Phil Taylor, Product Owner
FATCA (the Foreign Account Tax Compliance Act) and CRS (Common Reporting Standard) have been around since 2014 and 2016 respectively. At Microgen we see clear trends around these legislations in the Trust, Corporate Services and Fund Administrators industry and the impact on our customers. These insights, at the coal face so to speak, are useful when reviewing your approach.
Here to stay
Putting to one side the well documented criticisms of FATCA and CRS, (a cursory Google will inform you of those!), these reporting obligations are here to stay and now form part and parcel of our customer's regulatory process.
When the FATCA legislation was announced, one can just imagine the various reactions across the globe when reading and digesting the minutiae detail of the legislation for the first time. Maybe you don't have to 'imagine', and you still have the battle scars. I apologise now if reading this is raking up bad memories and causing you to break out in to a cold sweat, that's not the intent!
As for CRS, I'm sure that there were high fives all around the office when people realised that the 'C' in this abbreviation stood for 'Common'. Let me paint the scene, the tax compliance team are sat at their desks, reviewing the CRS requirements, "Phew, each jurisdiction requires the same data set, what a relief!....oh hang on a minute". Yes, the misconception that common translates to "shared" or "universal" or "conventional", or any of the other synonyms I could find in the Oxford English Dictionary is one that we frequently encounter at Microgen.
When our customers first reached out to Microgen for assistance in producing data for inclusion in FATCA/CRS reporting, one of the biggest challenges was simply collecting the missing information of reportable clients. It may have been held in a gargantuan spreadsheet, or spread across multiple disparate systems, but the call to arms was the same "Help me produce the numbers!".
Another challenge we frequently encounter is this misnomer of "common" with regards to CRS. Keeping up with changing governments regulations in multiple countries could be seen as analogous to a hamster on a wheel. Just as you think you've met the requirements set out by the appropriate government and you file your submission, you are then hit with updated requirements for the following year's submission, a tweak here, a tweak there, but a change nevertheless.
One barometer of the differing requirements stipulated by governments is Microgen's internal "FATCA and CRS" Microsoft Teams channel. This is our "early warning system" where we post information relating to regulations pertaining to a particular government. Suffice to say, it is one of our busier channels, with updates posted all too frequently. Not only do we encounter different data requirements, but we've seen instances of certain governments (they shall remain nameless!) issuing updated guidance two weeks before the filing deadline, resulting in submissions having to be made in an updated format. This challenge with differing reporting requirements is magnified when our customers open a subsidiary office opened in a new jurisdiction, "Right, what does this government require for reporting?!".
The collection of missing information for reportable entities was a huge undertaking, and although that initial submission may have been seen as a 'one-off' the fact is that this has now become a regular exercise and part of "business as usual" operations. If it was a one-off, then our customers could possibly have stomached the effort expended in collating this information. However, this isn't a one off exercise, and instead is a regular occurrence. The level of risk, continual maintenance and spiralling budgets make the manual approach less palatable and our customers are looking to technology to help them with their FATCA/CRS processes.
The role of technology
Embracing technology with regard to FATCA and CRS is one of the best ways to ensure compliance. For instance, Microgen 5Series has inbuilt mechanisms that allow one to automatically collate information on reportable entities. A good example; indicating whether the transactions posted into an individual ledger account should be included in Tax Reporting, and have 5Series automatically calculate reportable values. This is one example of how 5Series can ease the burden on a tax compliance team when producing FATCA/CRS reporting.
I'm not promising that there won't be some manual intervention required, but employing technology such as 5Series to do some of the "heavy lifting" can make life that little bit easier for you and your organisation and hopefully reduce those "cold sweats" sometimes associated with these legislations.
Philip Taylor is a Product Owner at Microgen Financial Systems.
While Philip is not responsible for filing either a FATCA or CRS returns, that doesn’t stop him from trying his best to ease the burden on our customers!
You can find Philip on LinkedIn