Due to the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA) implemented by the US and the OECD, tax transparency has become more important for financial institutions and asset managers throughout the globe. As a consequence of the CRS, financial institutions have been very busy over the last several years.
Financial firms are required to report what information, and why, to the government. What do you think are the most difficult issues to overcome? What impact does it have on the customer connection and the client experience? When it comes to financial institutions, what is the most critical factor? Bearing Point RegTech, the regulatory reporting experts, will try to address some of these difficulties in this guest article.
In designing the CRS, we had a certain end in mind.
For the automatic transmission of financial account transactions, the Common Reporting Standard (CRS) is an internationally agreed-upon standard. The OECD created the CRS in 2014, and the first reports were made available in 2017 as a result of the implementation of the system. In the years afterwards, an increasing number of countries have banded forces to combat cross-border tax evasion.
- These days, it’s almost impossible to hide money from tax authorities, and investors with offshore bank accounts can almost certainly depend on their home countries’ tax authorities finding out about any hidden income they may have. As an example, the 2016 revelation of the “Panama Papers” has increased government and tax authority pressure to act, leading to increased regulatory and political scrutiny of the banking industry generally.
- When it comes to the automatic exchange of information (AEoI), tax authorities must acquire reportable account information from their banks. According to the IRS, the acquired data is subsequently shared with tax authorities throughout the world on an annual basis. As part of the CRS, financial institutions must report account information to the tax authorities in their respective jurisdictions. In addition, they must ensure that the proper due diligence procedures are followed and that the data submitted to the tax authorities is of high quality, among other requirements.
Because of the introduction of the CRS, financial firms have faced significant challenges.
The COVID-19 pandemic has resulted in economic hardship for governments throughout the world. Tax transparency programs may be used to mobilize tax revenues and to prevent tax evasion in order to combat the pandemic. Because of this, financial institutions must be aware of the objectives of Common Reporting Standard and basic requirements.
The amount of information that financial organisations are required to provide is steadily increasing.
Financial institutions must identify reportable individuals or legal entities, as well as their reportable accounts, in order to meet the reporting requirements of the CRS. Many financial institutions have difficulty accessing a complete database that contains all of the account information necessary to be reported under the CRS since it is a relatively new standard.
Ongoing monitoring of the present client base, as well as due diligence measures when on boarding new customers, is required by the FDIC in order to discover reportable accounts. These individuals are also responsible for ensuring that the data they provide is in compliance with the local tax authorities’ formatting and data requirements