With the starting line for implementation only two months away, Justin Hayes, product manager at Linedata, the leading international software and technology provider, says fund administrators and investment managers need to get to grips with the OECD’s Common Reporting Standards, dubbed ‘Global FATCA’, before it’s too late.
“Financial institutions in early adopter jurisdictions, including the UK, Ireland, France and Germany, now have just two months until they will need to implement the OECD’s Common Reporting Standards (CRS). Fund administrators and investment managers must waste no time in putting in place procedures required to meet the burdensome new global rules around the exchange of tax information.
“Early preparation will be critical especially for smaller and mid-sized firms, who will feel the most pressure on resources and costs. They will need to be in a position to hit the ground running in January or face the onerous task of retrospectively reporting on unprecedented volumes of investor information when crunch time hits at the end of next year.
“A review into the first round of reporting for the US FATCA serves as a timely reminder of the task ahead, identifying missing documentation and incorrect categorisation of clients as common failings. But this was only the warm up act and if fund managers and administrators thought they had it tough now, the worst is yet to come when the OECD rolls out tax reporting requirements on a global scale.
“Penalties for non-compliance will be set by the individual member states, and as well as the reputational damage firms could also face financial fines or even jail time if fraud is suspected. Financial institutions will need to have solid and robust procedures in place to make sure they comply with CRS or face the consequences.
“Operating on a multi-jurisdictional level, with more than 50 jurisdictions already signed up, the standard will be open to differences in interpretation and variations of regulations by each member state. Significant uncertainties remain about the detailed requirements and the industry is waiting with bated breath for crucial guidance and explanation from local jurisdictions to interpret the CRS. However, there is no time for procrastination and institutions should be assessing their existing processes and looking at implementing due diligence procedures before the end of 2015.”