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The case study focuses on the challenges faced by US-based financial institutions due to the implementation of the Foreign Account Tax Compliance Act (FATCA) in 2014. This legislation increased compliance burdens by requiring financial institutions to document foreign payees, leading to complexities in managing tax forms. Approximately 25% of Form W-8 submissions from customers were found to be invalid, primarily due to customers' difficulties in navigating the intricate requirements rather than fraudulent intent. To address these issues, EY developed an innovative electronic tax form validator (eTFV) that enhances data quality and operational efficiency for financial institutions. The eTFV streamlines the process by ensuring that forms are valid on their face and against available records, allowing for straight-through processing. When additional documentation is necessary, the eTFV provides clear instructions to customers, simplifying their understanding of requirements. As a result of implementing the eTFV, financial institutions experienced a significant reduction in operational burdens, which improved customer satisfaction and facilitated international transactions. This solution not only bolstered the reputation of the financial institutions as reliable business partners but also contributed to their overall success in navigating the complexities of tax compliance.
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