Hello,
During my most recent BSA audit it was commented that a financial institution should have a tracking process in place for expiring W-8 forms. I am in the process of working on a procedure with deposit operations staff. Has anyone else been told this? Anyone willing to share their process?

We are collecting forms on all accounts, not just interest bearing, to keep account opening documents consistent. Right now, the forms are reviewed for completion but are not tracked for expiration. In my opinion the forms are a deposit compliance responsibility, what do they have to do with BSA/AML? The BSA department maintains a list of NRA customers for transactional risk monitoring and to ensure proper CIP has been conducted, but expiring W-8 forms have never been brought up until last year.

Any input, guidance, or sharing of information is appreciated. Thank you in advance.

IMHO - Expiring W-8s have nothing to do with BSA/AML. As you said, that it purely an operational issue.

It frustrates me to no end the way that W-8's are referenced in the Non-Resident Alien section of the FFIEC Examination Manual. From a due diligence perspective, the W-8 is one method for collecting country of citizenship from an NRA to assist you in determining anticipated activity, particularly if it will include international transfers. However, this information can just as easily be collected on a new account questionnaire.

The W-8 is an IRS document and one that expires may result in the bank having to perform backup withholding on an interest bearing account, but it does not change the country of origin. One could make the argument that an NRA that does not respond to a request for an updated W-8 could be an indicator of a change in risk profile. However, most NRA accounts that I audit that have outdated W-8s are sitting dormant. Those banks that consider these high risk regardless of the transaction volume waste a lot of time performing EDD every three-six months to say that nothing is happening.

I cannot agree with you more Brian! The amount of time wasted recently during our BSA exam on our handful of NRAs was shocking to me. A few of them are dormant, but we still had to provide a bunch of information. The others have no activity.

So much for "risk-based" exams...….

We do track these in the BSA Department as part of our due diligence. We currently have a customer (joint owner) who is not responding to our requests for an updated form. The account is low balance and does not have suspicious activity. Would you close the account?

From an IRS perspective, obtaining a W-8 on a joint owner is a colossal waste of time since IRS rules require that you report the interest using the primary owner.

As to how to handle an account where requests for updated due diligence information go unanswered, you should follow your risk-based BSA procedures.

Have you contacted the primary owner to ask for assistance or to verify if the NRA is even still in the country for you to be able to contact? Have you considered revising your BSA procedures to collect NRA due diligence information on a form that doesn't expire so you don't ever run into this decision again?

Just some food for thought.