Centenal: Automated CRS Compliance

The global financial crisis of 2008 was the catalyst not only for the FinTech revolution but also a veritable explosion in regulatory changes, principally lead by the OECD. Modern regulations now require Financial Institutions to comply with complex reporting requirements. The OECD Common Reporting Standard (CRS) is correctly viewed as highly complex and operationally difficulty. The global annual costs of complying with the CRS is thought to be in excess of 12.5 US$ billion, involving over 400,000 Financial Institutions spread across 104 countries reporting in excess of 47 million Financial Accounts.

In the face of this unprecedent regulatory change, Financial Institutions are increasingly turning to technology to try and find a sustainable solution. Centenal a Singapore based, LegalTech company, has been leading the way with its CRS Expert reporting software.

Under the leadership of Zac Lucas, founder and head of legal at Centenal, the company has created CRS Expert an end-to-end solution that covers each stage of a client’s CRS reporting lifecycle, from Onboarding, to Monitoring to Reporting. “CRS Expert was designed to address each stage of the CRS compliance function and not just the reporting stage, we observed that many vendors simply provided solutions to assist at the reporting stage, but on the ground compliance teams were struggling with understanding application of the rules and effective client account monitoring; reporting was not the priority, what the teams needed was analytical support and a modern IT infrastructure to easily facilitate reporting” says Lucas.

Centenal’s CRS Expert is built on a visualized graphical user interface comprising icons representing client structures, including companies, trusts, foundations and mutual funds. Real world client structures are graphically reproduced with the software capable of then applying computational algorithms to determine not only the CRS reporting outcome, but also the structures’ ultimate beneficial owners. The computational aspect of the software permits automatic CRS outcome analysis to be produced both for annual reporting as well as for compliance audit purposes. Changes to a client’s account, whether as a result of a change of status, or change of tax residence are able to be monitored in a live environment where the CRS outcome is automatically re-calculated by the software. Automated XML schema conversion and reporting is the final stage of the automated software support. “It was important that we created an application that was easy to use, visualized, and that could be a centre point for each team, whether operations, tax, compliance or front office relationship managers, to easily input relevant client data, so that we could avoid manual reconciliation of fragmented client data at the end of each year – this is where the real inefficiencies occur in the present “spreadsheet” approach to complying with the CRS” says Lucas.

CRS audits are expected to begin in the second half of 2019 in readiness for the global CRS peer review process which is due to begin in 2020. “The CRS audit process will be fraught, as Tax Authorities scramble before the end of the year to both audit a reasonable sample of the financial sector and issue CRS specific guidelines, for Financial Institutions this will be the first time that their CRS compliance will be put to the test, anticipating this we purposely included audit trail and written report outcomes in the software to allow Financial Institutions to easily explain their reporting” says Lucas.

Centenal is now working on various other CRS derivative products, in order to keep up with changing regulatory demands, including a risk assessment tool designed to identify clients subject to CRS Avoidance “Mandatory Disclosure Rules”. Centenal intends to be at the forefront in providing legal and regulation technology solutions for the Financial Services sector.