By: Marco Zawar. MBA/LL.M
On September 30, 2020, the Inland Revenue Department (“IRD”) released updates on their AEOI Portal enabling CRS Reporting financial institutions to submit notification and CRS Returns using the Financial Account Information Return XML Schema (“XML Schema 2.0”).
For the reporting year 2020, starting January 1, 2021 CRS Reporting financial institutions are obliged to report their CRS reportable accounts using XML Schema 2.0. This includes also corrections on returns submitted in earlier years.
I like to remind affected organisational units that for the reporting year 2020 and all subsequent reporting years the number of CRS reportable jurisdictions has been increased to 126 (75 in 2019). The additional 51 reportable jurisdictions are as follows:
Albania, Andorra, Anguilla, Armenia, Aruba, Azerbaijan, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Burkina Faso, Cameroon, Cook Islands, Dominica, Dominican Republic, El Salvador, Gabon, Georgia, Ghana, Guatemala, Jamaica, Kazakhstan, Kenya, Liberia, Macao SAR, Maldives, Marshall Islands, Moldovia, Monaco, Morocco, Nauru, Nigeria, Niue, North Macedonia, Pakistan, Panama, Paraguay, Peru, Philippines, Saint Kitts and Nevis, Saint Lucia, Samoa, San Marino, Senegal, Sint Maarten, Trinidad and Tobago, Tunisia, Turks and Caicos Islands, Uganda, Ukraine.
Compliance requirements on CRS returns
IRD on their compliance web-site spelled out that the transmitted CRS returns shall be
- accurate (without errors); and
- complete (without omissions).
Potential legal and financial risks through inaccurate reporting
It is my experience tax compliance advisor working in the AEoI, CRS and FATCA environment that tier 2 and 3 financial institutions (including trusts and funds) and corporate service provider have the intention to rely on manual processes to generate and transmit the CRS and FATCA returns.
In the light of the Covid-19 situations, the potential non-availability of adequate resources and the increased number of reportable jurisdictions for the reporting year 2020 Hong Kong based reporting financial institutions might face legal and financial risks caused by the violation of data privacy law through the inaccurate transmission CRS returns.
To highlight the latest developments related through legal risks caused by inadequate CRS filings, I like to raise the awareness to a Court hearing held on September 1st at the Swiss Federal Court (Case-No Case No A-88_2020.pdf (in German)), in which the court confirmed, that the responsibility for the accuracy and correctness of data transmitted under CRS is with the sending financial institution.
Mitigation actions to avoid legal and financial risks
I encourage all financial institutions and corporate service provider to perform a risk assessment on their current reporting procedures and to consider state-of-the-art RegTech Solutions like CRS/FATCA OneTM designed by our partner organisation Transworld Compliance Inc., to automate the existing client due diligence and remediation, client documentation and reporting procedures to mitigate legal and financial risks caused by inappropriate disclosure of account holder to competent authorities and to minimise operational costs caused by long-lasting and error-prone manual procedures.
If you like to find out more about CRS/FATCA OneTM please feel free to contact me to organise a Product Demo and to discuss potential implementation scenarios (licenced or as SaaS).