Introduction to CRS Client Identification

The Organisation for Economic Co-operation and Development (OECD) defined the following in the Standard for Automatic Exchange of Information in Tax Matters:

• The Model Competent Authority Agreement (CAA) serves as a template for intergovernmental agreements
• The Common Reporting Standard (CRS) displays the reporting and due diligence standard that underpins the automatic exchange of information.

Model Competent Authority Agreement (CAA)

The Model CAA displays the following clauses that aim at effective information exchange along with the type of information for exchange, along with the time and manner of such exchanges.

• Due diligence
• Domestic reporting
• Data confidentiality
• Infrastructure

For uniformity on agreements, the OECD has published model agreements, such as bilateral and multilateral. They also have a model nonreciprocal agreement for a jurisdiction where no income tax regime exists and the contracting state does not wish to receive information on its residents’ banking activities in the partner country.

Common Reporting Standard (CRS)

The CRS is an information standard that facilitates automatic exchange of information (AEoI), developed in the context of the OECD and is effective since 01 Jan 2016. The OECD standard is a step change in the way in which jurisdictions share tax information to combat tax evasion.

The OECD acknowledges that many jurisdictions exchange information automatically, often on certain common types of income, most notably within the EU. However the standard is intended to be global in scope and to focus on a universal set of information relating to financial accounts, drawing heavily on the intergovernmental approach adopted under FATCA.

Thus, CRS is a global standard, which contains due diligence and reporting requirements that are the foundation of automatic information exchange to reduce inconsistencies and help minimise compliance cost to the financial institutions, particularly institutions operating in multiple jurisdictions.

Thus, under CRS, FIs have to report on the account holder’s information who are tax resident in other participating jurisdictions Participating jurisdictions enact rules in domestic laws that are consistent with the provisions of the CRS.

CRS Process Workflow

The CRS process workflow is shown below.

The CRS Solution in Temenos Transact scales through the below processes:

1. Balance Aggregation process for the pre-existing and for new accounts.
2. Classification of the pre-existing and new accounts into Individuals and Entities.
3. Due-Diligence process for the pre-existing and new accounts.
4. Process to work out the indicia’s as part of the due-diligence process.
5. Recording of the mandatory information for the new accounts.
6. Reporting of both pre-existing and new accounts.

Configuring CRS Client Identification

In Temenos Transact, the CRS functionality is offered under the following module licenses:

• CD module licensing covering Client Identification and Due Diligence
• CE module licensing covering the AEoI Reporting Solution.

  

The CD module licensing supports banks to identify all customers reportable under the CRS Regulation by due diligence process.

• The year during which the regulation becomes effective.
• Ability to identify whether the customer having a tax residence in a country under participating jurisdiction and becomes reportable, with a facility for automatic update at regular intervals in case of changes in the jurisdictions.
• Initial Balance Aggregation process for all customers and subsequent aggregations only for CRS customers.
• Classification of customers into individuals & entity segregating balances into high and low values.
• Due Diligence process based on the Indicia given by the regulators and capturing of mandatory information for new accounts.
• Holding of clients’ information linked to the codes as prescribed by schema.

For customers identified as above, the CE module supports generation of XML reports towards CRS compliance through automatic exchange of information.

• Reporting is controlled based on high level parameter set up governing CRS Reporting.
• Base file is created to store all the required information for Reporting. Special feature to identify and report Dormant accounts separately
• Provision to amend the base file for corrections, if any
• Generation of XML Report.

CRS Workflow

The CRS workflow is as follows:

• Set up CRS.CLIENT.TYPE
• Set up ST.REGULATORY.PARAMETER
• Set upthe RT.REGULATORY.RULES table for field and indicia mapping
• Set up CRS.PARAMETER
• Set up BNK/ST.UPDATE.INDICIA – batch record
• Create a CUSTOMER record which satisfies the indicia for CRS.
• Run COB
• The CRS.CUSTOMER.SUPPLEMENTARY.INFO records are created.

The CRS.CUST.SUPP.INFO record is automatically created for corporate customers after the above steps are successfully completed. New features function correctly only if the configuration steps are completed successfully. To know more, refer to Due Diligence.

Illustrating Model Parameters

Parameters configured in Model Bank are detailed below:

S.No.	Parameters	Description
1.	ST.REGULATORY.PARAMETER	Defines the current rule book for each of the regulation. Record to be created with regulation name as ID. Users can specify whether updation of indicias or automatic creation of Supplementary Info records are allowed during the Indicia service.
2.	CRS.PARAMETER	This is a customer company level parameter table, which records the details of the institution agreement with the regulation. For example, CRS provisions effective date, participating jurisdictions and certain default conditions.
3.	ST.AGGREGATION.PARAM	Defines the balance aggregation rules for the regulation and the company to which the parameter record applies. Captures the details required by the regulatory for the balance aggregation.
4.	ST.AGGREGATE.BALANCES	Captures the balances of all accounts held by the customer are updated in this table based on the setup in CRS.PARAMETER and ST.AGGREAGATION.PARAM. The aggregated balance that is updated in this table comprises the Accounts (AC), Loans and Deposits (LD), Money market (MM) and Securities (SC) balances held by the customer. Balance status of the customer is derived by the Temenos Transact system based on balance held by the customer and the account type.
5.	CUST.REASONABLENESS.CHECK.PARAMETER	This application allows the user to define the fields that are used for reasonableness check. The ID of the application is CRS. There are two sets of multi-value fields, Tax Country From and Tax Country To. One set of multi-value fields are used to check the customer details during on-boarding while the another set of fields are used for post on-boarding. Tax Country From and Tax Country To fields allow valid Temenos Transact application, field names (including local reference fields) and the fields should hold the valid country code.

Illustrating Model Products

Model Products are not applicable for this module.