This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
  • Delicious


Close

Password Reminder

Please enter your email address to receive a password reminder.

 

Log into Tax-News+
Not registered yet? Find out about our daily news alert service »

Email Address: 
Password: 

Login »

Forgotten your password?


Today’s Top Headlines




Many Reporting Entities Unprepared For FATCA, CRS

by Mike Godfrey, Tax-News.com, Washington

23 August 2016

New research shows that financial institutions are generally confident about meeting existing and incoming automatic exchange of information obligations. However, the study also found that a significant proportion of the industry is facing higher costs and risking fines by being under-prepared for new compliance requirements.

The research by Aberdeen Group and commissioned by Sovos Compliance, the tax compliance and reporting software firm, shows that there is "a large gap in preparedness" for reporting requirements under the OECD Common Reporting Standard (CRS), the United States Foreign Account Tax Compliance Act (FATCA), and the United Kingdom's equivalent regime, commonly referred to as CDOT. Worryingly, many institutions, Sovos said, related high rates of inaccurate filings and excessive compliance costs, and expressed fears of significant business impacts, including reputational damage and falling customer numbers.

In a survey of 100 leaders of financial institutions subject to the CRS that is being rolled out globally through the end of 2018, 64 percent of respondents said their organization is "significantly prepared" to cope with the demands of automatic EoI. However, the report showed that less than half of filings under FATCA, which has been effective for more than two years and upon which the CRS is substantially based, are accurate and complete.

"This research shows that financial institutions are far less prepared for FATCA, CRS, and CDOT compliance than they feel and are putting themselves at risk of significant impact to their profit margins due to fines and the costs of compliance support," said Nick Castellina, Vice President and Research Group Director of Business Planning and Execution at the Aberdeen Group.

According to the survey's findings, the key to accurate AEoI reporting is having an appropriate information system in place, with successful institutions much more likely to have a single centralized information retrieval and reporting platform than separate software programs for each AEoI requirement.

"We found that institutions that have implemented Automatic Exchange of Information solutions are far more prepared to handle compliance," Castellina noted. "In fact, top performers are currently 38 percent more likely to have a centralized AEoI solution. Institutions with these solutions are more likely to be able to automate the cleansing, consolidation, and reconciliation of essential data for filing, ensuring efficiency, accuracy, and compliance."

Institutions with more effective AEoI systems are also more likely to enjoy lower compliance costs than their less prepared competitors, according to the study, with the most successful firms seeing a 75 percent lower increase in costs than their peers. Nevertheless, Savos said that the level of operational costs, which has risen by as much as 20 percent, is "troubling." Moreover, survey respondents have had six percent of their gross proceeds withheld due to non-compliance with FATCA. Consequently, half the respondents plan to implement a centralized AEoI platform to connect data from multiple systems in one place to limit costs and compliance risks.

"The nature of the problem with AEOI is that it's changing dynamically," said Andy Hovancik, CEO at Sovos Compliance. "It's no longer a matter of simply automating the reporting. Financial institutions must deal with data from multiple systems spread across dozens of regions around the world."

TAGS: compliance | Institutions | Foreign Account Tax Compliance Act (FATCA) | tax | business | FATCA | banking | United Kingdom | United States | Compliance | Tax

To see today's news, click here.

Leave a comment

Read our Posting Guidelines