VOICEOVER: In January 2016, the OECD's CRS will be effective in over 50 early-adopter countries. This means that it's more important than ever for your financial institution to prioritize compliant customer due diligence and reporting obligations. KPMG can help you understand how the CRS will impose a heavier burden than FATCA and the UK's Crown dependencies on overseas territories.
So what's actually changed? FATCA only requires you to identify and report certain U.S. account holders, whereas the CRS requires reporting of certain nonresident account holders of all countries participating in the standard.
The CRS doesn't give you the option of electing a de minimus threshold for individuals' account balances, therefore increasing the number of customers in scope for further due diligence and reporting.
It also has fewer exemptions from reporting financial institution status than under FATCA, so some deemed-compliant entities under FATCA will be reporting financial institutions under the CRS.
The CRS requirements have significant differences from FATCA and the intergovernmental agreements, and local implementation of the CRS is resulting in even more differences. You need to understand the differences across the jurisdictions in which you operate and make changes accordingly.
So how do you come up with an effective strategy to implement to maintain AEOI compliance? First, you need to educate your organization about the requirements. Then perform a gap analysis of your process systems and controls. Once this is complete, you'll need to classify your own entities, implement new onboarding procedures, remediate preexisting account holders and then collect, validate and format your entity information and your customer's personal and financial information into reporting, all the while maintaining key controls and assurance over compliance. KPMG can help at each stage.
Let's take a closer look. Understanding the requirements includes considering three key areas: keeping up with legislative requirements, updating operational processes, and working with industry groups to understand market practice. Your gap analysis should include a review of the current jurisdictional processes, systems and controls. This should produce a high-level roadmap for changes to your operating model and systems.
Once you've classified your own entities and understood their obligations, you can enhance your customer onboarding channels. In the short term, your customer onboarding process will likely be a tactical one to meet aggressive regulatory deadlines. But longer term, you should be thinking about a strategic solution that incorporates AML, anti-money laundering and KYC, know your customer.
Preexisting customer remediation will require a technology solution and some outreach, so anticipate increased resource needs to communicate with your customers.
Another significant challenge is identifying, collecting and validating information and translating it into the right reporting schema formats. Your organization should consider an automated solution to convert system data into the correct jurisdictional reporting schema, while keeping information secure.
A key controls matrix is critical to ensuring implementation and maintenance of regulatory compliance. Maintaining compliance as part of business as usual will require a reliable source to identify changes to the rules in all of your different jurisdictions. And the work doesn't end there.
Now you'll need to communicate the revised strategy effectively to all stakeholders and clients. KPMG can assist you with these essential steps with minimal disruption to your business, ensuring that when the time comes, you are ready for implementing AEOI.
For more information on managing CRS and AEOI, please view KPMG's global AEOI resources.
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