CRS & FATCA Reporting - 6 tips for successful reporting
Sep 10, 2021
In this post we provide some pointers and suggestions that highlight different approaches to managing FATCA and CRS Reporting as adopted by our clients over the years and how best to manage the reporting process.
FATCA & CRS reporting presents two challenges to every financial services business that has FATCA & CRS reporting responsibilities. Firstly is the need to comply with the legislation, guidance and process surrounding reporting, e.g. who and what to report. Secondly is meeting the technical challenge of processing reporting in a complex digital format, which for businesses that provide outsourced administration services including trust and corporate service providers, fund administrators and the like, high volume reporting needs to be effciient.
Meeting the first challenge is an evolving piece. Compliance professionals have had to navigate a potential minefield of understanding extensive legislation coupled with local guidance. Specialist advice provided by a community of advisors is available to ensure that structures are understood and classifications are correctly applied. The second is where our software Flyingboat Tax Data Exchange (fb-TDE) provides the solution.
1 - Centralisation for multi office, multi jurisdiction financial institutions: We are seeing a number of larger global Fiduciary and Corporate Service Providers using Flyingboat Tax Data Exchange as a single reporting tool across the business. In addition, businesses have in some instances implemented a centralised reporting team to concentrate expertise and create a pool of subject matter experts who facilitate robust compliance and reporting processes. The team provides guidance, direction and oversight to local offices to ensure data collection and data maintenance standards are enforced to enable efficient reporting. Having a single reporting product like Flyingboat Tax Data Exchange enables consistent reporting, maintenance of a single repository of submitted reporting and avoids any gaps created where various line of business applications have varying degrees of support for FATCA and CRS reporting.
2- Importance of data quality and completeness: Without a complete data set, successful automation of reporting is limited. This can result in potentially laborious manual intervention at reporting time. This problem has two dimensions. Administration or CRM systems often simply do not have all of the necessary fields and data holders to properly collect all of the required reporting information. Secondly, insufficient controls or processes around data collection and recording of the information leads to gaps discovered at reporting time. For the former, we have provided advice on how to extend systems using custom fields or similar, to ensure that sufficient data elements of the right styles are in place.
3 - Client Web portals for Account Holder data validation / Self Certification workflows: Maintaining the accuracy and completeness of account holder data can be a challenge. However, the emergence of Client Web Portals together with associated back-office workflow management, can facilitate a proactive and automated process for account holder data reviews, the refreshing of Self Certifications and collation of other KYC / CDD data should it be required. This is a product area where we are now able to offer solutions for managing the whole of the customer entity lifecycle starting with digital onboarding.
4 - Invest in integration: For larger reporting requirements, integrating systems reduces the time taken to acquire data into our software and reduces potential for human error in data transformation. Tight integration works where a direct connection is established between the line of business systems' databases allowing the reporting data to be actively pulled on demand by Flyingboat Tax Data Exchange. Sometimes the reporting data may be staged in a data warehouse or similar to assmble the complete data set. The integration method allows ongoing data quality monitoring as it becomes possible to take a snapshot of data at any point in time and use the data validation facilities of the software to reveal any deficiencies. A loose coupling is where organisations have built reporting extracts that generate output in the spreadsheet format that we use as the import mechanism to the software. A particular advantage of this approach is that if data sources are incomplete for any reason, or require merging, then the extracted data can be reviewed and supplemented in bulk before importing to Flyingboat Tax Data Exchange. This approach is quite agile but requires human intervention.
5 - Start reporting sooner, make test submissions: One thing we have consistently found is that despite being a Common Reporting Standard, technical filing and validation requirements vary around the world and sometimes changes in tax authority’s portals go unnoticed or do not get widely publicised. These requirements may only be discovered when an institution tries to file its reports. For our fiduciary and corporate service provider clients who often have high volumes of reports to file, we recommend preparing an initial batch of reports across various jurisdictions and filing early to obtain comfort that the bulk of the reporting to be undertaken subsequently, will follow smoothly.
6 - End of filing season review
Once filing is complete for a season, take stock of how the process went, where were the challenges, what went well, what can be improved… Make early steps to implement iterative improvements in the process.
We will be very happy to discuss your FATCA and CRS reporting needs on a no obligation basis. Please contact us for any assistance we can offer.