Investment managers and fund administrators should act now in order to be prepared for the Organisation for Co-operation and Development (OECD) Common Reporting Standard (CRS) ahead of the start of the first reporting period, according to Justin Hayes, product manager for Linedata.
The CRS, sometimes called a global version of the Foreign Account Tax Compliance Act (FATCA), will require institutions in early adopting countries such as the UK, Ireland, France and Germany to adopt the new rules from 1 January 2016.
Hayes said: “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 of the first round of FATCA reporting found that missing documentation and incorrect categorisation have emerged as issues, and, according to Hayes, this is only going to become more troublesome as reporting requirements are introduced on a global scale.
On top of this, there may be inconsistency between jurisdictions, and non-compliance could have both financial and reputational implications.
Hayes said: “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.”
He added: “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.”
