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How to Protect Your Financial Institution from FATCA and CRS Sanctions

The UAE central bank has recently imposed penalties on many banks and an exchange house for failing to comply with a reporting requirement related to tax evasion. The banks were obliged to implement the Common Reporting Standard (CRS), a reporting requirement to help fight US tax evasion. However, the failure to achieve the appropriate level of compliance regarding due diligence and reporting procedures and standards resulted in millions in losses. 1 Adopting leading CRS and FATCA (Foreign Account Tax Compliance Act) Reporting Automation Software can help prevent such losses while supporting financial institutions by implementing the proper system.

The Key Challenges for Banks and Financial Institutions

Financial institutions must adhere to CRS and FATCA compliance and provide their tax authorities with relevant account data. 2 However, Financial institutions face several challenges in adhering to CRS and FATCA compliance, including:

  • Comprehensive Data Collection: Institutions must provide their tax authorities with relevant account data, ensuring compliance with due diligence procedures and high-quality reporting. This requires a deep understanding of the CRS and FATCA objectives and requirements.
  • Self-Certification and Client Data: Accurate data relies on self-certifications from clients and the thoroughness of existing Know-Your-Customer (KYC) and Anti-Money Laundering (AML) procedures, which may overlap with CRS/FATCA requirements.
  • Differences in Reporting Standards: CRS requires more comprehensive data collection than FATCA, making it challenging to use the same systems and processes for both.

CRS/FATCA System Challenges

There is still a lot of uncertainty regarding FATCA and CRS compliance. With banks and financial institutions having to alter their operational processes, they now have to provide additional steps in their customer onboarding as well as KYC/self-certification processes. Financial institutions can also be challenged in terms of handling complex high-net-worth relationships. The predominant challenges posed by these regulations are:

  • Outdated Data: Inaccurate and outdated information can lead to compliance failures.
  • Manual Processes: Labor-intensive indicia identification and manual workflows increase error rates and administrative costs.
  • Complex Workflows: Compliance increases operational transactions and necessitates numerous rule-based access points, complicating workflows and slowing turnaround times.
  • Data Accuracy and Security: Ensuring the accuracy and security of large volumes of data is a significant challenge.

What is needed is a comprehensive workflow manager, an automated system that is fully integrated with core banking systems and has an open architecture that adapts to new regulations. At the same time, the bank needs to make it easy for clients with automated forms.

FATCA & CRS Compliance Solution

GDI offers an integrated suite of tools that enable financial institutions to manage and comply with FATCA and CRS requirements efficiently. Our solution features:

  • Data Source Compatibility: Works with any data source or core banking system.
  • Real-Time Monitoring: Continuously monitors changes in client circumstances.
  • Executive Dashboard: Provides a real-time heat map for reportable accounts.
  • Document Automation: Automatically suggests and tracks necessary documents for account holders.
  • One-Click Reporting: Generates required FATCA and CRS XML reports instantly.
  • Comprehensive Support: 24/7 support in four languages.

Our solution helps banks and financial institutions worldwide implement international standards effectively, simplifying compliance tasks and enhancing operational efficiency. Contact us today to explore how we can tailor our solution to your CRS and FATCA needs.

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