Firms from all over the world exist to help resolve the question of tax compliance. However, the biggest thing to have hit international tax compliance in the recent few years is undoubtedly the implementation of the Foreign Account Tax Compliance Act or FATCA. Followed closely by the Common Reporting Standard or CRS. TAINA can help banks and financial services companies with both requirements. And much more.
Today tax compliance is becoming digital. In some cases, tax authorities have simply directed it to be digital. In more recent times the pandemic has now forced tax compliance to be digital. And being digital means that more things can be made transparent. Which means that tax compliance is more important than ever before. The fines for non-compliance can be severe.
In 2017 the OECD Secretary General at the time reported to the G20 that the implementation of CRS has resulted in more than €93 billion in additional revenues and that over 500,000 individuals had already disclosed offshore assets. The CRS includes a collection of 100+ countries and more countries continue to join. As a result, financial institutions are having to deal with the ever increasing complexity globally.
Since 2018 there have been several convictions for violating FATCA. The first one involved charges of money laundering. A few year later, in September 2021, Oleg Tinkov was convicted for felony. Prior to sentencing Tinkov paid over $500 million for taxes, statutory interest on that tax and a nearly $100 million fraud penalty.
Closer to home in the banking sector. UBS had a long-standing case in France:
The banking landscape is full of stories about regulatory oversight. Every few months a new story emerges. And many of the cases are now ending up in court with much bigger fines than ever before.
The origins of compliance RegTech
Whilst many of us are becoming used to seeing huge fines for misconduct and other breaches within banks. It will come as no surprise that the market has offered a solution. A solution that over the years has evolved and is now helping solve the problems that the traditional banking industry faces.
In 2010, when FATCA was first set out, it was a huge step forward for tax professionals across the world. By the end of 2015 the process of declaring tax for U.S. citizens in Europe was already agreed and implemented. Other regions of the world followed suit. The project was a massive piece of work that needed engagement from governments as well as traditional banks.
With the Common Reporting Standard, the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) is making in-roads into jurisdictions all over the world. Helping individual governments with the process of implementation and enforcement.
RegTech itself has evolved because of these things as well as other regulatory challenges. With time this has led to multiple sub-divisions of regulatory technology. Some more focused on the analytics and the technology, others more on the risk and compliance. There is also client verification, another area of regulatory technology.
The Value Drivers behind TAINA
DisruptionBanking met with TAINA’s CEO Maria Scott to discuss in more detail the story of the firm and how it works with financial institutions to resolve many of their tax compliance challenges.
Maria is a tax lawyer who has worked at financial institutions and law firms most of her professional life. While she was working in the sector, she “could see first-hand that reputable financial institutions really, really do try to get this right. There’s no one who wants to wilfully not comply with the regulations,” Maria explained.
“Financial institutions throw a lot of money and a lot of people behind this,” Maria explained. She then continued by bringing up the topic of FATCA and CRS. Regulations that she believes are some of the most complex and hardest to keep on top of particularly for global and complex financial institutions, with so many jurisdictions, business lines, legal entities and customer types involved.
But it’s not just the complexity that is a challenge, Maria explained: “Global financial institutions also have to battle with legacy, so many different systems which often do not speak to each other. They have teams of highly skilled people reconciling spreadsheets and doing manual cross-checks. They have customers globally, dealing with different business lines in different jurisdictions. Where tax documentation has to be kept up to date.”
Maria continued, “a real nightmare scenario is if you’re having to ask your customer for documentation 17 times if they engage your 17 different business lines. Adding another layer of operational burden and annoying the customers. Then add the risk of regulatory fines and even potential criminal penalties. Getting this wrong is scary,” Maria added.
“Quite rightly, the C suite are really concerned about the impact of all the paperwork’” All the extra paperwork mean that customers are fleeing to challenger banks. To add to the woe, the more you try to get it right, the worse the customer experience tends to get.
Investing and Partnering with TAINA
The City of London has long been known for its strengths as a financial powerhouse. From leading the global FX markets to pioneering Open Banking technology, there is one other sector that the City prides itself on. Regulatory Technology or RegTech.
Some of the most successful Fintech startups to have come out of the UK have been from the RegTech sector. The RegTech landscape is highly competitive globally, and yet British firms have done well. SteelEye, Elliptic and Regteck are all great examples of the different offerings British RegTech firms offer. But today we are focused on the compliance RegTech TAINA.
British RegTech startups as a sector “is benefiting from the fantastic pool of British regulatory talent and a rich regulatory ecosystem” Maria shared.
TAINA itself is a perfect example of this. It continues to attract the world’s most sophisticated financial institutions as customers and investors. It has been listed in the RegTech100 for 6 years running. TAINA is also a fellow member of the now legendary #Level39, located in London’s Canary Wharf.
In 2020 SIX Fintech Ventures were part of TAINA’s funding round. Last October HSBC Asset Management and Deutsche Bank joined SIX Fintech Ventures as investors in TAINA.
In the case of HSBC, Maria explained how “HSBC asset management invests as a financial investor.” Whilst Deutsche Bank “invested as a corporate venture which invests in line with Deutsche Bank’s mission to shape the future of financial services.” Maria shared how the two types of investment show the diverse appeal of TAINA to financial institutions. In both cases however, the bank investors look to TAINA to deliver outstanding value to them as clients as well as a return on their financial investment.
Maria added how the relationship with SIX Fintech Ventures in Switzerland was another great example of how investors work with TAINA.
Maria explained how SIX investment was an important part of TAINA’s strategy to add value to the Swiss Financial Ecosystem. SIX Fintech Ventures invest with a mission to bring cutting edge solutions to the Swiss Financial Center.
“Switzerland is a very special market” shared Maria, “it requires a great deal of local expertise and presence which is where SIX adds a great deal of value”.
Improving Customer Experience with TAINA
The rise of the challenger banks and the customer experience they have been offering has been one of the main points of disruption. Traditional banks everywhere are inundated with concepts such as the Amazonisation of the customer journey. It even led to a rant at BigTech and the Fintech incumbents by Jamie Dimon of JP Morgan last year.
Also last year, Tony Moroney shared his thoughts with DisruptionBanking on the subject. And whilst its clear that many of the challengers to traditional banking are using the latest methods to engage with their customers. Its not so clear how far these same challengers have come when it comes to being fully compliant with tax regulations. Or whether they are as compliant as some of the traditional banks operating on the market.
However, one doesn’t normally think about customer experience in the context of regulatory technology.
Yet, the team at TAINA believe that traditional banks have an opportunity because of this. “If you think about FATCA. There are painful tax forms that people must complete. Believe it or not, customers are still required to complete paper forms which they often complete incorrectly. Even if you are the biggest financial institution it is hard not to have a few unresolved issues going through a traditional paper-based process,” Maria explained.
The chance for traditional banks to strengthen their approach to customer experience has never been more important than it is now. “We’ve proven with the customer journey, even if they go into detail, that we can help the customer get through it 63% faster. We can reduce going back and forth to customers to tax information by over 85%. We also help the customers correct mistakes in real time so they can submit correct information first time round, quickly and easily. All of the soft aspects of the customer experience,” Maria concluded.
When it comes to the incumbent challenger banks. Maria agreed that they have their own challenges in this space. In many cases they have grown so fast that now they have to work really hard to bring their operational and regulatory compliance operating models to that scale without disturbing customers’ experience. For these players, TAINA has built intuitive customers journeys not involving tax forms at all. Which ensure compliance whilst retaining beautiful customer experience.
With TAINA there is not only the expertise the company has in tax compliance, but Maria also assured DisruptionBanking that TAINA can help financial institutions be a lot smarter and intuitive.
To find out more about TAINA, the below tweet is a great introduction to the benefits the platform can offer customers:
Join us in learning more about TAINA by registering for the UK FinTech Mission to Western Europe which is virtual and free to attend on the 3rd of March. The link through LinkedIn explains more about the event itself.
Another recent story about Maria and TAINA is also worth reading in Business Leader.
Author: Andy Samu
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