The Common Reporting Standard (CRS) was introduced by the Organisation for Economic Cooperation and Development (OECD) in 2017, its purpose being to combat global tax evasion. In this podcast hosted by the International Chamber of Commerce (ICC) Academy Xiangyu Wang, Senior Customer Success Manager at Regnology, explains how the CRS helps ensure that assets held in overseas tax jurisdictions are made available to local tax authorities for reporting purposes. An automatic exchange of information (AEOI) between tax authorities enables each jurisdiction to receive information about all residents holding offshore assets in another jurisdiction, thereby encouraging transparency, and addressing the tax evasion problem.
Since the launch of the CRS over 100 tax jurisdictions across the world have become signatories of the standard and it has contributed to over 112 billion Euro of additional tax revenue. However, financial institutions face significant challenges in complying with the CRS. As Wang notes, implementing the due diligence process is far from simple given that it follows the entire client life cycle and involves relationship managers, compliance teams and operational professionals who need to understand key data requirements very clearly. Then there are challenges around collecting data for the many accounts that existed prior to the implementation of the CRS, while the reporting process itself is constantly evolving.
As this podcast highlights there are a number of strategies and best practices that financial institutions can deploy to ensure the effective implementation of the CRS. These include developing the appropriate processes, excellent data management solutions as well as sufficient training and knowledge retention.