Five Ways RPA Bots Can Improve Efficiency for Bank Tax Operations


The tax teams at banking and financial institutions in the U.S. have been subject to increased scrutiny by the IRS. Both the client and custodian banks must shoulder the responsibility of ensuring timely and accurate filing of documents. Custodian banks act as withholding agents for their clients and are responsible for paying taxes to the IRS.

Some of the challenges tax operations teams face in terms of tax compliance quality assurance are related to the time-sensitive nature of their work, volume spikes and penalties. A tax team has a hard deadline to close and consolidate books, typically at the end of the month or quarter. Then there is the increase in the number of transactions the tax team must handle as clients make their deposit and vestment choices toward the end of the reporting period. Tax teams also must be prepared for IRS-imposed penalties for any errors or delays with depository filings.

How Automation Improves Bank Tax Reconciliation, Reporting and Compliance

Digitization of data and introduction of robotic process automation (RPA) can help tax teams handle their load without breaking their backs. The scenarios listed below are ideal for introducing RPA bots to help tax team members. When RPA is deployed in tax operations, the team members can focus their attention on higher value activities like subjective decision-making.  

  1. Periodic tax reconciliation: Banks use account reconciliation platforms to standardize the process and produce high-quality financial statements. RPA bots can save precious time for accounting teams who must check statements and upload support documentation for accounts that have to be reconciled. The applications involved with reconciliation processes are usually dedicated reconciliation applications and client-facing web-based systems, and RPA bots can easily move between them.
  2. International tax compliance: NRA and FATCA filings need to be checked before they are filed. When RPA bots are programmed to check figures across filings and highlight any differences, they help the business avoid IRS penalties for incorrect filings. Bots can work seamlessly between legacy systems and optical character recognition (OCR) platforms needed for the documentation process.
  3. Tax provision: Bots are exceptionally efficient at rules-based and mundane processes like those involved in the tax provision process, such as extracting periodic statements from account consolidation systems, formatting and manipulating data and uploading data in the provisioning application.
  4. Consolidation: Tax operations require consolidating data from several sources and databases, and then manipulating and transforming the consolidated data as per current period requirements. RPA bots can manage this activity during off business hours and keep the data ready for the tax teams to review and action when they return to the office.
  5. Reporting and closure: The tax team must tally its books on a periodic basis, generally at month-end. This activity is time bound and requires tax team members to stretch their day and ensure the activity is completed on time. Bots can aid the team by handling non-value add, rules-based tasks and leave the decision-making for humans.

Digitizing tax operations will increase accuracy and efficiency in tax reconciliation and compliance, resulting in a win-win for both the client and the custodian banks. A combination of RPA and OCR solutions can address any of the above listed scenarios in the span of just 12 to 15 weeks. For more information, contact the automation team at ISG.

About the author

Birad Bhatt is a Senior consultant with ISG’s automation practice. He has extensive experience deploying RPA solutions for clients in the banking industry and writes about his views/insights on a regular basis.