Early Adopters and Late Followers – Lessons learnt from their CRS Reporting experience

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.


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