Regulatory Compliance Update June 2014

Regulatory Compliance Update June 2014

By: Hickman Beckner, Vice President

We’ve reviewed recent regulatory compliance activity, and there is an IRS issue that will affect our COMMERCIAL and RETAIL systems:

The IRS voluntary program that allows the Taxpayer Identification Number to be masked (or Social Security Number for individual taxpayers) has been made permanent. The final rule allows for masking on any document that is not specifically excluded by the IRS. We will mask the first 5 digits for all 1098 and 1099 series documents produced. Our COMMERCIAL and RETAIL teams are updating the systems to take advantage of the new rule, which goes into effect December 31, 2014.

Here are additional regulatory compliance developments that might be of interest:

  • The Foreign Account Tax Compliance Act (FATCA) went into effect July 1. The act requires countries and their financial institutions to provide information on account holders in order to determine if U.S. taxes have been paid. In advance of the law going into effect, the U.S. has reached agreements with 90 countries including the U.K., Switzerland, the Cayman Islands, and China. The agreements cover more than 80,000 foreign financial institutions and greatly reduce the need to withhold taxes for payments. We made the Shaw code that addresses these FATCA rules available in the Client Solution Center in late 2013.
  • A new Dodd-Frank requirement for escrow accounts has been published. Disclosures are required at closing to inform the customer that either an escrow account has or has not been created. A disclosure is also required prior to the bank closing an escrow account. Since this is an extraordinary situation and the disclosure must be provided in advance of the closing of the escrow account, we believe the bank will create these documents outside of our systems. The new disclosure rules go into effect August 1, 2015.
  • According to the Wall Street Journal, U.S. bank regulators plan to take a comprehensive look at existing regulations to determine which ones may be outdated or overly burdensome to the financial sector. In early June regulators published the first of four official requests for comment on which regulations aren’t needed, releasing a 15-page list of rules on aspects of banks’ business, including mergers, usury laws, banks’ foreign operations, lending discrimination, “stress tests” and capital requirements. Read the first notice here.
  • Election season is upon us. In the months of June and July there were more than a dozen separate bills introduced in the House and Senate that would affect financial institutions. The bills cover a range of issues including credit bureau reporting, home equity lines of credit, debit cards, escrow requirements for mortgages, flood insurance, revisions to the Servicemembers Civil Relief Act (SCRA), and exempting smaller institutions from the requirement to provide escrow accounts for certain loans. We’ll be following the progress of all of these bills.

In addition to the regulatory news we share here in the pages of Connected magazine, during User Advisory Board conference calls, and in the Client Solution Center, we send Shaw clients comprehensive monthly regulatory compliance updates via email. If you have concerns about any regulatory issues that may affect your Shaw software, please contact me at