BEPS, ATAP, CRS, FATCA? What does it mean for the Infrastructure investor community?
Following the financial crisis in 2008, governments decided that transparency about beneficial ownership and the international exchange of information thereon would make tax evasion impossible and tax avoidance less attractive. To achieve such a goal, several key initiatives were introduced. Among them, the Foreign Account Tax Compliance Act (FATCA); Common Reporting Standard, (CRS); the Ultimate Beneficial Owner (UBO) Register, and the 4th EU Anti-Money Laundering Directive (4th AMLD).
What do these initiatives really mean for the infrastructure investor community?
First of all, any fund administrator and fund manager must ensure that all fund and special purpose vehicles become compliant, first by undergoing classification and then preparing applicable registrations and reports in a timely manner. Furthermore, they have to ensure that all investors, to the extent applicable, are properly identified, checked and registered, with an understanding of the different jurisdiction needs and how they apply guidance, local laws and workflows.
Clearly this means more administrative work, with fast requests for action and a heightened risk of not being consistent or compliant. Add in the increased liability and potential for reputational damage, and you may never sleep again.
There is a solution. TMF Group can take care of your administrative needs in almost every location, allowing you to focus on your core business as an administrator and/or manager.
Why is this more relevant now than in the past?
Until recently, authorities (excluding those in the US) were somewhat relaxed about matters such as beneficial ownership, as neither tax planning nor proper governance were considered serious issues in the professional (institutional) investment industry.
Indeed, tax authorities found it difficult to collect and review all the relevant data involved, which in turn limited their capability to enforce stronger regulations. However, the rise of registration requirements, exchange of information and most notably the increased use of big data techniques has changed the situation completely.
Combine the more aggressive enforcement stance with the push-back to tackle tax avoidance and it’s likely any manager or administrator would agree that playing the game properly these days calls for ramped-up administrative capabilities.
There is a flipside to this issue. Infrastructure investors are typically among the most conservative and their stringent environmental, social and governance policies are not only applied to the investment decision-making process, they also expect their investment manager and administrator to have a rock-solid compliant, global operating model.
So what is the answer to these increased demands and reputational risks?
Of course the option always exists to set up a large administrative and governance apparatus by investing in expensive systems and infrastructure. The combination of increased demands, big data techniques, and enforcement will increase the need to ensure that all investor data is regularly checked through research systems; that reporting under any applicable regime is consistent both at fund and SPV or PropCo levels; and that all information in these reports is checked and updated in a timely manner.
But this approach brings its own set of problems. It conflicts with the need to be lean and mean. Importantly, it can shift the focus of the manager and administrator away from investments and investors towards governance and compliance tasks – areas that are not core to the business.
Moreover, administrative and governance requirements are difficult to scale up or down in line with the level and size of funds and the number of investors. This could get worse when results are not as expected. Still, it needs to be done. And the most intelligent way to do so is via a specialist with the dedicated systems, processes, procedures and focus to cost effectively fulfil these administrative tasks.
How can TMF Group fulfil your needs?
TMF Group has specialists in more than 80 countries. We are always there to support you meeting your global regulatory and statutory requirements, and we have the right administrative capabilities and capacity. We allow you to leverage our intelligent accounting, reporting and research systems for proper data extraction and exchange, and access to know-how that is constantly and consistently updated.
TMF Group stands by offering localised services on a global scale, while remaining close to you. To realise this, we have a network unique in size, knowledge and reach.
What do you have to do?
Have a conversation with us, so we can talk about how FATCA, CRS, UBO Register, and other regimes affect you and your clients.
What happens after our conversation?
A step plan will be created to help you decide which set-up best fits your compliance and governance administration needs, so you can enhance your flexibility and lower your operational costs. Externally sourcing these activities to a dedicated and reliable global player like TMF Group shows that you, as manager and administrator, take due care while remaining focused on your business and retaining efficiency.
TMF Group builds bridges between your needs and your results.