OECD Common Reporting Standard – Getting into the DetailSTEP / GAT
Jo HuxtableMartin Popplewell
11 February 2016
• Introduction – CRS and the wider regulatory environment
• CRS – latest developments and issues in practice
• FATCA / CRS – operational considerations
• Questions and Next steps
Agenda
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Introduction – Common Reporting Standard and the Wider Regulatory Environment
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The Regulatory LandscapeOver 90 jurisdictions have committed to CRS
E U
R O
P E
, M
I D
D L
E
E A
S T
AN
D A
F R
I C
A
A M
E R
I C
A S
A S
I A
P
A C
I F
I C Australia
Brunei Darussalam
China
Hong Kong
India
Indonesia
Japan
South Korea*
Macau
Malaysia
Marshall Islands
New Zealand
Niue
Samoa
Singapore
Anguilla*
Antigua and Barbuda
Argentina*
Aruba
Bahamas
Barbados
Belize
Bermuda*
Brazil
British Virgin Islands*
Canada
Cayman Islands*
Chile
Colombia*
Costa Rica
Curaçao*
Dominica
Grenada
Mexico*
Montserrat*
Saint Kitts and Nevis
Saint Lucia
Saint Vincent and the Grenadines
Saint Martin
Trinidad and Tobago
Turks and Caicos Islands*
Uruguay
Albania
Andorra
Austria
Belgium*
Bulgaria
Croatia*
Cyprus*
Czech Republic*
Denmark*
Estonia*
Faroe Islands*
Finland*
France*
Germany*
Ghana
Gibraltar*
Greece*
Greenland
Guernsey*
Hungary*
Iceland*
Ireland*
Isle of Man*
Israel
Italy*
Jersey*
Latvia*
Liechtenstein*
Lithuania*
Luxembourg*
Malta*
Mauritius*
Monaco
Netherlands*
Norway*
Poland*
Portugal*
Qatar
Romania*
Russia
San Marino*
Saudi Arabia
Seychelles
Slovak Republic*
Slovenia*
South Africa*
Spain *
Sweden*
Switzerland
Turkey
United Kingdom*
United Arab Emirates
*Signatories of multilateral CAA signed in Berlin; source: http://www.oecd.org/tax/exchange-of-tax-information/MCAA-Signatories.pdf
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The Regulatory TimelineCRS is being implemented on a very short timeframe and is replacing UK FATCA
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CRS
US FATCA
Go live: 01/07/14
UK FATCA
2014 2015 2016 2017
June Annual Reporting
Taken over by CRS on 01/01/16
Go live: 01/01/16
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The wider regulatory and risk environment
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Tax
Information exchange
Regulation
Risk and enforcement
CRS – Latest Developments and Issues in Practice
FATCA vs CRS – Source Materials
US FATCA CRS
Agreement type Bilateral Multilateral (mainly)
Length of agreement
IGA – 47 pages CRS, commentary and appendices to the “purple book” – 307 pages
Supplementaryguidance?
US Regulations and IRS FAQs – but not directly binding on a IGA model 1
OECD implementation handbook – 118 pages
Review of local guidance etc by other party?
No formal arrangement Yes – OECD peer review
Local Guernsey guidance notes
Yes – 194 pages Yes – 24 pages (for now)
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CRS in the Crown Dependencies
• For FATCA we saw largely common guidance notes produced across the Crown Dependencies.
• For CRS, the islands are producing separate guidance.
• Both Jersey and Guernsey released their CRS guidance notes in December 2015 (IOM CRS guidance expected shortly).
• There is a difference at a policy level between the guidance. Jersey are adopting an approach such that the existing FATCA guidance can continue to be applied for CRS (provided it does not frustrate the purpose of the agreement).
• The Guernsey approach is to broadly follow the extensive OECD materials rather than the existing local FATCA guidance.
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Example of US/UK FATCA vs CRS – Trust Structure
XYZ Trust
Investment - Property
Asset Hold Co
Trust Company
Beneficiary Settlor
“Manages”
Key features of CRS analysis :-
• Financial asset test not optional?
• No “look through”• No formal sponsored
entity regime• TDT equivalent under
CRS• Requirement to “look
through” all entity account holders of the trusts?
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CRS – Immediate RequirementsCustomer onboarding
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Illustration of CRS differences in practice
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XYZ Trust
Investment - Shares
Asset Hold Co
Trust Company
Beneficiary A, B and C
“Manages”
Corporate SettlorCorporate
beneficiary DCorporate
beneficiary E
Illustration of FATCA vs CRS differences in practiceAccount holder Issue to highlight Self-cert
receivedFATCA analysis
CRS analysis
Corporate Settlor Look through of corporate accountholders of trusts under CRS?
Yes – Active NFFE (say UK resident)
Reportable UK FATCA
“Look through” of entityaccount holders of a trust – identify controlling persons (?)
Beneficiary A (new individual account)
Timing of CRS implementation
Yes – say New Zealand resident
Not reportable Reportable – but not until 2018
Beneficiary B (pre-existing individual account)
Residential address test
No Indicia reviews Optional residentialaddress test
Beneficiary C (new individual account)
CRS undocumented accounts
No Reportable for both US and UK FATCA
Undocumented account
Beneficiary D (entity) Specified person definition
Yes – UK FI Reportable (unless a depository FI)
Not reportable (although“look through” required as entity account holder of trust?)
Beneficiary E (entity) PMIE in NPJ Yes (?) – USFI
Reportable US FATCA
Look through of PMIE in NPJ
FATCA / CRS – Operational Considerations
Transition of FATCA to Business as Usual
Benchmarking
Document the current compliance approach at a high level and align with peers
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Controls validation
Identify existing controls, integrate components and document intended function
Controls testing and BAU
Test the robustness of controls and ensure function is as expected
2 3
Implementing a standardised approach to assessing the governance of FATCA/CRS programmes
Moving to BAU
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FATCA Operating ModelCentralised Project vs Business as Usual
FATCA Programme
Manager
Relationship Managers
IT
ComplianceBoard of directors
Client queries
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FATCA Operating ModelCentralised Project vs Business as Usual
FATCA Policies and Procedures
Divisional Champions
Divisional staff
Divisional Champions
Divisional staff
Divisional Champions
Divisional staff
FATCA Programme Board
FATCA Programme
Manager
Training, governance and assurance
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Example FATCA / CRS ProcessExample Reasonableness tests
Initial Reasonableness test (on receipt of self-certification)
Ongoing change in circumstances requirement
1. Initial checklist on receipt of self-certification for completeness.
2. Formal guidance / training for relationship managers to undertake reasonableness check.
3. Cross check to wider information held.4. Remediation process in place where test
is failed and follow up required.5. “Reasonable” Forms passed to central
FATCA team / Directors for approval.6. Final forms processed on system.7. Defined list of staff permitted to allocate a
FATCA classification8. Evidence on file of the above process
(and policies documented).
1. Certain “trigger events” (e.g. change of address etc) defined in procedure documents and automatically require FATCA sign off by approved persons.
2. Training / guidance for staff on these “trigger events”.
3. FATCA / CRS part of annual file review.4. Staff give separate independent sign off
that met FATCA / CRS obligations – link to performance management.
5. Implement remediation policy including details on “curing documentation” (e.g. loss of nationality certificates)
6. Where classification has changed, defined list of staff with permission to allocate a FATCA classification. Link to reporting workflows.
7. Evidence on file of the above (and policies documented).
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Example FATCA ProcessDocumentation
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The path AheadThere are a number of key activities for all FIs in the next 6 months…
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• Conclude on FATCA reporting strategy for 2016.
• Conclude pre-existing FATCA reviews (if not already done).
• Undertake CRS GAP analysis (if not already done).
• Ensure FATCA programme is clearly documented with procedures and controls in place.
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Contact
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Martin PopplewellDirector01481 [email protected]
Jo HuxtablePartner 01481 703 [email protected]
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