Tag: compliance


Non-US companies doing business in USA – Things to consider about FATCA

Foreign Account Tax Compliance Act (FATCA) is bound to be implemented on the biggest scale ever seen in the global industrial circuit, impacting several business entities, directly or indirectly through its multiple provisions. Its new documentation, information reporting, and tax withholding requirements on US and non-US companies engaged in international transactions will change the business scene significantly around the world. Since, FATCA is primarily directed at the financial institutions, many multi-national companies (MNCs) outside the conventional spectrum of financial services are mistaken into believing that they will remain unaffected by this new taxation regime transcending on the business environment. However, a deeper analysis of its key implications clears the air around its all encompassing nature, and establishes its reach over a wide range of companies across all industries, including industrial products and services companies.

There are essentially three ways that FATCA applies to your business:
a. There are entities within a multinational company’s global corporate structure that could be termed as FFI (Foreign Financial Institution) and will subsequently be subject to FATCA including non-US retirement funds, treasury centers, holding companies, captive finance companies, special-purpose entities, banking-type subsidiaries, and non-US insurance companies.
b. our multinational company makes withholdable payments that will get impacted by FATCA imposing a 30 percent withholding tax on payments made by and to certain non-US entities (even if they are non-FFIs). The definition of withholdable payment is also murky with several caveats but basically IRS defines this as US source FDAP (Fixed, Determinable, Annual, Periodical) Income for the payee. So, if you make payments such as interest, dividends, pensions, real estate rent, sales commission, grants, prizes, awards as well as insurance premium to insure US risk, they are all considered withholdable.
c. Your multinational company receives withholdable payment – so if any of the entities in global corporate structure receives income such as interest, dividends, rent, commissions etc. it will be classified as an NFFE (Non Financial Foreign Entity) and subject to FATCA related withholding.

Failure to adhere to FATCA’s new requirements may lead to several penalties including a possible loss of 30% of certain withholdable payments. Non-compliance may further make you liable to 100% of the amount not withheld in addition to related penalties and interest. Thus it becomes imperative for your company to devise a comprehensive strategy for streamlining key processes and procedures in line with FATCA’s reporting requirements. A planned and systematic approach can help you be FATCA ready by the time it gets fully implemented, which will in all probabilities happen by July 2014. Here’s a step wise guideline that you can follow to remain compliant in this dynamic business environment:-
Step 1 – The plan of action should begin by identifying the business entities or operational areas within your global corporate structure that make or receive withholdable payments according to FATCA and thus create the need for specific information reporting and tax withholding processes.
Step 2 – After a thorough analysis of FATCA regulations where you determine all necessary FATCA classifications, documentation, monitoring and reporting; you should try and figure out the existing information reporting processes and documentation that can be leveraged to ensure FATCA compliance.
Step 3 – Formulating a detailed change management strategy should then be your focus in order to modify existing processes and design new processes across business units and regions to ensure compliance. Herein you may need to deploy the services of a financial/legal expert who can guide you into building a robust framework.
Step 4 – Implementation of the new/ amended processes should not affect the business as usual. You will need to devise a well laid out implementation plan that unfolds in a phased manner targeting the most critical processes first and gradually moving towards the non-core processes. An experienced technology partner may provide you with a robust platform to build this process framework.
Step 5 – Since most of the FATCA related process changes will be across organization, identifying the departments and personnel affected is critical. A robust training and education program should then be initiated to ensure resource optimization
Step 6 – Closely monitoring the new process framework to ensure regulatory compliance without letting productivity getting affected is absolutely essential

Name: Rajeev Kak

Bio: Rajeev is the Global Vice President, Industry Solutions and Marketing @ Newgen Software Technologies. Rajeev has over 20 years experience in high technology and consumer product companies including Coats, i2 Technologies, Adobe Systems, SAP and MetricStream with an outstanding record of driving revenue and developing new strategic business alliances, driving corporate marketing and pipeline generation as well as managing new product introductions to achieve consistent year over year growth in SMB and enterprise markets.


How prepared are you for FATCA?

FATCA stands for the Foreign Account Tax Compliance Act. According to leading consultancy firm PWC – “It adds a new chapter to the Internal Revenue Code (Chapter 4) aimed at addressing perceived tax abuse by U.S. persons through the use of offshore accounts. The new rules require foreign financial institutions (FFI’s) to provide the Internal Revenue Service (IRS) with information on certain U.S. persons invested in accounts outside of the U.S. and for certain non-U.S. entities to provide information about any U.S. owners.”

FATCA was enacted by the United States government in 2010, as part of the Hiring Incentives to Restore Employment (HIRE) Act. It is an important development by the US to combat offshore non compliance. It is also being seen as an initiative that will increase compliance and transparency around US persons and assets, and hold to task those that do not meet its conditions.

FATCA applies to any individual, US or global banks and institutions, and any company or business entity that engages with US clients or assets over a certain threshold in an account. While FATCA will impact US MNCs and withholding agents, its bearing upon Foreign Financial Institutions (FFIs) will be most profound.

FATCA requires that FFIs and global banks register with the IRS and enter an FFI agreement whereby they promise to identify, collect and report information on offshore bank accounts of their US clients. Entities can register through the FATCA web portal. In order to be included on the IRS’s list of compliant institutions in December 2013, all entities must register before October 25, 2013.

What is your bank’s or organization’s role after FATCA coming into effect?

  • Perform a detailed analysis of your existing customer base to filter and identify any U.S. clients and report them to the IRS.
  • Send annual reports to the IRS on the assets held and transactions that have occurred on the accounts or portfolios of any U.S. clients.
  • Capture additional documentation with respect to new customers as and when they set up an account or portfolio.
  • Make modifications or updates in your existing banking system that will withhold the 30% U.S. Tax on customers that refuse to supply the information and documentation required.

Why prepare now?

With FATCA coming into effect, it is imperative for entities that fall under the purview of FATCA to be prepared.

Many strategic and operational decisions need to be made, analysis needs to be done, and systems and controls need to be in place before applying for an agreement, in order to to ensure compliance. If no steps are taken and the deadline is missed, the 30% withholding will begin to be enforced.

Challenges faced by Banks and FFIs:

  • FFIs will need to make a strategic call on remaining invested in the US market or exiting it, for the sake of its customers or itself
  • Current KYC Processes will need to be overhauled as they don’t gather enough information for FATCA purposes
  • Adapting and investing in processes and IT systems to meet the FATCA deadline
  • Non-compliance brings with it the real risk of losing revenue from US customers and assets
  • Undertake training for key personnel and setting up a dedicated team

How can Newgen help you prepare?

FATCA compliance enabled Newgen’s OmniFlow Solution will assist in the identification, classification, documentation, retention, maintenance and reporting of financial information of US Persons with holdings at your Bank’s legal entities. Our solution acts as a layer on top of your core systems thereby ensuring none of your current processes are disrupted, and that our system can run fluently in the background giving you the reports you need. Newgen’s solution provides a focused workflow to bring uniformity and automation to your due diligence process, thus providing visibility and control.

Five practical issues to keep front-of-mind

  • Timing: FATCA is now a timing challenge (not just in terms of key dates but pace of preparation and execution readiness).
  • Business Impact: FATCA will have ‘front-to-back’ impact through financial institutions: from customer awareness and information management, through establishing a Transparent, Repeatable and Consistent Process.
  • Opportunity: FATCA is not just a challenge it is an opportunity; to improve customer data quality and availability, to open new dialog with customers, to transform compliance in this key area. FATCA will have major implications for customer data quality and availability.
  • Imperative and Impending: FATCA is a ‘must fix’ not a ‘maybe fix it at five minutes to midnight’ – it WILL happen and financial institutions need to have a clear picture of their readiness.

Immediate: The time to act is NOW!

Name: Imroz Adeeb

Bio: Imroz is Associate Manager - Corporate Communications at Newgen Software.


BPM – A Key Enabler for F&A Transformation

The demands on the Finance and Accounting (F&A) function in business organizations are significant, with constant pressures to achieve process compliance and increase business efficiency and agility, while also driving down transactional costs.

As a result, finance operations demand a transformational approach with higher automation, better process visibility and enhanced business agility. A Business Process Management (BPM) solution is the right tool for finance functions seeking not just cost savings but also process efficiencies and compliance, as well as improved management reporting. BPM enables business organizations to model, automate, manage, and optimize their F&A procedures.

Newgen’s BPM-based F&A solutions help clients overcome the problems posed by manual systems, by enabling continuous streamlining of processes in order to improve efficiency, control, compliance, and risk mitigation, to meet the challenges of a highly volatile business environment.

Newgen’s BPM suite has been recognized by top analyst firms.  Two Newgen clients- Unilever and Future Group were declared winners of the 2011 Excellence Awards for Finance & Accounting (F&A) Transformation through Shared Services. While Unilever Shared Service (erstwhile Indigo) was recognized under the category of Excellence in Servicing Clients in the Sub-continent, the Future Group Shared Service won the award for Excellence in Strategy towards Financial Transformation.

Newgen’s solutions are designed to automate a wide range of F&A processes, such as accounts payables, receivables and fixed assets, general ledger and policy owner servicing, etc. Newgen helps clients to improve operational effectiveness while allowing them to leverage their existing technology investments. Business benefits delivered to the client by Newgen’s F&A solutions include:

  • Better monitoring and control over F&A operations
  • Reduced ongoing F&A costs
  • Real-time process visibility due to comprehensive MIS reporting
  • Reduction in human errors due to image-enabled data entry
  • Improved and measurable productivity
  • Scalable solution to allow for future growth and continued improvements

Bio: Garima is Manager - Marketing & Communications at Newgen Software.


The Evolving role of CIO

In the last few years, the role of CIO has changed and evolved, and with that change comes the streamlining of the skill-set of  IT team members who keep IT operations up and running.

Today’s CIO has become more multi-faceted and the job is no longer just about maintaining the company’s IT infrastructure but also of keeping all of the processes operating to meet the demands of their employee and client base.

Numerous factors in today’s environment are driving the evolution of the CIO role:

  • Strategic planning and decision making is required to capitalize on the strategic benefits of IT
  • Technology now supports the entire business, and the CIO needs to align IT with Business
  • Rapid market changes, competition and globalization demands agility of IT to support back-end processes
  • Security, compliance, and risk-management issues increasingly dominate the CIO’s tasks.
  • Pressure of to pursuing new initiatives with budgets limitations

The demands of the role have always been associated with revitalizing IT infrastructures on a restricted budget  and in today’s competitive business environment, the CIO is required to have insights into a whole range of processes including strategic planning, business development, sales, marketing and products launches.


Road Beyond Core Banking: Centralized Back-Offices and Leaner Customer Centric Branches

Indian banking sector is poised to become the 3rd largest in asset size by the year 2025 as per the IBA-FICCI-BCG report, titled “Being Five-Star in Productivity – Roadmap for Excellence in Indian Banking”, launched at the recently concluded Global Banking Conference, organized by IBA and FICCI at Mumbai. The report further sets out an action agenda for banks, based on a benchmarking exercise conducted across 40 banks, highlighting that the banks have to strive for excellence on five dimensions: with one of the dimensions being lean operations.

In the context that the second highest number of people are employed in non customer-facing, back-office roles, lean operations can be achieved by digitization of processes and centralization of back office operations, while the employees having customer facing roles can be based at the leaner front office / branch.

Care must be taken to ensure that at the process design stage, we must take a customer-centric approach, so that centralization does not lead to lack of touch with the customers.

For the high volume and relatively lower transaction value lines of businesses like retail banking, non customer-value adding activities need to be centralized and modeled as a lean process, eliminating all error-prone, redundant and superfluous activities like manual hand-offs, over-staffed tasks, needless paper movement, redundant checks and validations etc. Focus of process design should be on providing a smooth and efficient interface between the customer centric branches and centralized back-end operations factories.

For lines of businesses where the transaction volumes are low, the cost savings from centralization will be less. For such lines of businesses, the transactions will be lesser in number but the size and complexity of transactions would be higher, thus requiring higher levels of customer service. Here, the efficiencies can come by bundling of processes across customer segments with a focus on seamless alignment between products / offerings and targeted customer segments.

The underlying technologies for enabling swift implementation of any BPR exercise and continuous process improvement for operational excellence consist of ECM and BPM platforms based on digitization, document management and workflows, and productivity tools like monitoring dashboards etc.

Thus, at a time when most banks have already implemented “Core Banking Solutions”, BPM and ECM platforms present an answer to the question “what to do after core banking?” Another important benefit offered by these technologies is the ability to meet regulatory compliance, which is again a very important factor, especially in the light of the prediction that Indian Banking industry will become one of the biggest in the world by 2025, and that along with great size, must come great responsibility. Or is it that, only due to our prudent and responsible banking practices shall we be able to become one of the biggest in the world?

Bio: Rohit Thakur is Senior Manager-Marketing, at Newgen Software


BPM as an Enabler for GRC

With greater than anticipated exposure to unforeseen adverse happenings in the global marketplace, there has been increased pressure on companies across industries to prioritize risk mitigation and regulatory compliance. Stricter compliance requirements from regulators have made it essential for businesses to evaluate and more prudently manage their risk profiles.

Compliance is complex while non-compliance can prove to be extremely costly to a business. Regulations are generally complicated and specify a range of required activities for an organization to meet regulatory standards. This requires investing real time money and energy into developing a Governance Risk & Compliance (GRC) strategy that is robust with regards to data storage and delivery, dashboard-enabled and can intelligently map enterprise processes to strategic business assets.

In a constantly changing regulatory landscape, a business needs to ensure that business rules are tightly coupled to business processes, enabling real time process updates. This means, as soon as a process changes, so should all associated metadata and rules.

Business Process Management (BPM) plays a critical role in helping organizations manage and mitigate risks by supporting their compliance strategies – allowing organizations to shift from project-based, highly manual, and resource-intensive processes, to an approach that emphasizes business practices and processes that are in sync with current and future compliance requirements. Investing in the right BPM suite, with comprehensive risk assessment and management capabilities is critical for an organization to build a sustainable business process improvement program.

Process intelligence and real-time visibility of business operations, is essential for a sound GRC program. A BPM solution with a user friendly Business Activity Monitoring (BAM) module enables management to monitor business activities, as they occur, ensuring both compliance and a high degree of risk management.  BAM generates customized alerts based on rules defined in the dashboards for each category of user enabling corrective action as the process is being executed.

Given the benefits provided by BPM, it is an essential component of a  foolproof compliance strategy.


Why BPM for ‘Grievance’ Management in the Insurance Domain

“A grievance is most poignant when almost redressed.” – Eric Hoffer

Managing grievances or complaints is one of the top priorities among all private and public sector companies these days; in fact it is the ‘key’ to the growth of any business in today’s fast moving and competitive market.

Today, all major regulatory bodies are concerned about customer rights and fair trade. Almost all major regulators across industries have set up robust grievance management and redressal mechanisms to service and protect interests of end customers.

Seeing exponential growth in the Insurance domain, the IRDA recently developed their Integrated Grievance Management System. The key objective behind this development being to have a single collaborated grievance and complaints redressal system integrated with individual grievance systems of all Insurance companies. This will enable end customer to file the complaints directly on IRDA portal, which in turn will transfer the complaint to respective insurance company’s grievance system and track status updates as per defined turned around time and guidelines. With this IRDA will now be able to track the progress of complaints and overall performance of the Insurance companies.

Customer centric organizations today look for a robust complaints tracking system to ensure superior customer care support and service to their esteemed customers. Inside the organization, internal employee force, complaint redressal process & policies and automation tool together are responsible for successful functioning of the customer care function. The first two of these concerns are overcome with proper training and motivation of employees, buying external expertise or consultancy for best processes and polices, inputs from regulatory compliances etc. But the major that organizations face is in deciding right automation engine, which is robust and flexible enough to adapt to their requirements.

Some companies develop their own custom built systems, which take ages, battalion of resources and months to develop. Some go for readymade CRM tools, but such systems are rigid enough to meet: organizational needs, adherence to compliances, process flow specific requirements and flexibility. Custom changes are again time and resource consuming, and add more rigidity to future change management. Also, overheads and maintenance costs on such systems increases exponentially over a period.

There is another approach to automate these requirements over a BPM (Business Process Management) based platform. An efficient BPM engine enables organizations to automate their business processes within the time frame of readymade tools and with the flexibility of custom built systems. In terms of cost, BPM based automation averages between both and over a period has exponential ROI, when the platform is extended to automation of other processes.

BPM’s graphical process modeler enables process design over clicks as per “your organizational needs”. It enables companies to easily configure their business logics, compliances, escalation matrix, approval flows and reporting metrics as per organizational requirements. Using the graphical process modeler of the BPM engine businesses can design their end to end grievance and customer complaint management process, right from complaint initiation till capturing feedback. Initiation of grievances can be through multiple sources like email, web portal, IRDA’s IGMS system, scanning of physical complaint letters, phone etc., and once initiated all requests can be routed to the central BPM workflow. Thereafter, the requests are routed to the grievance team, internal stake holders and approvers as per the defined flow. BPM’s push based queuing mechanism auto allocates the tasks to respective users. Users will open their respective transactions and initiate the resolution process. System keeps track of the defined TATs (turnaround time). Configurable and advanced TAT management system ensures that the operations meet regulator defined TAT. System sends emails or SMSs in advance to respective users, approvers and stakeholder before crossing the defined deadlines. Based on configured rules, the system can also auto escalate cases to respective users.

“Complaining from dissatisfied consumers is considered as an indispensable tool to learn the Voice of the Customer and becomes increasingly important in many business contexts.” – (Crask et al, 1995)

BPM’s real time reporting engine, configurable report building wizards and management dashboards enable learning the limitations, monitoring the grievances and inputs for further change management of the processes. BPM’s graphical process modeler further enables the organization to adopt inputs from such reports and ensures business advancements.


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