(Mondaq) -- Common Reporting Standards' (CRS) early adopters clearly demonstrate that compliance with the implementation comes with challenges. It takes time to complete preparatory work and you must make sure to adhere to appropriate local regulations to classify and report. In this second and last article, we go over some take-away lessons.
FATCA and CRS confusion persists
A key lesson from CRS early adopters is that FATCA and CRS are still being confused and interpreted as part of the same legislative piece. Leila Szwarc warned: "From experience we see institutions claim they are FATCA compliant, therefore don't need to be compliant with CRS, or have the same information." Naturally, the two schemes have significant differences.
Szwarc continued: "CRS and have similarities but it's important to understand they are not the same and each has its own penalties and requirements. CRS jurisdictions may have their own reporting languages and portals, FATCA is targeted at US citizens, whereas CRS is much broader, and is based on residency." Late adopters should factor in time to ensure that staff that is already familiar with FATCA can learn the new requirements brought by CRS. Depending on the situation, FIs and entities must file both FATCA and CRS reports in each jurisdiction.
Service provider market is fragmented
Finding competent partners to administer CRS is not easy, warned Leon Mao, Head of Family Business & Wealth Solutions at TMF Hong Kong, especially in smaller countries. "The feedback we are getting from small jurisdictions is that providers are not always able to assist with compliance people, like lawyers and technicians who are needed to provide a comprehensive CRS service. Some service providers will drop out of the market. I can see consolidation in the future, as clients go with those who have the platform, the internal processes, and the people to deal with things like tax portals and tax authorities on behalf of the client."
Penalties for non-compliance
In Hong Kong, the penalties vary from fines to imprisonment, from six months up to three years. Sophia Lim, Director Client Relationship at TMF Singapore, confirmed that Singapore takes an equally stringent view. "If convicted they can be liable to a fine or imprisonment, depending on the seriousness of the breach."
Unofficial penalties can be just as severe. Non-compliance can tarnish a corporate reputation, and lead to loss of confidence amongst customers. Global exchange and access to information increases reputational risks from non-compliance of companies and FIs, as the information becomes public faster than ever before and it's spread globally from day one.