At a time when financial transparency is not only valued but also mandatory, financial market participants are forced to navigate a complex maze of reporting obligations. The CRS, MAI55, FATCA, and CESOP regulations aim to combat tax avoidance and ensure integrity in financial markets, but they impose a significant compliance burden on financial institutions worldwide. How can market participants effectively manage these obligations? Is there a way to streamline compliance processes without compromising accuracy and reliability? In this interview, Jonas Cirtautas, Product Manager at Inventi, discusses the value of an automated solution in facilitating regulatory reporting and ensuring compliance with CRS, MAI55, FATCA, and CESOP requirements.
What are the biggest challenges faced by payment institutions when reporting?
One of the more significant challenges is the information system for financial institution reporting to the Lithuanian State Tax Inspectorate and its requirements. Through long-term service we understand well how this system works, as the requirements are somewhat complex and can be difficult to adhere to.
In terms of CESOP compliance for payment institutions, the challenges are even more unique. The requirements, processes, and reporting formats of the tax systems of the 27 EU countries are different, and they significant time and resource investment to fully comprehend. Some market participants may need access to certain countries unexpectedly, as organizations may be unable predict which countries their clients will make money transfers to or from. Reporting can, therefore, take a lot of time and effort.
Recognizing that this is a substantial administrative burden for market participants, requiring significant time, resources, and process knowledge, we help them to overcome these challenges. The clients upload the data to us, and we provide them an already compliant file in the correct format for that EU Member State and verified for a successful submission.
Which companies are interested in an automated solution?
Our solution is designed for financial market participants’ reporting - fintech, banks, and other payment institutions licensed by the Bank of Lithuania, which are obliged to submit daily and annual reports to the State Tax Inspectorate of the Republic of Lithuania (STI) for the following reports:
- The Common Reporting Standard (CRS),
- FATCA (Foreign Account Tax Compliance Act),
- In accordance to Article 55 of the Law on Tax Administration of the Republic of Lithuania (MAI55).
The reporting service is also available to companies operating in any country in the world with activities in Europe, which must report to some, or all of the 27 European Union (EU) countries' public financial institutions under the CESOP (Central Electronic System of Payment Information) regulation.
Is the reporting solution scalable to accommodate the growth and development of payment institutions?
Our mission is to ensure an easy compliance process for all organizations - from the smallest to the largest. We are equipped to handle both small and vast amounts of data.
You say it's suitable for both large and small businesses?
One of the advantages of our system is that it comes in 2 operating models. The first one, which we recommend for larger organizations, is integrated directly into the client's IT system, and the data to generate reports is obtained without the client's manual involvement; they just need to press a button. Why do we recommend it for larger companies? This solution requires an investment in the client's existing IT infrastructure, which needs to be prepared for specific changes and is suitable for large data volumes. However, the investment pays for itself over time.
For smaller companies, we offer a more straightforward solution: we generate reports based on the client's data in Excel format. This system model is particularly relevant for start-ups that need to get to market as quickly as possible and with as little investment as possible. Our solution takes much of the work of preparation off their shoulders.
Which roles can benefit most from this solution?
The solution would make the work of compliance managers and specialists much easier in larger organizations. In smaller organizations, it will help data analysts, operations managers, and finance staff work in compliance.
We simplify their work by providing automated data reporting. Suppose the volume of data is not huge, and there is no need for IT intervention. In that case, almost everything can be handled for the customer without investing in additional technical work for integration with the tax office.
What are the main advantages besides saving time and resources?
The most significant advantage is that we can substantially reduce the headache of compliance. We have a deep understanding of these data requirements and a clear understanding of our client's needs. We have translated the system's technical specifications into plain language to make it easy for customers to understand how it works. We are also constantly improving the system and ensuring it meets the latest requirements and latest validations. For example, now that we know that new technical specifications will be required for CESOP reporting next year, we are already preparing the relevant updates.
What problems can it help prevent?
For example, if companies provide incorrect data, it may be rejected, and the reasons for rejection and suggestions for corrections are sent back in technical language requiring an understanding of the technical specifications.
We translate the information about errors into human language and allow them to be corrected directly by logging into our system so that the customer does not have to do it manually. In addition, we have built in our own additional rules that automatically prevent the submission of incorrect data, which protects the customer from processing such data and then needing time to correctly submit the corrections required.
Why is reporting automation seen as a tool for successful compliance, and what is its precise value to companies?
- Reduces human data collection and reporting errors and consistently applies regulatory rules.
- Simplifies the compliance process by significantly reducing the time and resources spent on manual data processing.
- The solution is continuously updated to meet new requirements.
- Automation reduces the risk of non-compliance and the consequent high fines.
- Allows institutions to reallocate resources to areas that add more value to the business rather than devoting them to manual compliance processes.
- Improves data integrity and security, essential when handling sensitive financial information.
- Businesses that manage compliance effectively can react more quickly to market and regulatory changes, giving them a competitive advantage by reducing their compliance investments.
Where do I go to start benefiting from the solution today?
Contact Inventi. We offer not only a system but a partnership that accompanies our clients on their complex journey through compliance. We help you understand, advise you on all the issues, and resolve challenges promptly. We can be a partner from the very first steps of a payment institution in the market.