As public attitudes towards tax transparency have shifted, pressure has mounted on governments to take action and recoup lost tax revenue globally. One way they have tried to achieve this is by increasing the scope of client information that they expect financial institutions (FIs) to identify, monitor, assess and report via multiple regulatory regimes. With more regimes on the horizon (the introduction of the beneficial ownership register in the UK being a timely example of this), the expectation for trust companies to react quickly and responsively to these new developments is becoming more certain.

Some larger trust companies have focused recent efforts on developing technology, advancing data analytics capabilities and recruiting regulatory reporting specialists to meet the ever‑increasing demand for outsourced services for reporting activities across multiple jurisdictions. Outsourcing these services has been a sound decision for many, given the high investment costs associated with in‑house compliance and enhancing capabilities, the increasing number of tax authority audits and changes to local regulations to keep up with. Outsourcing also reduces challenges companies sometimes face in gaining board‑level support for continued investment, as well as removing the headache of finding candidates who are sufficiently experienced in these regimes.

Whichever model an organisation aligns with, whether focusing internally or choosing to outsource, there are some focus areas where trust companies can review, renew and adapt to enhance their level of compliance.

Data

Many regulatory reporting regimes exist on the common assumption that FIs hold large amounts of data on persons with foreign financial interests by virtue of the services they provide. Based on this, trust companies are expected to be ‘good at data’. From a Foreign Account Tax Compliance Act/Common Reporting Standard (CRS) perspective, data is maintained for individuals considered controlling persons of reportable trusts and their respective transactions. For DAC6, DAC7 and DAC8 and mandatory disclosure rules, monitoring takes place to identify and report scenarios that are considered to contain ‘hallmarks’ of CRS avoidance or structures that disguise the beneficial owners of offshore assets.