finalised EU AML V – European Union Fourth and Fifth Anti-Money Laundering Directive and CFT (Combating Finance of Terrorism).
Key features of the KURE AML/KYC module include:
- Custom risk scoring: We customise the system to store the specific risk assessment criteria and use the same risk level assignment paradigm as is used by your specific organisation uses. This achieves greater efficiency through customised and automated risk assessment.
- Risk-level-based document tracking: Assigned risk level dictates what specific documentation is required and monitored for receipt which creates greater efficiency through automated, risk-level based document tracking.
- Scalability for any sanction/PEP list provider on the market: Whether free or purchased, our flexible solution can interface with any single list or multiple lists one chooses to utilise.
- Ability to interface with other third party fund administration systems: KURE can serve as a central repository for all of your clients' compliance-related data, regardless of whether or not their funds are administered by Koger products.
- Report withholding and automated email notification of outstanding documents: The system automatically withholds reports from recalcitrant investors and informs them of outstanding document requests. Requires less human resources to keep yourself and/or your clients compliant.
- A team of analysts, business users, and programmers constantly monitors industry trends and regularly enhances the system to be in sync with the latest regulatory changes and reporting standards.
The flexibility and adaptive design of KURE means that it is perfectly placed to overcome not just the pressing compliance needs of today but, more importantly, those of the future, as the alternative funds industry continues to evolve.
We at KOGER® believe that the KURE application, now, more than ever, provides a uniquely scalable, flexible, and unified solution for efficient management and increased automation of both your anti-tax-evasion-law compliance and operational due diligence responsibilities.
