Common Reporting Standards

As part of the global fight against tax evasion, tax authorities have developed broad powers to capture information held by financial institutions. These regimes place considerable compliance burdens on FIs and their customers.

The US led the way with the Foreign Account Tax Compliance Act (FATCA) which went live in July 2014. This sought to identify US citizens holding financial accounts offshore, including under complex trust and corporate structures. As governments started to negotiate agreements with the US to provide the information required under FATCA, they identified the value of this information for themselves. This led to the development of the Common Reporting Standard, which will involve the automatic exchange of financial account information across more than 100 jurisdictions.

As the information that is exchanged will form the basis of tax enquiries, financial institutions will need to ensure that staff at all levels of the organisation are aware of their obligations to ensure that returns are complete and accurate. There are a wide range of regulatory and reputational impacts for non-compliance that would arise from the provision of incorrect returns. These can range from penalties for incorrect returns, data protection breaches or even customers seeking recovery of the costs of defending a tax enquiry.

CRS has recently 'gone live' across the Middle East and places considerable obligations and challenges to financial institutions in a region with a highly mobile population base, given that it focuses on the transient concept of tax residence.

In order to ensure that FIs can demonstrate compliance to the tax authorities and to support any subsequent challenge by customers as to why information has been reported, FIs will need to ensure that they can demonstrate clear audit trails of the entire CRS compliance process. This includes how they have:

• Classified themselves and each entity in their group
• Classified all of their products
• Conducted due diligence and classify their customers
• Developed procedures to identify and escalate any changes that may be identified in the above
• Reported financial information to the relevant regulator for exchange with the relevant tax authority

This course will take participants through the entire CRS compliance journey to raise their awareness and understanding of this important area.

As part of the obligations under CRS, each implementing jurisdiction is required to introduce an effective audit and penalty regime. Accordingly, periodic regulatory compliance inspections are inevitable.

The topics covered in the course include:

• An introduction to the aims of CRS
• The key obligations on Financial Institutions
• The roles of relationship managers and other front-line staff
• The practicalities of tracking changes in circumstance
• The reporting obligations of financial institutions and the use that Revenue authorities will make of the data
• How authorities will monitor compliance