CRS Compliance: How to Adhere to Global Tax Reporting
The following is a review of the Marcus Evans webinar series on CRS compliance which ran between June and July of 2016. The video was produced in partnership with Software Daten Service (SDS).
The Common Reporting Standard (CRS) aims to tackle the problem of tax evasion by increasing transparency via measures including the automatic exchange of information (AEoI). A multi-faceted and complex measure, CRS throws up a number of considerations for financial institutions.
Ian Hutchinson is an authoritative source on CRS compliance. As the head of programme delivery at RBS, Ian is tasked with overseeing the introduction of operational tax at the institution. He begins by elucidating the amount of difficulty institutions can have with the somewhat daunting list of regulations, saying that even RBS is not yet up to the standard of ‘best practice’. Ian adds that, while not yet reaching the heights he wants for RBS, there are still numerous lessons that have been learnt over the course of the process.
Even disregarding the various contextual issues, CRS is intimidatingly complex—and the fact that it’s a first-time regulation only serves to obfuscate further. Those attempting to improve compliance should endeavour to demystify the process where possible by explaining jargon in simple, more understandable terms. The pure output required is also increased, with the reportable volume increased by a factor of five to ten times what it was under FATCA, adding further difficulty. Perhaps most challenging though is the variability of regulations. Changes from year to year, sometimes at the last minute, require a methodology which is flexible as well as thorough.
The changeability of regulatory dates features heavily in Ian’s talk. Paramount is being clear on regulatory dates while understanding that, come tomorrow, they may be unfamiliar; it’s this volatility which necessitates the capability to make last minute changes to files. In order to maintain a pro-active response to these inevitable changes, and to handle any tax return reworks in a punctual fashion, Ian advises that BAU (‘Business As Usual’) tax teams are resourced to keep abreast of the landscape, putting changes into place when necessary. He also offers general pointers like developing and deploying tax solutions well in advance and maintaining high data quality, while conceding that these goals are far easier said than done.
Ian also points out that tax authorities should be treated as an aid rather than an aggressor. Validation tools provided by tax authorities are invaluable resources, and should be used wherever possible. Should any difficulties arise during the process, which is extremely likely, then talking directly to these authorities is prudent for assistance and direction. Ian reminds us that these regulations are a first time thing for everyone, and should be viewed as a collective learning process.
Ian then delves into some specifics of ongoing tax reporting, providing an insight into how RBS are attempting to attain the best reporting practices. Reporting is an annual activity, but the work and preparation required dominates six months of the year at RBS simply due to the size and complexity of the task at hand. The long-term goal at RBS is to establish central control over the process (although gaps are still being discovered as the process is reviewed). Achieving this goal is dependent upon myriad factors, including the assigning of proper roles and the documentation of previous years, from which the team is able to learn.
These measures all prioritise planning, which in turn increases the accuracy and efficiency of report production and review. One of the most important things to consider, Ian adds, is to include contingencies for ‘bounce-back’ — instances where data may be unacceptable for whatever reason. Global tax reporting is a huge and formidable undertaking, requiring widespread co-ordination and unprecedented levels of data transferral, so it is prudent to prepare for all eventualities.
Where does i:Reg come in?
Created by Software Daten Service, a leading international software company which specialises in the development of standardised banking software, i:Reg is a software solution which aims to facilitate CRS compliance in a stress-free, intuitive manner.
Talking about the solution is Wolfgang Göb (pictured left), the head of business development at SDS. Wolfgang expands a little on SDS’s background, with a focus on the global implementation of i:Reg. The statistics are staggering, with the solution in use at over 1000 financial institutions across more than 80 countries.
The purpose of i:Reg is straightforward: it’s a reporting engine which is able to handle the automatic exchange of information, including the transference of sensitive customer data and account information, alongside other aspects of CRS and FATCA. Reporting is automated in a manner which is thorough, accurate and as fast as the user wishes, with the potential to process millions of records over the course of a few hours.
SDS understands the importance of collating data for the purposes of availability and standardisation. i:Reg therefore contains a generic data reporting pool, offering an unlimited history of relevant data with full traceability, which allows full enrichment, correction and validation. The exception handling tool is then able to display any data that subverts any of the rules defined within the software, with report outputs also tweaked with ease of use and optimal efficiency in mind.
Wolfgang continues by saying that i:Reg is based on state of the art technology which allows the solution to handle unlimited volumes of data at the lowest cost. This has been achieved due to a simple three-tiered architecture of presentation, logic and data. This throughput-oriented system comes with two main benefits, which Wolfgang lists as:
- No hassles or issues with large amounts of data.
- Forms standardised software which is easy to integrate, working in any standard FI environment.
Aside from the demonstrable capability to handle vast quantities of data in an efficiently automated manner, i:Reg can also boast the flexibility to be used in many different scenarios, as Wolfgang illustrates via the different operational models for i:Reg’s roll-out.
Looking purely at conventional multi-tenancy, i:Reg is suitable for single instance and application provisioning approaches. Wolfgang provides various examples of why different institutions may want to adopt different systems. Single instance can work if a country has strict data privacy laws, or if the institution is a small branch with limited volumes of data. Alternatively application provisioning is more ideal for multiple institutions that rely on one software instance, those that require strict organisation and data separation or those that require individual configurations.
Wolfgang also suggests a new model for business process centralisation, offering the best chance to limit costs: a service centre. This is a shared, group-wide approach that is also possible with i:Reg, covering multiple reporting regimes spanning many jurisdictions under one central governance. This involves many sets of data — an unlimited amount — being processed in one instance, with FATCA and CRS reports handled in parallel. By processing these vast amounts of data centrally, SDS is able to maximise the efficiency of reporting and therefore massively lower the costs.
Download the webinars and their accompanying slides here:
Learn more about SDS’ International Reporting Engine: i:REG Here: https://www.sds.at/en/solutions/international-regulatory-reporting/
Connor O’Malley,
Intern
Marcus Evans
101 Finsbury Pavement,
London, EC2A 1RS
webinars@marcusevansuk.com
