Meeting the constantly evolving regulatory requirements of the tax authorities presents a significant problem for financial institutions. The need for tax returns has surged among many banks’ clientele who have assets everywhere. The number of transactions is rising, new guidance is being released often, and it is getting harder to comply with standards, which further adds to the difficulty of the situation.
Here are MG’s view on the most common reporting standard errors identified by STEP that occur during the CRS reporting process. Let's deep dive into each of them.
- The financial institution (FI) must re-register, and it is unable to access previous returns on the portal since its login information has changed due to employee turnover. Login information for the Automatic Exchange of Information (AEOI) portal should be kept private and shared only with those who require it. The financial institution should ensure that there is a reliable method of maintaining access to its portal. A phoney email account could be a good alternative if the FI has robust security and data protection safeguards in place.
- The FI has the wrong idea of what an undocumented account is. HMRC has told FIs that they are wrongly reporting accounts as “undocumented” when an account holder has not filled out a self-certification that was asked of them. This has caused a lot of accounts to be reported with the wrong country code for GB residents. This is only applicable to Pre-Existing Individual accounts and not applicable to entities and New Individual accounts.Undocumented lower-value accounts only exist if all three of the following criteria are met:
- The Financial Institution’s only signals from their electronic record search are a “hold mail” instruction or an “in-care-of” address in a CRS Reportable Jurisdiction.
- There is no other address or indicia of residency for the Account Holder.
- The financial institution has, in the sequence that best suits the situation:
- attempted to get a self-certification or other documented evidence from the Account Holder to demonstrate the jurisdiction of tax residence of the Account Holder but was unsuccessful in doing so; or
- conducted a paper record search for indicia but no indicia were located.
- Only a “hold mail” instruction or an “in-care-of” address in a CRS Reportable Jurisdiction are the only signs that the Financial Institution has from their paper record search and electronic record search.
- There is no additional address or indication of residency for the Account Holder.
- To determine the Account Holder’s jurisdiction of tax residence, the Financial Institution has attempted to get a self-certification or other documentary evidence from the Account Holder but has been unsuccessful.
- The FIs submit using the XML schema. The submission is turned down because MessageRef, FIReturnRef, and AccountRef were used in the wrong way.HMRC published Schema and supporting documents for software developers who use the AEOI service. The schema guidance tells you everything you need to know about how to use references. You can find it here.Our CRS Stride populates the XML schema which contains the above-said parameters.
- The FI reports accounts for which the account holder does not live in a jurisdiction are subject to reporting.It is not appropriate to report people who do not reside in a reportable jurisdiction. Some jurisdictions that have signed up for CRS are not yet prepared to receive exchanges, while some of those that have signed up are not reciprocal. It is important to note that the reportable jurisdictions are updated frequently, and the notification will be given by HMRC. Refer to IEIM402340.Our CRS FATCA tax consultants follow the HMRC updates on the jurisdictions and add or remove the jurisdiction in the CRS Stride solution for effective CRS/FATCA reporting.
- Although the resident country code is not the US, the FI reports accounts as NPFFIs.Concerning years up to 2016, the phrase “non-participating foreign financial institution” (NPFFI) solely applies to FATCA and is not relevant to CRS. The resident country code, if applicable, should be US.Our CRS Stride can identify and segregate the NPFFIs in the exclusive audit reports we generate.
- The FI reports accounts that are not reportable because they are excluded, such as registered pension plans.IEIM 401720 provides a detailed definition of undesignated and designated accounts.Undesignated accounts: When a financial account (owned by a non-financial intermediary, such as a solicitor) is a pooled account that holds the funds of underlying clients of the non-financial intermediary and does not meet the requirements of IEIM401860, where:
- If the non-financial intermediary is the only person listed or identified on the financial account with the financial institution, and
- If the non-financial intermediary is not required to disclose or pass on their underlying client or clients’ information to the financial institution to comply with AML/KYC requirements or other regulatory requirements, then, provided both of these conditions are met, the financial institution is only required to carry out the due diligence procedures concerning the financial account.
- The FI reports non-individuals who should not be reported.Governmental organisations, international organisations, central banks, and financial institutions are not reportable account holders under CRS, nor are firms with regularly traded stock and similar entities. Article 1 (gg) of the UK-US Intergovernmental Agreement contains a list of exceptions to the phrase “specified US person” as used in FATCA (IGA).
- The FI submitted the CRS XML which does not adhere to XML schema definitions (XSD) published by HMRC.An XML schema definition (XSD) is a framework document that defines the rules and constraints for XML documents. The generated CRS XML must fully adhere to the rules of the XSD document published by the HMRC.
- The Entity’s account holder type is set as Reportable Entity with Controlling Person, but controlling person(s) is not provided in the XML.If the account holder type is set as “Reportable Entity with Controlling Person” then at least one controlling person must be provided for the entity.
- The entity must be reportable even though the entity’s jurisdiction is not reportable and any one of the controlling persons is in reportable jurisdictions.As per the HMRC guidelines, if any one of the controlling person’s jurisdictions is reportable and belongs to the particular entity, then entity details are also reportable.
- TIN (Tax Identification Number) is not provided for the US customer.As per the HMRC guidelines, the TIN for US Tax residence is mandatory. If the customer does not provide the TIN, then the default TIN value of nine-zero must be populated. If possible FIs can populate the TIN values provided in the link instead if nine-zero.
- Void Submission File generation to delete the submitted CRS file from the HMRC portal.If FIs identified an issue in the previously submitted CRS file, then void submission XML file needs to be generated which should adhere to XML Schema and Specification given by HMRC.
- Only financial institutions are permitted to use the AEOI enquiry helpline.HMRC requires that you refrain from providing your account holders with information about the AEOI enquiry lines. This overwhelms its AEOI filing crew and makes it unable to help FIs with their reporting requirements.
- The FI waits until the last minute to file.When submissions are made far in advance of the deadline of May 31, every year, FIs have more opportunity to address any unforeseen problems, such as missing data or incorrect XML structure, which could result in the application being denied.
Click here to learn how MG’s “CRS Stride” can satisfy your need for an optimal CRS solution. Our product and services cover all aspects of your CRS reporting obligation, but you can cancel at any time.
When it comes to data management in HMRC CRS reporting processes, SME banks faces number of compliance hurdles. To be fully compliant with HMRC, AEOI/OECD standards, banks must also ensure they have adequate controls and data management in place.
There is a level of basic information required of customers that can easily be obtained in the onboarding process are required for the CRS reporting. Our blog “Key Practical Aspects of OECD Common Reporting Standard (CRS)” explains the data requirements for the CRS reporting, OECD standards and its implications to the financial institutions.
Many SME banks offer a range of products and services, making it more challenging to determine which accounts should be subject to CRS reporting. All financial accounts which meet specific criteria must be reported in line with CRS. In addition, Banks must also report any account held by a company or trust under CRS guidelines. This means that the new rules could impact a wide range of financial products – from savings accounts to investment funds.
SME banks in particular typically have fewer compliance resources available to devote to implementation, and they may also struggle to identify all their customers who meet the reporting criteria. Banks started educating their staff on how to accurately confirm and report on a client’s identity and entity information.
The problem for growing SME-facing financial institutions is how to do these at scale with complete accuracy. As banks scale their products and services, they are continuously changing their procedures and systems to comply with CRS, requiring a data-led approach to make reporting easier. Proper systems and procedures should be put in place to identify and report any such activity and verify the identity of their clients.
Banks must take a holistic approach to CRS compliance and seek expert solutions to avoid rising compliance costs and significant fines. While training for bank staff is essential, an automated software solution will ensure smooth and compliant implementation of CRS reporting. Implementing CRS reporting software rather than relying on compliance staff to manually onboard customers is becoming increasingly essential.
CRS compliance and the impact on the client experience
The implementation of CRS will significantly impact the relationship between banks and their clients. Banks must take the necessary steps to ensure compliance but without creating a lengthy, manual customer experience.
The simple solution is automation. Capturing structured data in the onboarding journey and automatically storing data in line with HMRC CRS reporting requirements can significantly reduce onboarding time and in-life review processes. With CRS Stride banks are able to save up to 85% of their typical processing time.
Compliance can be a complex process, and banks must communicate openly with their clients about what is required of them. Embedding an end-to-end reporting solution in the customer journey will reduce duplication of entry for clients while ensuring data integrity and automated reporting workflows for compliance teams.
Key considerations by SMEs in implementing a best practice approach to CRS Compliance
There are several key considerations when implementing a best practice approach to CRS compliance. Firstly, SME banks should seek expert help to get up to speed with the new rules. If they are to build an in-house solution, it must be constantly managed to keep in line with changing regulatory requirements and to ensure controls hold up to audit standards.
Secondly, comprehensive data analysis is essential to identify all customers who meet the reporting criteria. Financial institutions must accurately report this data to HMRC. Banks must put in place systems and procedures to ensure compliance with CRS on an ongoing basis. Without an automated CRS reporting solution, this will rely heavily on training staff and manual review of potential suspicious activity.
Implementing a best practice approach to CRS compliance can be a challenge for SME banks. However, it is essential to avoid any penalties or reputational damage. By implementing expert solutions to provide comprehensive data analysis and put robust systems and procedures in place, SME banks can ensure compliance with new and changing regulations.
Complying with CRS reporting standards is a complex challenge for SME banks. Obtaining the relevant data can be straightforward on a smaller scale, but manual compliance comes at the cost of longer processing times and a poor customer experience. As banks look to scale, data management should be integral to any strategic decision making. Software solutions are critical to accurate reporting and allow much greater flexibility as they grow their products, services and markets.
SME banks that take this best practice approach to CRS compliance can reap several benefits, including a reduced risk of penalties, improved reputation and a smoother relationship with HMRC.
The shift in financial and economic conditions all over the world requires stringent regulatory scrutiny. Regulators demand financial institutions to improve transparency in their reportable accounts and tax revenues.
As you are aware, after decades of discussion and dialogue finally in 2014, the Organization for Economic Co-operation and Development (OECD) introduced CRS as a global legal framework for Automatic Exchange Of Information(AEOI) between multiple jurisdictions to promote tax transparency and prevent offshore tax evasion. OECD directs the participating jurisdictions to obtain information from the Financial Institutions on the financial accounts held by the non-residents. This information will then be exchanged annually among the relevant jurisdictions. So far 115 jurisdictions around the globe have adopted CRS to maintain the integrity of the tax systems by combating offshore bank secrecy.
Every financial institution is scrambling to get over the line of HMRC CRS deadline every year around April and May. Nevertheless, on the regulatory reporting front, authorities are more stubborn on respective deadlines & Reporting accuracies, hence enterprises are shifting to digital automation at a faster pace never to be “battlefield ready” with a good flood-defence system. It’s more strategical rather than a routine regular exercise.
CRS reporting landscape constantly demands increased dynamics of changes including the following
- Reporting jurisdiction addition/drop from AEOI regime.
- Sustained demand from HMRC on correct account classification & reporting.
- Continuous impact on onboarding platforms to capture extended and precise tax declaration and ongoing maintenance and review.
- Periodical review & ongoing centralised record maintenance on Self Certification.
- Platform to support HMRC queries and submit a revised variation.
- Platform to support Remediation, Cleansing & Data Enrichment using single customer view data.
Lets start discussing the above said changes and the challenges around the CRS reporting and what banks and other financial institutions should do to be proactive with an effective plan to manage the CRS FATCA regulatory obligations seamlessly.
What are the challenges faced by the financial institutions in CRS reporting?
Data quality is one of the main challenges in any regulatory reporting as the legacy technologies or the manual operational approach results in data inaccuracies, data gaps, inconsistent taxonomies & consolidation of entities that affects the accuracy of the CRS reporting and increase the operational risk.
Further, as the new compliance processes require more granularity around the reportable data, FIs with their legacy operational approach find it hard to produce data that is fully compliant with HMRC FATCA & CRS reporting guidelines.
Achieving the regulatory compliance mandate is time-dependent and involves operational risk due to manual data scrubbing. Manual validation causes are results in error-prone and require additional investigation from the Regulator prompting questions and enquiries over the operational efficiency of the business and the data which lead to reputational risk.
What do the financial institutions need to do?
As you are aware that the deadline for HMRC CRS/FATCA reporting for 2023 is 31st of May, it is the right time for financial institutions to initiate the gap study and analysis on your CRS data and reports at the earliest so that you will be fully geared up along with effective data governance framework for this year CRS reporting on time.
Financial Institutions need to foster collaboration between various teams such as Operations, IT, Legal, and Taxation that ensures comprehensive and hassle-free compliance to robust regulations. Financial institutions should revisit their existing KYC/AML and client onboarding procedures with an exhaustive due diligence procedure to segregate and categorise the CRS reportable accounts. It requires a robust framework, domain expertise, a unified solution, etc to handle the ever-evolving CRS requirements, address the challenges and be prepared for the reporting obligation now as well as future.
Macro Global offers ”Fully-Automated, Future-Proof, Cloud/On-Prem/Hybrid” platform CRS Stride – AEOI / HMRC CRS & FATCA Reporting Solution that is unique and flexible comprising both Audit & Automation processes as a single integrated platform crafted with all our experience & expertise learnt over years.
With our futureproof “CRS Reporting Solution”, financial institutions would be better placed to furnish the precise CRS data in line with the HMRC CRS specifications.
We take care of your CRS reporting obligations in its entirety and assist you not during the deadline but prepare you before and after the submission. You have one less thing to worry about and fully confident that your compliance adherence completely addressed throughout with an assurance validation by our tax and subject matter experts. You could save substantial cost and effort by your compliance team to prepare and submit CRS report without worrying endless technical challenges around the submission, remediation & managing variation and finally “Assurance Certification”.
One great reason to choose us is the product maturity as it’s already tried and tested with every small detail addressed leaving you to focus on your business than burning midnight oil to tackle endless queries from HMRC.
If this sounds like something you are keen, pls drop a note to our sales team at firstname.lastname@example.org or call us at +44 0204 574 2433 to book a demo or for a free no-obligation product trial.
In 2010, the Foreign Account Tax Compliance Act (FATCA) is introduced in the United States to ensure that citizens fully disclose their worldwide income to the Internal Revenue Service (IRS). Foreign Account Tax Compliance Act (FATCA) is a piece of US legislation aimed at preventing and detecting offshore tax evasion by US citizens (US citizens, US tax residents or US legal entities). FATCA became effective on July 1, 2014.
Foreign governments across the world have agreed to comply with the regulations and have signed FATCA into local law by establishing bilateral agreements known as Inter-Governmental Agreements with the US (IGA).
What is the objective of FATCA?
FATCA was enacted to impose a reporting burden on monetary payers to protect the US tax base. It enables the Internal Revenue Service (IRS) to view information about offshore accounts held directly or indirectly by US citizens in cases where tax evasion is suspected.
Foreign financial institutions (FFIs) must identify their financial account holders and then report to the IRS the details of reportable US account holders and their accounts. This is typically done indirectly through the FFI’s local tax authority such as HMRC (for the UK), and it is dependent on the IGA in place.
The IRS compares FFI data to what private individuals and legal entities report on their tax returns. Before FATCA, the IRS could not make this comparison and had to rely on taxpayers to be forthcoming.
UK-US intergovernmental agreement (IGA)
The important point is that the legislation is now part of UK law because of the UK-US intergovernmental agreement (IGA) and the regulations issued under section 222 of the Finance Act 2013. Default has financial and reputational ramifications.
All UK entities are subject to UK rules, and solicitors may be asked for their clients’ FATCA status when dealing with other institutions such as banks and stockbrokers, in addition to the standard AML and client identification procedures.
Every year, financial institutions must evaluate their accounts and report certain account holders to HM Revenue and Customs (HMRC). This includes data required to be sent to the United States under the Foreign Account Tax Compliance Act (FATCA).
Who are the reportable persons under FATCA?
The legislation requires Financial Institutions (FIs) (banks, stockbrokers, and other financial intermediaries, including most Trusts) to notify the IRS through HMRC when any amounts are paid to or for a US person, irrespective of where the payment is made. Furthermore, the IRS must be confident that the FI has adequate systems in place to identify and record US Persons. The FI will be in default if there is a failure to report or any other non-compliance with the FATCA regime.
Individuals who are US citizens, US tax residents, or US legal entities are FATCA reportable persons.
- Private individuals born in one of the states of the United States, the District of Columbia, Puerto Rico, Guam, the Northern Mariana Islands (born on or after November 4, 1986), or the Virgin Islands.
- Foreign-born children under the age of 18, residing in the United States with their birth or adoptive parents, at least one of whom is a US citizen by birth or naturalisation.
- Individuals who have been granted citizenship by the US Citizenship and Immigration Services (USCIS) (naturalised US citizens).
US residents such as Citizens of the United States of America, Green Card holders. Persons who spend a significant amount of time in the United States, regardless of citizenship, or those who choose to be treated as a US resident for a portion of the year.
US legal entities include US domestic corporations, companies, partnerships, and trusts that are organised under US law. The federal government of the United States, as well as its agencies and states.
What financial institutions should do for FATCA reporting?
Customer Identification: According to this IGA agreement, Financial Institutions are responsible for identifying and reporting Financial Accounts held by Specified US Persons. Customer Identification can be done in three ways:
- Indicia search – The Financial Institution can identify Reportable Accounts by searching for US indicia by referring to documentation or information held or collected in connection with the maintenance or opening of an account; this may include information held for the purposes of complying with UK AML/KYC rules.
- Self-certification – obtained from an account holder or Controlling Person.
- Publicly available information (for entities only) – Using publicly available information, a Financial Institution may be able to determine the FATCA status of an entity account holder.
Reporting: According to HMRC guidelines, banks must report all financial account information held explicitly or implicitly by US reportable customers to HMRC. The information will then be forwarded to the US Internal Revenue Service by HMRC.
Withholding: FATCA requires Foreign Financial Institutions (FFIs) outside the United States (US) to provide information about their US customers to the Internal Revenue Service (IRS). Anyone who fails to comply is subject to a 30% withholding tax.
Key Challenges faced by financial institutions in FATCA reporting
Need for detailed guidance on Self-certification forms
Self-certification is likely to be the preferable option for most financial services firms, which will shift as much of the compliance burden as possible to clients. Clients will seek advice from the financial institutions with which they do business. However, the lack of detailed guidance and the absence of case law means that financial institutions will be hesitant to provide advice for fear of being sued and facing non-compliance issues.
Adherence to OECD guidelines
FATCA and UK tax obligations are already difficult. The OECD’s Common Reporting Standards add to the confusion. The OECD standards are merely guidelines for the 40+ countries that have agreed to them. Each country will be free to implement these standards in the way that best suits them. This could lead to inconsistencies and place a significant burden on businesses. FATCA forms are already lengthy and complicated. Customers are requested to fill out forms for other jurisdictions. It will be tedious for the financial institutions to ensure complete compliance with multiple jurisdictional and disparate requirements.
Lengthy & Tedious Client onboarding process
Banks must educate their customers about the importance of adhering to compliance requirements while onboarding them. Financial services firms’ due diligence requirements with respect to compliance obligations also result in significantly longer onboarding times. Hence banks should implement a digital customer onboarding process. Digital Customer Onboarding improves the customer experience and makes the process smoother or even effortless.
Need for Centralised Data sourceTo have a single view of their customer across all parts of the business, financial institutions will need a centralised customer database and some data processing capability. To pull this data from disparate systems, new technology such as FSCS SCV Enterprise Solution Suite will be required.
Lack of Ongoing Compliance Process
Foreign financial institutions must identify where their customers’ income is earned and sourced. This exercise is carried out every quarter. Financial institutions also have to identify any incoming funds that may be subjected to withholding tax, in which case, systems will need to calculate the appropriate tax to be withheld. Robust processes are to be established to fulfil the above said regulatory obligations and to ensure a higher degree of compliance.
Shortage of Compliance Knowledge
Generally, there is a lack of understanding of the full scope of FATCA requirements and implications at all levels of the organisation. For the reasons stated above, front office staff of the banks should be more cautious in giving advice to their customers. Senior executives must be aware of the implications for them. Specialised training programs should be given to front office staff to de-risk non-compliance. Customers must also be made aware of the FATCA compliance requirements. It must also be refined on a regular basis to ensure it remains effective.
Need for well-structured Documentation & Data
Every stage of client onboarding and ongoing client interaction must be diligently documented to ensure a comprehensive audit trail and proof in the event of regulatory scrutiny. Additional circumstantial data and documentation will need to be collected and stored so that evidence can be framed under the circumstances at the time of audit investigation or regulatory scrutiny drills.
Documentation is one of the most significant challenges for most financial services organisations, necessitating a comprehensive change programme to ensure that everyone in the organisation understands the importance of documentation and does it consistently. Major banks are using our Aira – Enterprise Document & Workflow Management System, which enhances the productivity and efficiency of their business operations to the next level of profitable growth.
Oversight & Senior Management Assurance
The Board members will be held individually and collectively liable for any FATCA compliance violations. They will require regular assurance that everything is in order. This will necessitate new governance and oversight processes, as well as an efficient and timely process for escalation of any regulatory violation. The Board will have to rely heavily on their senior directors to ensure compliance. Many boards will be sceptical and will require formal attestations from business leaders.
Who Is Responsible for FATCA Compliance?
Even though it appears to be a simple enough task, where do FATCA and other tax reporting compliance fit into the organisation? The larger multinational financial institutions appear to be struggling to answer these questions. Does FATCA come under the scope of the KYC team, the Tax Team, or Risk and Compliance? Is it a centralised team or a hub-and-spoke structure? The requirement for a single view of the client precludes a purely federated model in which individual businesses are responsible for their own FATCA compliance. What should the governance process look like once a stakeholder is identified? Should the firm have its FATCA/Tax Reporting monitoring role? Is it required to Outsource, Build or Buy an effective FATCA reporting software to seamlessly achieve the expected CRS Compliance mandated by HMRC with critical strategic crossroads?
With decades of technical experience and subject matter expertise in the regulatory space, Macro Global provides financial institutions with the assurance that their CRS reporting activities are handled by a cutting-edge CRS & FATCA Reporting Solution. We have a sophisticated audit tool that will pinpoint all the shortcomings in the CRS data automatically based on the predefined rules rather than manually going one by one. This would save us considerable time and redundancy on either side.
Early adopters of the Common Reporting Standard (CRS) are evidence that the implementation of CRS compliance comes with challenges. Adopting CRS compliance is time-consuming as a lot of preparatory work is to be done. Financial institutions should adhere to local regulations when classifying and reporting reportable accounts.
Challenges faced by Early Adopters of CRS/FATCA Reporting
Misinterpretation of FATCA & CRS
FATCA and CRS are still being misunderstood and interpreted as two separate pieces of legislation, according to CRS early adopters. Many institutions claim they are FATCA compliant, so they don’t need to be compliant with CRS or they have the same information. These two schemes differ significantly.
Although there are common themes between CRS and FATCA, it is vital to understand that they are not the same, and each has its own set of penalties and requirements. CRS jurisdictions may have their country-specific reporting styles and gateways, whereas FATCA is only for US citizens, whereas CRS is much broad in scope and based on residency.
Late adopters should plan ahead of time to ensure that staff who are already comfortable with FATCA can learn the new CRS requirements. Depending on the circumstances, Financial institutions and entities may be required to file both FATCA and CRS reports in each jurisdiction. In the nutshell, more tasks are to be done for CRS reporting compared to FATCA reporting.
CRS reporting is pretended to be a more complex and unsolidified reporting proposition than FATCA because of the increased volume of reportable accounts to the broader range of tax authorities involved and the limited time to implement the regulatory changes. Thus the challenge to keep up with its requirements is that much greater.
Penalties for non-compliance
Penalties for non-compliance may vary for each jurisdiction. Non-compliance can spoil a company’s reputation and cause customers to lose trust. Global exchange and access to information raise the reputational risks of companies and financial institutions failing to comply, as information become public way quicker than ever before spread globally from day one.
Banks in multiple geo-locations
Early adopters of CRS learned that there is a degree of nuance in which organisations are obligated to report. The massive magnitude of the CRS adds complexity for banking institutions that operates from multiple geo-locations whose clients are spread all over the world.
Exploring multiple tax jurisdictions, handling massively more data reporting volumes than FATCA, and adhering to a relatively high number of data validation rules are just a few of these barriers.
Siloed data are the slippery side of compliance
The legacy reporting systems that support the compliance team in regulatory reporting preparation by pulling data from multiple sources to cobble together an excel report that is prone to errors, omissions, and duplication are the bank’s business challenge. Even though the systems are designed for operational drives and objectives, the data contained within the core system in some shape or form that does not fully comply with regulatory reporting with significant data silos.
The reality is that organisations are frequently confronted with multiple systems that do not communicate with one another, as well as multiple data feeds in various formats, resulting in duplication issues. The massive volume of unstructured data presents a new challenge for compliance teams, as it is difficult to derive accurate data and perform data unification with multiple records for the same person.
With increasing pressure from regulators to achieve high-quality standards and a plethora of emerging regulations in both the prudential risk and business conduct arenas, the financial institutions aspired to streamline the existing regulatory reporting process, which was not standardised, and improve the data quality.
Absence of Solid Data Governance Framework
As organisations have customer data distributed across systems, with multiple database technologies, and different and inconsistent formats, financial institutions have been fighting the battle of poorly integrated customer data.
Various implementation approaches to ensure data consistency across platforms in the past have ranged from enforcing strict policies and the approaches have all failed in the face of increasingly distributed information, inadequate middleware infrastructure, and increased operational costs.
Key takeaways for the Late adopters from the Early adopters
Financial institutions are finding it difficult to manage the existing slew of new and impending rules and regulations, forcing them to develop a more consistent and comprehensive view of all the entities with which they do business. Banks should operate with the intense knowledge that more changes are inevitable and that the timeframe for implementing their own CRS reporting functionalities is now extremely short.
Data integrity has often been a daunting task because organisations can’t analyze until they’ve done the integration, and they can’t do the integration until they’ve done the cleansing, deduping, matching, and enriching. The accuracy of matching customer accounts must be significantly improved, and this process can be hampered if the base name and address data are of poor quality.
As a result, a thorough data cleansing and enrichment process are required in advance. The desire to maintain consistent and high-quality data was a top priority for every financial institution, and it was viewed as a competitive advantage. The use of automated validation routines is one approach to achieving the framework that they should be able to see a cohesive, accurate record of the customer’s details across systems.
The first step for entities looking to implement smooth and efficient classification and reporting is to contact a service provider and discuss applicable requirements. Each entity will have distinct requirements.
There will be difficulties, so stay informed…
Today’s critical business development issue is strategic in both the short and long term, and it must be resolved in accordance with the organization’s strategy. They are usually intertwined with an organisational structure or a business process. The current and future tightness that exists between the tactical and planned approaches should not be a source of concern for business. Both must be represented in a strategic plan while remaining realistic in addressing the business’s immediate needs.
A good strategic plan forces everyone out of their comfort zones, methodically challenges their assumptions, and employs an unbiased approach to find the best strategy that supports the organization’s mission and objectives, as well as desired outcomes and metrics for measuring the goals. In most cases and key challenges, identifying and concentrating on business development issues is the best course of action.
Observing the difficulties that SME banks face in re-engineering their operational processes and keeping up with the trends in the regulatory landscape expansion, Macro Global saw an opportunity to provide a compliance platform to assist SME banks in processing reporting requirements with greater agility.
CRS Stride addresses the challenges of efficient regulatory change compliance management through intuitive integration of impacted controls and processes mandated for CRS reporting. Our cloud-based solution is intended to meet CRS compliance obligations in the most cost-effective manner possible, thereby reducing operational impediments. CRS Stride simplifies and lowers the cost of compliance by automating the reporting process and effectively managing data issues via our optimised business rule engine. Data issues are thrown back for easy correction after being validated against the HMRC reporting criteria.
CRS Stride consolidates, validates, and enriches data in real-time, improving data integrity and reporting accuracy. Our solution enables financial institutions to easily unlock value and manage regulatory compliance, allowing them to focus on their core business rather than going around in circles.
If you require advice from our expert team, who understands your industry better than our competitors? If you’re curious about how we transformed businesses by leveraging our unrivalled industry and domain expertise, read on.
The Common Reporting Standard (CRS), developed in response to a G20 request and approved by the Organization for Economic Cooperation and Development (OECD) Council on 15 July 2014 as a global standard for the Automatic Exchange Of Information (AEOI), requires jurisdictions to obtain information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis.
The Standard is made up of four major components:
- A model Competent Authority Agreement (CAA) establishes the international legal framework for the automatic exchange of CRS information
- The Common Reporting Standard (CRS)
- Commentaries on the CAA and CRS
- The User Guide for the CRS XML Schema
It applies to all countries that have signed on to the CRS and incorporated it into their domestic legislation. Over a hundred countries have signed on so far, and the list is still growing. As of October 2021, over 4500 bilateral exchange relationships had been activated concerning more than 110 CRS-committed jurisdictions, The list of countries participating in the CRS is available at http://www.oecd.org/tax/automatic-exchange/commitment-and-monitoring-process.
The OECD lists forty-plus “developing” countries that have not yet signed on to CRS. With 196 sovereign countries and non-sovereign territories (such as Anguilla or the Cayman Islands), there are a few jurisdictions that aren’t on either list.
CRS requires Financial Institutions (FIs) located in a CRS-compliant country to identify non-resident clients and report them to their local tax administrations in a CRS-compliant country.
It specifies that financial institutions must report the various types of accounts and taxpayers covered, and the common due diligence procedures that financial institutions must follow. Financial institutions will be required to provide HMRC with information on anyone who owns foreign investments and appears to be a UK resident, such as by having a UK postal address. Certain clients will be required to be notified by financial institutions and certain relevant persons, including professional businesses providing tax advice.
The implementation of automatic information exchange is based on the following actions:
- Account-holders who must declare their tax residence to determine whether or not they are considered “non-residents” via self-certification in the following cases:
- for any new account or subscription of CRS-eligible products for an existing client, provided that this client does not already have a valid self-certification
- for any change in circumstances that has a tax impact.
- Financial institutions that must report annually to their local tax authority on “non-resident” clients’ account balances and financial income paid to them during the year
- The tax authorities of the participating countries should share this information with the tax authorities of the account holders who are the subject of this declaration for tax purposes.
Account holders who didn’t provide the CRS-required information will be reported “undocumented” by their regional tax authorities and will face legal consequences as per local law.
The Common Reporting Standard (CRS) and its Implications for the Financial Services Industry
Financial Institutions must report their income and expenditures to their jurisdiction’s governing body under the CRS, but there are some exceptions. Financial Institutions are defined by the CRS as:
- Custodial Institutions
- Asset/Wealth Managers
- Investment Trades
- Investment Entities
- Depository Institutions
What are the challenges faced by the financial institutions in CRS reporting?
Achieving the regulatory compliance mandate is time-dependent and involves operational risk due to manual data scrubbing. Manual validation causes are results in error-prone and require additional investigation from the Regulator prompting questions and enquiries over the operational efficiency of the business and the data which lead to reputational risk.
Further, as the new compliance processes require more granularity around the reportable data, FIs with their legacy operational approach find it hard to produce data that is fully compliant with HMRC FATCA & CRS reporting guidelines.
Identification and Classification of the Reportable Accounts
The existing customer onboarding process involves manual interaction and the data received from the customer during this onboarding process may not be adequate to identify and classify the CRS reportable accounts. Hence the banks and financial institutions must perform exhaustive data cleaning processes to make their customer data fully compliant with HMRC CRS guidelines, which is a time-consuming and tedious process.
Impact on Data Quality due Data Silos
Data quality is one of the main challenges in any regulatory reporting as the legacy technologies or the manual operational approach results in data inaccuracies, data gaps, inconsistent taxonomies & consolidation of entities that affects the accuracy of the CRS reporting and increase the operational risk. Multiple systems are to be integrated to collate and aggregate the data that is required for CRS reporting which is a challenging and complex task considering the IT architecture and the scalability of the financial institutions. Implementing a solid FATCA/CRS solution can save your life.
Compliant to HMRC CRS Reporting Schema
Reportable banks and financial institutions must have improved systems in place to monitor and assess capital-market transactions for potential withholding and reporting. This demands the deployment of a relevant reporting schema to capture additional data, which is a difficult task that requires a comprehensive understanding of CRS & FATCA requirements and the related taxonomy.
Inadequate operational efficiency
Typically, data is distributed across variety of products and geographical data sources. It is critical to synchronise data from various departments to make the necessary decisions concerning account holders. Only a few institutions accomplish error-free reporting by adopting effective FATCA/CRS solutions that address the issue.
Short deadlines and a lack of trained resources
FATCA/CRS regulatory reporting is a comprehensive regulation. Because of the critical tasks and strict deadlines for report submission, employees of reportable institutions may not have complete knowledge of these ever-changing regulations. As a result, banks and financial institutions may seek an external solution to assist in interpreting the regulation and identifying its impact on the business process to file the report on time and without error.
New Amendments in CRS
In 2017, the OECD published a new guidance called “Mandatory Disclosure Rules” for Combating CRS Avoidance Arrangements and Offshore Procedures. It considered,
- Will the additional reporting obligations reduce cross-border tax evasion?
- Preserving the protections offered by legal professional privilege while shifting the reporting obligation to the taxpayer in cases where arrangements are covered by privilege.
Following this, the OECD issued new Model disclosure rules in March 2018, requiring intermediaries such as lawyers, accountants, financial advisors, banks, and other service providers to notify tax authorities of any schemes they put in place for their clients (as promoters or service providers) to avoid reporting under the CRS or to conceal beneficial owners of offshore entities or trusts.
CRS Regulatory Reporting Requirements
From 2017 onwards, Crown Dependencies and Overseas Territories started reporting to their tax authorities.
In the UK, HMRC oversees CRS implementation within each reporting FI located in a country that has recently signed or is planning to sign the CRS soon.
To promote tax transparency, HMRC commits to fulfilling all its CRS obligations following the principles outlined in its Tax Code of Conduct. Below is the key information which should be shared with HRMC:
- Personal identification information, such as name, address, and date of birth;
- Bank account numbers
- End-of-financial-year balances and valuations
- Interest earned
- Earnings from asset sales
The information on remittance basis users will be included in the reports, which is likely to be of particular interest to HMRC.
Individuals with assets in other countries should ensure that their affairs are compliant; if they are, they will have peace of mind. In any case, making a prompted disclosure is preferable to awaiting an HMRC challenge.
Banks are not required to notify their clients that their information may or may not be disclosed to tax authorities in other CRS member countries.
What are major shifts to look out for?
“Tax authorities now have a new and very powerful tool to track and combat tax evasion with the CRS.”
The success of the CRS is determined by how strictly the FIs implement the CRS procedures to procure the correct data which is compliant with OECD guidelines. Its impact will be felt over time once respective governments generate more revenue and tax collection. At the same time, multinational corporations are taking advantage of the CRS to improve their business models and data quality and analytics capabilities.
Internal Procedures and Procedures – Because CRS aims to achieve global tax compliance, it will have an impact on due diligence processes as well as product and entity classification. It will also have an impact on data collection, data quality assessment, and exchange readiness, as well as the implementation of specific reporting procedures. Each jurisdiction will be closely scrutinised to ensure compliance with the law.
Embracing new technologies – Financial institutions are working hard to improve their existing data capture, KYC validation, and due diligence checks while onboarding customers by leveraging innovative technologies such as Artificial Intelligence, Behavioural Biometrics, and Machine Learning.
Digital Customer Onboarding – Banks adopt to Digital customer onboarding process. By aggregating the customers’ data and making the process smoother or even effortless, Digital Customer Onboarding improves the customer experience with intuitive navigation. Digital customer onboarding platforms like Pera provides dependable online identification services that assist banks in quickly verifying customer data and thus expediting customer access to banking products and services.
Privacy – CRS requirements must be included in financial institutions’ data protection terms to explain why CRS collects client data.
When tax evasion was discovered by authorities in the past, many authorities lacked the resources to prosecute offenders. Today, however, technology is easing the resource burden by allowing governments to more easily review CRS data provided by foreign counterparts and match it to taxpayers in their own countries.
Financial Institutions are proactive and think and act holistically about tax, onboarding, data, and using technology to automate manual processes are at an advantage. More accurate data and information technologies will help governments pinpoint and reduce tax evasion more effectively.
With end-to-end automation features, our cutting-edge CRS & FATCA reporting solution “CRS Stride” provides an outstanding reporting platform that reduces the Common Reporting Standard reporting headaches for any SME banks or financial institutions.
If you would like to find out more about our CRS Stride and try our product for free with no obligations, click here.
While opening an account with the bank or during the CRS reporting cycle, banks may send a declaration form something in the name of “Tax Residency Self-Certification Declaration form” or “CRS Entity Self-certification form”. This form is being sent to account holders to certify about themselves to identify their tax resident countries and other related information. This form generally contains the Account Holder’s (i) name, (ii) residence address, (iii) jurisdiction(s) of residence for tax purposes, (iv) tax identifying number for each Reportable Jurisdiction, and (v) date of birth.
Financial institutions are directed to collect and report certain information from their account holders (individual or entities) to the tax authorities. This information will help the financial institutions to classify the reportable accounts whether the account holder needs to be reported under CRS or FATCA.
As per HMRC guidelines, any individual who opens an account must provide a self-certification establishing where the individual is tax resident. If the self-certification demonstrates that the Account Holder is a tax resident of a Reportable Jurisdiction, the Reporting Financial Institution must treat the account as a Reportable Account.
For tax residents outside the UK, HMRC will ask the financial institutions to share this self-certification information along with the account details. This information will be shared with respective tax authorities outside the UK by HMRC.
It is the responsibility of the account holder to ensure that the personal information shared by them is correct and up to date. By completing this form, the account holders ensure that they shared accurate and up-to-date information about their tax residency. Unless there is a change in circumstances that impacts the tax resident status or any information submitted in the form becomes erroneous, the CRS form will remain valid. If any of the personal details change, the account holder must notify the financial institutions within 30 days of any change in circumstances that affects their tax residency status or causes the information held to become inaccurate, and the account holder must provide an updated self-certification and declaration within 90 days of such a change.
Participating jurisdictions are expected to provide information to help taxpayers determine their tax residence(s). After obtaining a self-certification, the Reporting Financial Institution must confirm its reasonableness based on the information obtained in connection with the account opening, including any documentation collected according to AML/KYC procedures (the reasonableness test).
If a Reporting Financial Institution does not know or has reason to believe that a self-certification is incorrect or unreliable, it is considered to have confirmed its reasonableness. When a self-certification fails the reasonableness test, the Reporting Financial Institution is required to obtain either a valid self-certification or a reasonable explanation and documentation, as appropriate, supporting the reasonableness of the self-certification.
The Reporting Financial Institutions will always be held accountable for their reporting and due diligence obligations, including confidentiality and data protection obligations.
Each jurisdiction may permit Reporting Financial Institutions to use service providers to meet their reporting and due diligence requirements. Macro Global is one of such technical service providers in the RegTech & FinTech space delivering the best-in-class products to the financial industries. Macro Global has been consistently recognised for its exceptional outcomes and services around Regulatory Reporting for the past 20 years. Macro Global’s CRS Stride, FATCA & Common Reporting Standard solution features a centralised, fully automated Self-Certification module which includes the entire process cycle of classification, customer communication, correction, and consolidation for CRS and FATCA reporting.
CRS Stride generates a filled-in self-certification declaration form in PDF format from the CRS input data as per the HMRC CRS reporting guidelines. Banks can send the filled-in self-certification form to the account holder’s email inbox from the CRS Stride portal itself in just a single click. The account holders have to send the duly signed-in self-certification form back to the bank. This process is made simple as account holders are no longer needed to reach out bank’s customer service for additional information.
MG’s approach in implementing the CRS FATCA reporting solution is crafted to achieve maximum operational efficacy by easing the data management process to ensure data integrity and CRS report accuracy.
In-built Data Correction feature in the CRS Stride reporting solution enables to rectify inaccuracies and redundancies in source data to append/enrich for more complete and accurate reporting on our platform.
Our Tax Experts will do Assurance validation, providing peace of mind that the data is in a good shape with high accuracy and compliance before submitting to HMRC.
CRS Stride – FATCA & CRS Reporting software is available to you from the moment an amendment is published by HMRC to implement control mechanisms and audit-proofing.
Looking for a fully automated CRS FATCA reporting solution? Try CRS Stride today and see how it can power up your CRS FATCA Reporting program!
Over the years, offshore banking has been considered as the safest method of evading local taxes. Thanks to globalisation and the seamless connectivity between financial institutions, regulatory bodies and other governing authorities, offshore banking have become more transparent, allowing AEOI regimes to gain control over their taxable finances held in offshore banks.
AEOI promotes the exchange of information on income-generating assets between tax authorities in jurisdictions where those assets may be subject to a tax claim.
The key goal of implementing the AEOI regulations is to improve tax compliance around the world and to avoid tax evasions.
What are the Global Standards on Automatic Exchange of Information?
The Common Reporting Standard (CRS) and Foreign Account Tax Compliance Act (FATCA), are the global standards for Automatic Exchange of Information (AEOI) on bank accounts across reporting jurisdictions to prevent offshore tax evasion, is one such globalisation initiative.
To maintain the integrity of their taxation systems, the reporting jurisdictions exchange AEOI reports once a year “automatically”. Banks and other financial institutions are required to communicate information on non-resident customers’ financial accounts with the tax authorities in their countries of business.
These regulations are intended to ensure that taxpayers correctly disclose all income and assets held in offshore accounts on their tax returns. They enable tax authorities to identify individuals who do not correctly disclose all income by comparing information shared by tax authorities to tax returns. Non-disclosure of this nature is referred to as (offshore) tax evasion.
Foreign Account Tax Compliance Act (FATCA)
The Foreign Account Tax Compliance Act (FATCA) is a part of US legislation aimed at preventing and detecting offshore tax evasion by US citizens (US citizens, US tax residents or US legal entities). FATCA went into effect on July 1, 2014.
Foreign governments around the world have agreed to comply with the legislation and have signed FATCA into local law by implementing bilateral agreements called Inter-Governmental Agreements with the United States (IGA).
FATCA makes it easier for the financial institutions in participating nations to exchange information about US citizens. This scheme has been adopted by all major jurisdictions in some form or another. Financial institutions outside of the United States are required to provide the local tax authority with information on each account owned by a US citizen, including the greatest balance on the account in each year and the income and gains earned by the account.
Common Reporting Standard (CRS)
CRS was created to increase global transparency in tax matters. It requires financial institutions (FIs) to identify accounts held directly or indirectly by individuals who are not tax residents in the country where their account is opened.
If the FI is in a CRS Participating Jurisdiction and the person opening the account is a tax resident of another CRS Participating Jurisdiction, the FI will report the account details to their local tax authority.
What is the difference between CRS & FATCA?
FATCA requires financial institutions to identify and report offshore accounts held directly or indirectly by reportable US citizens. CRS involves over 100 countries that require information on their tax citizens to be collected and reported.
The other significant difference between the two is the choosing of a reportable private individual. CRS investigates tax residency, which is generally established by a person’s permanent residence, whereas FATCA investigates tax residency and citizenship, which includes those who do not reside in the United States.
What Financial Institutions should do to comply with FATCA & CRS compliance?
FATCA & CRS compliance regulations insist the global financial institutions to identify customers who have accounts, directly or indirectly, in countries where they are not tax residents. Customers are asked to complete a document known as a ‘self-certificate’ by financial institutions.
Financial institutions are required to submit certain information provided by account holders to their local tax authority, which will forward it to the tax authority of the nation where any reportable persons associated with the account are designated as tax residents.
MG’s approach in implementing CRS & FATCA Reporting solution
MG has been consistently recognised for its exceptional outcomes and services around Regulatory Reporting for the past 20 years. MG’s approach in implementing a common reporting standard solution is meant to maximise operational efficacy by simplifying the process of combining, validating, and enriching data to ensure data integrity and CRS report correctness. We start from Gap analysis, provide advice on implementing the strong data governance framework to rectify all the data related issues and make the data fully compliant with AEOI guidelines.
Pls refer to our CRS Stride – AEOI / HMRC CRS & FATCA Reporting Solution landing page to know more about our product capabilities.
As part of our cloud adoption strategy and being a Microsoft Gold Partner, Macro Global has tailored our CRS solution as a Secure Cloud-based Web Application by automating the entire processes around CRS reporting with all our experience & expertise in the regulatory landscape.
This strategic change ensures our customers are transitioned to a much better “Fully Supercharged, Single licencing, All-in-one SaaS Platform” that takes care of your business round the clock, “Anywhere, Anytime, Any Device”.
Macro Global’s CRS Stride enables the bank to meet the HMRC CRS requirements to achieve the ‘Fully compliant to CRS’ status by automating the entire CRS reporting process. Our CRS solution is efficient with automatic data validation and processing including CRS XML reporting and technical standards for audit compliance and process monitoring. The CRS Stride is offered as a cloud-based web portal with flexible access. Fully automated reporting solution to meet the ever-evolving regulatory requirements thereby increasing operational efficiency. Our application validates the data and runs it through risk and regulatory calculations to produce XML reports.
Our CRS solution facilitates the financial institutions to extract the raw input data from disparate datasets by fully automated mapping to the banks data sources and to enrich the same by making amendments at the customer level “within the application”. Banks can make use of the updated CRS data to generate and email the customised self-certificates for the individual, entity and controlling person customers with a touch of a button.
The generated CRS XML file is subjected to 90+ CRS specific audit validations to identify the inconsistencies within and to categorize them based on their severity. The banks can utilise the extensive “Risk-based Audit Report” generated out of our solution to identify and mitigate the risk items around the source data which could trigger non-compliance of HMRC CRS reporting mandates.
Cloud Adoption: What does it bring to our customers?
About Macro Global
Macro Global (MG) the UK based IT products and services company have been offering more advanced and evolving FinTech and RegTech solutions to over 25 plus Banks in the UK and expanding across Europe & MENA markets. We are one of the leading and fast-growing vendors in the Regulatory Technology space and are very well known as the most trusted strategic technology partner by our clients in the UK and European markets for easing out their compliance obligations and regulatory burdens.
We are ISO certified in the following categories and all our products and services are more secure and comply with the industry’s top accreditation. In addition, we are further working on CMM & SOC Type 1 & 2 compliance global accreditation.
- • ISO 9001:2015 – Quality Management System
- • ISO 27001:2013 – Information Security Management
- • ISO 27701:2019 – Privacy Information Management
- • ISO 27018:2019 – PII protection in public clouds
We hold 10% of foreign banks market share in the UK and the major retail/corporate banks in the UK use our products ranging from regulatory and compliance, open banking & open finance, consumer payments and next-gen banking. We continue to onboard 10-plus banks across various regions. We currently cover all major core banking systems including Finacle, FlexCube, Temenos T24, ACBS, Finastra CBS Platforms (Fusion & Equation) and working on TCS BaNCS and all our customers have great confidence in us for three reasons – Quality of the product, Exceptional Service delivery & Speed of support as you already heard from the market.
In our last article Identify the “Best-Fit” CRS Solution – Outsource, Build or Buy?, we discussed “Best-Fit” and in a follow we wanted to discuss Data Management. Despite the substantial investment made by banks in data management, the requirement for a platform to carry out manual workarounds to the CRS Input data for impairing the risks of inaccurate reporting continues to persist.
It’s an obvious truth that many people overlook: master data is not as good as one would like it to be.
For CRS and FATCA reporting, especially, high data quality is required to generate accurate and complete reports to tax authorities. Financial institutions must look out for multiple data repositories of the account holders such as deposit-taking, wealth management and custody footprints for detailed information that is required to fulfil the reporting obligations.
Financial institutions can find themselves on a downhill slide if they don’t have effective data quality procedures in place to keep up with their reporting and refiling obligations while also monitoring constant multi-jurisdictional FATCA/CRS reporting changes.
Financial institutions now have clear and concise requirements for recording customer information. Some requirements are imposed by law, while others are the result of internal processes. In the past, there were fewer provisions and forms, which led to problems now with the master data’s accuracy.
Data gaps that arise in this manner are usually not addressed until the next customer meeting, which is usually a long time away. Filling the data gaps that frequently remain can be time-consuming and expensive in practice. Our CRS Stride software detects these gaps in real-time and alerts financial institutions so they can be closed within the application.
Data gaps begin from the Core System
Whether a specific attribute is recorded for a customer may be irrelevant to the core system of a financial institution. However, it may still be a key barrier if this information is needed later in the process.
Because different downstream systems demand various information, the list of mandatory core system attributes grows very long, even if they aren’t completely essential in the core system.
So, it all starts in the core system, where either there isn’t a field for certain information where the customer data is initially entered, or it wasn’t previously required to fill in these fields.
In 2015, for example, there were no requirements for TIN verification or validation checks in the CRS. Implementation of the US Internal Revenue Service TIN matching codes and the shift to CRS Schema 2.0 for XML filing are two recent significant changes that have affected data management and quality. Both changes necessitate financial institutions to achieve higher levels of granular data accuracy, necessitating data refiling.
Mandatory fields slow down the Customer Onboarding Process
Mandatory fields are a double-edged sword because, on the one hand, the customer should be completely documented, but on the other hand, the customer creation process must be quick and should not be slowed down by details that can be added later – provided, of course, that these later additions are made. And only if there is a suitable field for this purpose. Whatever the reason, there are frequently gaps in the data that can be time-consuming and costly to fill.
Data Inaccuracy & Data Gaps lead to Resubmission
Resubmission is one of the four major challenges associated with FATCA/CRS reporting, together with data challenges, rules, jurisdictional nuances, and 3rd party reporting. HMRC reach out to the financial institutions to resubmit the data if the institutions fail to submit data that is complete, accurate, valid, timely, and consistent. This process, which is often done manually, can be very long and tedious, as well as posing a compliance risk.
The need for resubmission is primarily spurred by poor data quality. Depending on whether (a) the resubmission is voluntary or non-voluntary, (b) the resubmission is under a tight deadline, and (c) the FATCA/CRS reporting solution is automated, organisations face significant pressure.
There are two possible scenarios when it comes to resubmission:
- The organisation is aware that a recent submission has a data quality issue.
- Regulators find a flaw in the initial submission and require a resubmission within an arbitrary timeline, which can range from two weeks to two months.
The approach used for refiling, whether it is voluntary or non-voluntary, must be carefully thought out to effectively tackle the many complex situations that arise.
During this resubmission process, financial institutions should handle complex situations more carefully as data quality issues may result in revisiting their operational approach. Gap analysis has to be done to identify the loopholes and a stringent data governance framework should be inducted to ensure the quality of data. CRS Schema 2.0 was imposed to overcome all these complex resubmission processes.
What should the financial institutions do for resubmission?
- Void submission: Cancel the original XML, make the necessary changes, and resubmit with a new XML.
- Account-level resubmission: Based on corrected data, all account-related details, including Controlling Person for CRS and Substantial Owner for FATCA details (if any), are re-classified. Following that, an updated XML is generated automatically.
- DocRefID resubmission: Regulators specify which DocRefID to correct, and users have the option of only correcting the affected DocRefID and leaving the rest of the XML file alone.
Whether the financial institutions resubmitting the CRS/FATCA reporting on their own or it is mandated by HMRC to rectify and resubmit within specific timelines, there should be a trustable, automated and seamless process should be in place to refine the specific data to reply to the HMRC quickly.
Most financial institutions are scrambling their heads to meet tight deadlines as the data cleansing process is a tiresome task if it is done manually.
Financial intuitions should shift to an automated CRS/FATCA reporting solution which takes care of all the reporting obligations seamlessly so that they can keep their focus on growing their business rather than running behind the compliance burdens.
Core Banking System is the golden source of reference data for CRS reporting but before accommodating the CRS input file it requires exhaustive refinements to comply with the HMRC standards. The maladaptation to the system scalability makes the banks lookout for new solutions.
What if the CRS application enables you to amend reportable data?
Having data management as an integrated feature within the CRS application will eradicate performing multiple iterations in amending the CRS reportable data.
Macro Global’s “CRS Stride – AEOI / HMRC CRS & FATCA Reporting Solution” facilitates amending the CRS data at the customer level within the application, enabling the banks to achieve the desired input data quality before considering it for CRS XML file generation.
Upon achieving the desired standards, CRS Stride generates an extensive audit trail with 90+ validations based on predefined rulesets to track and manage the deviations within the reportable data, providing utmost confidence for the banks in reporting the CRS data. This would save a lot of time and redundancy on both sides.
Macro Global offers a comprehensive “GAP Analysis and Recommendation” exercise, in which our subject matter experts will collaborate with the concerned teams of the financial institutions, perform raw data analysis, and bridge the gaps.
MG’s Adhoc and On-demand support for HMRC queries
In the event, that HMRC detects and notifies inaccurate data around the submitted CRS Reports, MG with its team of SMEs provides an extended arm to precisely fix the erroneous data by efficiently generating the Submission Variation and Submission Replacement XML files within the stringent timelines as specified by HMRC. The platform enables multiple variation submissions with ease.
Click Here to know more about the other features and benefits offered by CRS Stride.