Compliance
Preparing For CRS Is A Huge Task, Hampered By FATCA "Fatigue" - KPMG

Many financial institutions are dragging their feet on preparing for the incoming CRS, reasons for which include confusion over certain elements of the legislation and what has been described as FATCA fatigue.
As hype around the benefits and drawbacks of the US's Foreign Account Tax Compliance Act simmers down somewhat, another acronym is hot on the industry's radar: the CRS, or Common Reporting Standard.
Well over half (61 per cent) of respondents to a global survey of financial executives believe the CRS will impact more of their accounts than the provisions of FATCA. However, although 55 per cent anticipate that complying with the new standard will require more resources, only 30 per cent said their organization has taken “significant steps” toward implementing the CRS.
The CRS, introduced by the Organization for Economic Co-operation and Development, aims to tackle offshore tax evasion by creating a globally coordinated and consistent approach to the disclosure of financial accounts held by non-residents, and the automatic exchange of that information by governments. It builds on FATCA, which came into force last year and requires foreign financial institutions to provide the US government with information on accounts held by US taxpayers.
Nearly 100 jurisdictions have committed to implement the CRS by January 1, 2017, while 50 jurisdictional “early adopters” will begin next year.
Denise Hintzke of Deloitte Tax recently spoke to Family Wealth Report about the misconception that just because financial institutions are in compliance with FATCA means they are in compliance with the CRS, as well as its potential impact on the private wealth sector. Hintzke also explained why the US is supportive of CRS but will not be a participating jurisdiction, at least in the short-term.
“Even for financial institutions that have a good handle on their FATCA obligations, complying with the CRS model will be a monumental task because of a greater volume of data that needs to be reported,” said Michael Plowgian, a principal in the international tax practice of KPMG. Most financial institutions will need to make significant changes to their client onboarding, due diligence and reporting procedures and systems, Plowgian added.
In other survey highlights, 44 per cent of respondents said their ability to meet onboarding objectives by their target date will depend on guidance they receive beforehand, while some 71 per cent believe, or are unclear if, CRS obligations will conflict with local privacy laws.
“The survey results make clear that financial institutions recognize the need to devote a significant effort to comply with CRS, but their lag in taking significant steps to get efforts underway may be due to the need for implementing legislation from adopting jurisdictions, as well as a level of fatigue related to FATCA,” said KPMG principal, Frank Lavadera.
KPMG’s findings are based on answers from 138 tax and compliance professionals at banks, asset managers and insurance firms.