A look at how SME banks are adapting to the Common Reporting Standard Shifts

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.

Final thoughts

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.