Hawk-i - 28 March 2019

Global regulatory changes affecting the financial market place in 2019

In recent years, financial regulators across the world have introduced amendments to legislation that have affected virtually every area of the markets. These changes  have seen significant developments in the financial services sector and as a result the global asset management & financial industry is undergoing unprecedented transformation in a challenging environment.

Tax authorities around the world have responded to the release of the OECD’s final reports, imposing stricter documentation and implementation of reporting requirements like the Common Reporting Standards (CRS) and Base Erosion Profit Shifting (BEPS), and applying penalties for non-compliance. Understanding these changes and adopting them quickly will safeguard survival in an ever evolving landscape and ensuring that you are working with the right advisors and partners puts you at the forefront of industry changes and events.

A new regulatory paradigm

The future, however, still promises more developments and changes in the international tax landscape. A short recap;

  • Exchange of tax rulings Transparency is expected to be a key element for the next months. Countries will continue to exchange tax rulings, and their efforts to comply with the  BEPS standards  will be monitored.
  • Country-by-Country Reporting The Action 13 country-by-country (CbC) reporting requirements have already been implemented by a number of jurisdictions, and tax authorities will start analysing the first reports exchanged in 2018. Moreover, the number of signatories of the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports  will increase.
  • Anti-Tax Avoidance Directive  (ATAD). Priority of the EU Member States will also be the implementation of the Anti-Tax Avoidance Directive (ATAD), which is  applicable as from 1 January 2019. The ATAD indicates that Member States shall adopt and publish the laws and regulations necessary to comply with these rules and implement anti tax abuse measures:
    • Transfer pricing The OECD is currently undertaking work on the transfer pricing aspects of financial transactions, and further developments are expected in this regard in 2019;
    • MIFID II and GDPR, In the EU, firms began in 2018 with implementation of Markets in Financial Instruments Directive (Mifid II) and imminently faced introduction of General Data Protection Regulation (GDPR). The focus on cyber security is only likely to intensify too as regulatory expectations in this area are still becoming clear;
    • Mandatory disclosure rules Directive (DAC6).  DAC6 obliges intermediaries and taxpayers to report potentially aggressive tax planning arrangements and has been designed to further insulate the Common Reporting Standards (CRS) against new avoidance schemes designed to get around its requirements. The scope of the regulatory reporting is very wide requiring intermediaries and companies within the European Union to address those reporting obligation more intensively In addition, multinational corporations that advise their group companies could also be caught by the rules as intermediaries. Although the rules will not enter into force by July 2020 across the EU member states, tax payers and intermediaries will need to review their cross border arrangements now to make sure they are not unexpectedly caught by the rules in two years. It should be noted that tax payers and intermediaries are subject to report these tax arrangements as of June 25, 2018 retroactively. This retroactive aspect forces intermediaries, multinational corporations and tax payers to start analysing their transactions now  and review their activities, processes and supporting IT landscape , in order to determine the scope what needs to be reported as of July 1, 2020. 

Add to this the current geopolitical uncertainties like Brexit and international trade and currency wars  and it is clear that financial institutions, multinational corporations, high net worth individuals & family offices as well as professional service providers are facing the challenge of adapting to a market environment that is evolving quickly, if not revolutionising. More complex client needs, as result of new regulatory requirements, changes in operational risk management,  reassessment of place of establishment, shareholder expectations, stricter new regulations and milestone developments in technology, will be driving future business models and shaping their requirements.

These changes in regulation impact every client differently and we see so many new clients coming to us asking for our support, as their previous provider was unable to support them in a way that was compliant, but also helped them to meet their objectives. It is important that you reduce your risk by either knowing about upcoming changes or aligning yourself with advisors that will do this on your behalf and guide you through complex regulatory changes.

We at Hawksford are continuously scanning  the regulatory horizon globally and actively engage in dialogue with our clients, regulators and industry bodies to bring you insights about the changing landscape and its impact on your business. We bring deep expertise and an agile approach to solve your most important problems. We see these regulatory  developments as an opportunity, an opportunity to show our solution driven approach and an opportunity to build trust.

If you would like to speak to Jeroen about how Hawksford might be able to support you or your business, please contact him here.

Email Jeroen

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