Operational Challenges with AEOI

OPERATIONAL CHALLENGES
WITH AEOI
Differences and similarities with FATCA
Joint EBF-FBF Tax Conference 2014 - Paris, 22 September 2014
Introduction
 FATCA and AEOI present many similarities (Scoping, Reporting, Due
Diligence…) making the AEOI easier to implement for FIs already compliant
with FATCA. Besides, AEOI doesn’t involve any Withholding obligation
whatsoever.
 However, some differences between FATCA and AEOI are expected to create
operational and implementation challenges.
 The progressive roll-out of AEOI across a growing number of jurisdictions over
time will require careful management of the implementation plan.
Joint EBF-FBF Tax Conference 2014 - Paris, 22 September 2014
A broader scope than FATCA
 More FIs impacted : local banks with no US client, insurance companies with
only low value contracts…
Scoping
•- The AEOI project might have to be implemented from scratch in certain FI.
•- Impact on market place readiness against short deadlines.
•- Need for raising awareness.
 Higher volumes of impacted clients (10 to 20 times as many as FATCA), because
all non-resident clients are targeted. In addition, no de minimis rule applies.
•- Increased need for automation
•- Impact on due diligence workload
Joint EBF-FBF Tax Conference 2014 - Paris, 22 September 2014
A burden on new account opening process
 Possibility of a single Self-Certification Process for FATCA (IGA 1) and AEOI
Classification of
new clients
•+ Some jurisdictions already enforced multiple tax residence collection.
•- Self-Certification documentation has to be adapted to collect information
not collected in FATCA forms (multiple tax residence, Date of Birth)
•- Need to modify database design
 Need for a new Self-Certification for new accounts opened by pre-existing
clients in certain cases
•- The classification process, done at KYC level for FATCA, may need to be
performed at account opening level for AEOI.
 Complex cases for entities whose FATCA and AEOI status may differ (FI vs
passive NFFE…)
•- Need to review the classification process
Joint EBF-FBF Tax Conference 2014 - Paris, 22 September 2014
A challenge to leverage FATCA due diligence
 Possibility to rely on existing tax residence if available for pre-existing Low Value
Accounts
Classification of
pre-existing
clients
•+ Checking the reliability of existing data may greatly simplify the review of
pre-existing clients.
•- Pre-existing insurance contracts are less likely to be exempted.
 The different timelines make it difficult to align FATCA and AEOI Due Diligence
processes
•- Due diligence could be mutualized, subject to the resolution of data
protection issues. This would be especially valuable for HVA and entities. The
volume of collected documentation will be higher, but there would only be
one process.
Joint EBF-FBF Tax Conference 2014 - Paris, 22 September 2014
An opportunity to build on FATCA reporting
 The AEOI reporting format is similar to FATCA
Reporting
•+
•+
•+
•+
Similar XML schema.
Same data extraction requirements.
Different scope of clients to be reported.
Single reporting tool should be considered.
 Multiple residence for individuals
•- Allowing for multiple tax residence triggers significant structural changes in
reporting and database design.
 Other data and process differences between FATCA and the AEOI are to be
analyzed (date of birth, closed accounts, change of jurisdiction,…)
•- FATCA data reporting design should anticipate the AEOI.
Joint EBF-FBF Tax Conference 2014 - Paris, 22 September 2014
Conclusion
 To launch or not to launch
 Challenging timeline to meet early adopters timeline (December 2015)
 Risk of moving target
 Need for countries to update their legislation…
 To allow mutualization of FATCA and AEOI due diligence
Joint EBF-FBF Tax Conference 2014 - Paris, 22 September 2014

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