A total of 78 countries have already signed the CRS agreement and have committed to commencing the exchange of account information in relation to 2016 or 2017 accounts. These include all of the EU nations and almost all of the world’s major financial centres. Overall, over 95 countries have indicated their intention to join. It is clearly evident, that the scale of reporting will therefore be substantially greater than that required under the Foreign Account Tax Compliance Act (FATCA).
What should UK financial institutions have done by now?
- Determined which of their products are “financial accounts” within the meaning of the legislation
- Updated their client on-boarding documentation
- Updated their procedures to identify potential changes in information provided by customers
- Briefed their front-line teams on the changes and how to handle customer queries
- Developed plans on how to undertake the review of existing accounts for indications that the customers may be resident in other jurisdictions
- Documented their CRS policies and procedures
- Started on their preparations for the first returns that are due under the UK’s agreements with Guernsey, Jersey, the Isle of Man and Gibraltar on 31 May 2016 – which is just 20 weeks away
Now that the regime is live, financial institutions are technically in breach of HMRC’s regulations if they have not updated their account opening procedures to capture the additional information from customers. Accordingly, they will need to act with immediate effect to rectify the breach, as HMRC are seeking to identify non-compliance, having already levied fines for non-compliance with FATCA.
We can support financial institutions to rapidly develop on-boarding documentation and procedures and assist with any immediate remediation. This should help to protect a financial institution’s, and its senior management’s, reputation with the tax authorities and its customers.
What does this mean?
Given that information will be passed by HMRC on to overseas revenue authorities, who will use the information as the basis for their enquiries, there are serious reputational risks for FIs with respect to their customers and regulatory authorities for any non-compliance. HMRC have already indicated that their compliance activities will initially be focused on FIs’ procedures and controls, and failure to comply on time could be seen as indicative of a generic weakness in an FI’s tax control environment. Therefore, senior management within FIs (particularly those in control functions, including CEOs, CFOs, CROs, compliance and legal officers) should all take steps to be satisfied that the new procedures to ensure CRS compliance are in place and operating effectively.
How Mazars can help
For FIs that have already upgraded their on-boarding procedures, we can assist by undertaking an independent assurance review of the work that you have undertaken. This will:
- Identify any potential gaps
- Help you to demonstrate compliance to HMRC in the event of a review
For FIs who have yet to make the necessary changes, we will be able to assist in:
- The rapid development of updated on-boarding documentation
- Drafting changes to procedures
- Delivery of training to the key members of staff at all levels of the business
- Assist in the preparation and delivery of a suitable remediation plan
Please contact Ali Kazimi or Rob Smith if you would like to discuss how Mazars can help .