Compliance Checklist for Financial Institutions in Luxembourg: A Must-Have in Today’s Regulatory Landscape
In the face of increasingly stringent Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) regulations, financial institutions in Luxembourg must ensure they are adequately prepared to avoid hefty penalties. The Luxembourg Tax Authorities (LTA) have been stepping up their audits, and a recent law amendment has introduced new requirements for reporting financial institutions.
Key Changes
On June 18, 2020, the Law was passed, explicitly demanding that Luxembourg reporting financial institutions maintain records of actions taken and supporting evidence used to fulfill due diligence and reporting obligations for 10 years. Additionally, the LTA’s investigation powers have been extended, allowing them to access relevant records and information for up to 10 years.
Importance of Compliance
To ensure compliance, Luxembourg reporting financial institutions are advised to review and update their processes and procedures to meet OECD, local regulator, and LTA requirements. An efficient operating framework is crucial in demonstrating FATCA and CRS compliance in a reliable and provable manner.
Essential Components of an Efficient Operating Framework
- Organizational structure with defined roles and responsibilities
- Tailored training program for relevant staff members
- Well-defined and documented processes and procedures
- Strong control framework
- Robust record-keeping and IT systems
Deloitte’s FATCA and CRS Health Check
To help Luxembourg reporting financial institutions meet these regulations, Deloitte offers a comprehensive FATCA and CRS health check. This service assesses compliance and identifies potential gaps by reviewing:
- FATCA and CRS policies and procedures
- Governance and controls in place
- Data quality
- A sample of accounts under a risk-based approach
- Reporting quality
The Deloitte experts summarize the findings and suggest remediation measures in a written report, which can be part of an audit defense documentation. The health check may also help identify non-reportable clients incorrectly documented for CRS, potentially requiring DAC 6 reporting.
Customized Approach
Deloitte’s methodology is flexible and can be tailored to individual needs. We can use a risk-based approach or base it on internal audit programs, performing a fully-fledged review or focusing on high-risk areas.
Additional Support Services
- Drafting FATCA and CRS policy/procedures
- Providing tailor-made FATCA and CRS training
- Answering technical questions and providing regulatory updates through a hotline
- Offering FATCA and CRS reporting solutions through Deloitte Solutions
Conclusion
In today’s increasingly complex regulatory environment, financial institutions in Luxembourg must prioritize compliance with FATCA and CRS regulations. By reviewing and updating processes and procedures, implementing an efficient operating framework, and seeking expert support when needed, they can ensure reliable and provable compliance.