In our recent survey – Stop Playing with Fire: Use Centralized AEOI Solutions to Prepare for FATCA, CRS and CDOT – financial institutions revealed several challenges related to complying with complex and ever-changing global reporting standards, including Foreign Account Tax Compliance Act (FATCA), Crown Dependencies and Overseas Territories (CDOT), and the impending Common Reporting Standard (CRS). The report, however, also identified good news in this complex web of global compliance challenges: financial institutions leveraging centralized Automatic Exchange of Information (AEOI) solutions can address these challenges head on.
As reporting obligations become more complex, those with AEOI solutions start to reap efficiency benefits that translate into real cost savings.
Top Five Global Reporting Challenges
- Cost of compliance: The initial implementation of a compliance solution is only the first of several compliance-related costs. Financial Institutions also need to consider the personnel required, potential fines and penalties in the event of errors, and the real costs associated with the loss of customers and reputation if there is an issue. Implementing a centralized AEOI solution eliminates time-consuming, mistake-ridden manual processes, reducing labor costs and helping to ensure accuracy.
- Meeting approaching compliance deadlines: Financial institutions are forced to juggle multiple tax deadlines, as few countries run on the same calendar. With an AEOI solution, companies can easily manage deadlines and customize processes to meet internal needs.
- Reporting across jurisdictions: Each jurisdiction has varying, and changing, requirements that financial institutions managing compliance internally must understand. An AEOI solution provides seamless reporting for each jurisdiction, validating rules and submissions at each step in the process.
- Understanding what information is needed to maintain compliance: Data is critical to effective compliance. The benefit of an AEOI solution is its flexibility in importing, mapping and reporting on this data, as AEOI solutions are designed to connect data from multiple systems. Data mapping can be a time-consuming task, so look for a solution that eliminates this hassle. AEOI solutions also track accounts to alert financial institutions to changing statuses to ensure appropriate jurisdictional rules are followed.
- The frequency of changes: Reporting requirements change rapidly. AEOI solutions are automatically updated to include the latest requirements, with no intervention required from financial institutions.
As reporting obligations become more complex, those with AEOI solutions start to reap efficiency benefits that translate into real cost savings. The benchmarking survey showed that the amount of time to maintain compliance has increased four times more for financial institutions that have not implemented an automated centralized solution versus those who have implemented an AEOI solution over the past two years.
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About the Author
Scott Freedman is director of product strategy for AEOI solutions at Sovos Compliance. Scott has over 15 years of experience in strategic marketing and product strategy. He has worked for business-to-business software and SaaS solution companies like Thomson Reuters, and with Fortune 500 companies as a business consultant. Scott has a background in law and earned his JD and undergraduate degrees from the University of Chicago and University of Illinois.More Content by Scott Freedman