Compliance with CRS and FATCA is essential for financial institutions, Trust and Corporate Service Providers, and Family Offices. However, meeting these obligations can be challenging, and even minor missteps can lead to penalties or damage to your organisation’s reputation. Here, we’ll cover some of the most common compliance mistakes we see and share tips to help you avoid them.

1. Incomplete or Incorrect Data Collection 

The Mistake

Missing data fields or collecting incorrect information can result in incomplete reports that fail to meet compliance standards.

Why It Happens

Data requirements can be confusing, and without a robust process, teams may overlook key details or misinterpret data requirements.

How to Avoid It

Implement a checklist and establish a rigorous review process which occurs well in advance of submission dates. Consider using automated data collection solutions that reduce human error and ensure completeness. Consider working with a CRS & FATCA compliance expert who can advise, check your data collection processes, and work with you to ensure consistency for your organisation.

2. Misclassification of Entities 

The Mistake

Misclassifying entities is one of the most frequent errors in CRS and FATCA compliance. Incorrect classifications can lead to inaccurate reporting and non-compliance issues.

Why It Happens

Classification rules are complex and vary depending on the jurisdiction. Many organisations can lack the in-depth knowledge to accurately determine the correct classifications. A common mistake leading to misclassification is how income is categorised. For TCSPs, passive income often forms part of business-to-business relationships, while active income is typically business-to-customer.

How to Avoid It

Check income streams carefully to make sure figures are categorised correctly. Ensure written documentation and rules are shared with compliance teams and classifiers. You could work with a CRS & FATCA compliance expert, outsource your classifications, or use specialised software that ensures entities are classified accurately according to the latest regulatory guidelines.

Outsourcing classifications can be an ideal solution for TCSPs. Learn more about the benefits of outsourcing classifications here including how this solution can help you to focus on higher-value compliance work.

3. Failure to Stay Updated with Regulatory Changes 

The Mistake

Regulations around CRS & FATCA frequently change, and failing to stay current with updates can lead to accidental non-compliance.

Why It Happens

Regulatory updates often happen quickly, and without dedicated resources monitoring these changes, organisations risk falling behind.

How to Avoid It

Subscribe to your local competent authority’s newsfeeds and any subscriber mechanisms to ensure you stay in the loop. Diarise an AEOI regulatory meeting once per year before commencing CRS & FATCA classifications and ensure the team is abreast of any changes which will affect CRS & FATCA compliance, for example due diligence, onboarding clients, classifications and reporting. Furthermore, you could take a step to partner with a compliance provider who actively monitors regulatory changes and integrates them into your compliance processes.

“The advice and guidance for our team was invaluable. Thank you Reporting Services. We would highly recommend.”

TSCP Managing Director
Isle of Man

4. Lack of Staff Training and Awareness 

The Mistake

When staff aren’t adequately trained in compliance, they’re more likely to make errors or miss key steps in the reporting process.

Why It Happens

Compliance training can be resource-intensive, and some TCSPs may underestimate the need for regular training. Organisations can treat training as a single event rather than an ongoing process, which fails to address regulatory updates or staff turnover.

How to Avoid It

Hold regular in-house training sessions, to keep your team up-to-date on the latest standards and best practices. Within staff training, include real-life examples and familiar income streams from your TCSP or Family Office so the theory can be put into practice. As CRS & FATCA compliance is a specialised area, experts can provide dedicated training and reviews to ensure your TCSP is ahead of the game.

Our CRS & FATCA Health Check Service is designed to provide a comprehensive review of your existing policies, procedures, and reporting mechanisms, giving you peace of mind and a solid foundation for any future audits. Discover how we can help your TCSP or Family Office be audit-ready here.

5. Ignoring the Benefits of Automation 

The Mistake

Many organisations still rely on manual processes, which can lead to errors, inefficiency, and a lack of scalability.

Why It Happens

Some organisations are reluctant to invest in automation, viewing it as unnecessary or too complex to implement. Unfortunately, a fear of change can lead to falling short on the benefits of automation. The industry is moving towards automation. Staying manual might mean falling behind competitors who are already reaping the rewards of streamlined compliance.

How to Avoid It

Embrace automation to streamline repetitive tasks, reduce errors, and free up your team to focus on higher-value CRS & FATCA compliance work. Automation also ensures that data is managed consistently, even as requirements grow.

Conclusion 

Achieving compliance with CRS & FATCA requires careful planning and execution. Avoiding these common mistakes will not only keep your organisation compliant but also build trust and credibility. If you’re looking to strengthen your compliance process, our team specialises in providing tailored CRS and FATCA solutions designed to prevent these pitfalls.

Reach out through our Contact Page for more information on CRS & FATCA consultancy, outsourcing, compliance documentation, or health checks for your TCSP or Family Office.