Corporates stress about reputational risk over non compliance with FATCA and CRS

Over half of senior executives from multinational financial firms are concerned that non-compliance with the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) mandates could affect their reputations, a Thomson Reuters survey has found

‘The results of the survey demonstrate that institutions’ greatest concerns regarding FATCA and CRS relate to regulatory uncertainty, internal readiness and compliance,’ said Michael Drinkwater, head of Onesource FATCA and CRS for Thomson Reuters.

‘Although institutions largely share common concerns, their level of preparedness and approaches vary widely, which leads to questions about which methods will ultimately lead to the best path to achieving compliance,’ Drinkwater added.

CRS, which was modelled on FATCA, was approved by the OECD Council in 2014 as a global standard to facilitate the automatic exchange of financial information between OECD tax jurisdictions on an annual basis.

So far all 34 OECD member countries (except the US), 96 jurisdictions and the G20 have signed up to support CRS and allow the automatic flow of data among participating jurisdictions.

FATCA and CRS require distinctly different processes, and 62% of survey respondents do not have a software solution in place to manage FATCA and CRS reporting requirements. Moreover, about one third of institutions are handling the process manually, and 19% say their software solution covers only FATCA.

Nearly one half of the respondents plan to add CRS-related responsibilities to the centralised teams already handling FATCA, while 38 percent will create a specific team to deal with both functions.

The Thomson Reuters survey, conducted together with Banking Technology, drew responses from 80 banking and financial industry professionals from over 25 countries.

FATCA is a 2010 federal law which requires US citizens, including those that reside outside the US, to file annual reports on their non US financial accounts to the Financial Crimes Enforcement Network (FINCEN), as part of the US government’s efforts to combat tax avoidance by those holding offshore financial assets.