2021 Operational Taxes for Banks London TAINA Key Takeaways

‘Cost of Compliance’ Vs ‘Quality of Compliance’ in 2021

On the 26th of May 2021, TAINA joined industry thought leaders and professionals at the Operational Taxes for Banks London Virtual Conference, for a full day of engaging discussions on the latest industry tax compliance solutions for the current regulatory and operational tax challenges for banks.

A particular highlight of mine was the very well-presented session on FATCA Preparing for IRS information requests by Tom Howgate (Deloitte) and Peter Grant (KPMG), who’s key messaging highlighted the importance of  the following areas; Compliance, Integrated Effort, Effective Controls, Strong Policies & Procedures, Robust Technology, Data Quality and Risk & Control Frameworks.

My key takeaway from this particular session is that it has become a balancing act between ‘Cost of Compliance’ and ‘Quality of Compliance’. I agree with this statement fully. Many institutions think they are being compliant in all areas around CRS & FATCA, but are they really?

Cost of FATCA and CRS Compliance in 2021

• Do you have duplicated processes or inefficient technology? 

• Do you have to bombard IT to access data? 

• Is the quality of the output leading to more reports of data that need to be consolidated into what you really are after?
• Have you set an efficient and effective reporting cadence?

These all fall under the cost of FATCA and CRS compliance. Tax Authorities have put a lot of focus on all of these parts, with the belief that they lead to quality FATCA & CRS reporting. Tax Authorities are now treating Institutions as the GATEKEEPERS to all of this data.

Inefficient and outdated technology may have worked 5 years ago, however in today’s world it is imperative that financial institutions have access to quality data. Tax operative teams need to be able to get all extracts from their system as well as continue to monitor for data changes including change in circumstances. 

Quality of FATCA and CRS Compliance in 2021

• Tax Authority CRS  & FATCA reviews
• Enforcement action from each jurisdictional tax authorities (independent for each jurisdiction)
• The effect on the Responsible Officer

These all fall under the quality of FATCA and CRS compliance. Tax Authorities are carrying out more reviews, including onsite reviews, requests for review of  FATCA and CRS  policies and procedures and conducting reviews of staff, operating models and technology. In the case of HMRC, this all needs to be seen within 10 days of request. Tax Authorities are rightly becoming tougher and will highlight inefficiencies and gaps that would lead to generating rejected Schemas.

In addition there has been a shift in jurisdictional tax authorities from being helpful and supporting with invalid or missing data on FATCA and CRS schemas, to checking and sending back for you to fix without as much assistance. Certain jurisdictions are even enforcing fines and penalties on a per error basis, which can stack up very quickly. This has led to Responsible Officers and Lead Governance CRS points of contact putting more responsibility on FATCA and CRS efficiency and compliance.

The Future of FATCA and CRS Compliance

In conclusion ‘Good data in at the start leads to good data out for all of your tax reporting’ This starts with having good onboarding, validation and ongoing monitoring of change in circumstance processes in place. Regulatory technology is heavily being sought after and supported by tax authorities to ensure the quality data for FATCA and CRS reporting but also for FATCA and CRS compliance reviews.

For more information on how our fully automated FATCA and CRS Validation platform can add value to your business, get in touch or request a demo to see it in action.