How to use FATCA regulations

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How to use FATCA regulations

Description Learn how Pega CLM uses KYC Questionnaires to help financial institutions determine the FATCA tax status of the customers.
Version as of 8.7
Application Pega Client Lifecycle Management for Financial Services
Capability/Industry Area Financial Services


To combat tax evasion the U.S. Treasury enacted the Foreign Account Tax Compliance Act (FATCA), which aims at preventing that U.S. taxpayers avoid taxation on their income and assets held abroad.

Financial institutions located in jurisdictions that have signed an Intergovernmental Agreement (IGA)[1] must report information to the U.S. Internal Revenue Service (IRS) about financial assets owned by U.S. taxpayers; reporting is done either to the relevant local tax authorities, which then provides the information to the IRS (in the Model 1 IGA), or directly to the IRS (in the Model 2 IGA).

FATCA compliant must be also Participating FFIs (Foreign Financial Institutions), i.e., the financial institutions that, although located in a country that has not signed an IGA, have decided to willingly cooperate with the IRS.

Scope of FATCA regulations supported in CLM

CLM supports with questionnaires – one for entities and one for individuals – only the determination of the tax status of the customer, which is the steppingstone from which other FATCA requirements (for example, reporting) derive.

The questionnaires are prepared based on both the Model 1 and Model 2 IGAs, and they do not address any other U.S. tax obligations, specific IGAs or implementing legislation or the U.S. Treasury Department’s FATCA regulations. Therefore, should financial institutions need to ensure compliance with other relevant local laws and FATCA requirements, they will have to configure the questionnaires accordingly.


Out-of-the-box, CLM triggers the displaying of the FATCA questionnaire in every customer onboarding, regardless of the products requested by the customer. The majority of financial institutions, in fact, prefers to have in the customer file, already at onboarding, the relevant tax classification in case the customer falls afterwards under the relevant FATCA reporting obligations.

However, CLM can support the other approach in the market where the relevant FATCA questionnaire is displayed only as per strictly dictated by the regulation, i.e. when the product requested by the customer falls within the definition of “financial account.”

In both approaches, the financial institution that must perform the tax classification of the customer is the one located in the country where the product is booked, if that country has signed an IGA. However, if the financial institution of the product booking location is a branch in a non-IGA country, but their Head office instead is, then that branch must also be FATCA compliant. The same applies if the financial institution is a Participating FFI.

How and where to configure triggers

As of CLM and KYC 8.6, the applicability logic for FATCA questionnaires can be configured using the Decision table ‘ApplicabilityMatrix’. For information on general configuration of this rule, see the 'Applicability matrix' section of the implementation guide.

The core decision logic is covered in the When rule ‘ApplyFATCACaseWhen’.

FATCA_KYC applicability matrix

Implementations based on CLM and KYC 8.5 or earlier versions will use the Decision table ‘TaxRegulationsMasterAppliesWhen’. For information on general configuration, see the KYC Type Applicability. This also uses the main decision logic in the When rule ‘ApplyFATCACaseWhen’.

FATCA_Tax regulation master applies when

You will need to configure the specific FATCA applicability logic for your financial Institution in the above-mentioned rules.

  1. For an updated list of countries that have signed an IGA refer to: Foreign Account Tax Compliance Act