Financial Crime World

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KENYA JOINS GLOBAL EFFORT TO COMBAT TAX EVASION

Nairobi, Kenya - The Kenyan government has joined over 30 other jurisdictions worldwide in committing to implement the Common Reporting Standard (CRS), a global initiative aimed at combating tax evasion and promoting transparency in international financial transactions.

What is the Common Reporting Standard?

The CRS requires reporting financial institutions (RFIs) to identify and report the residence of account holders for tax purposes. This includes:

  • Obtaining self-certification from account holders to determine their tax residence
  • Treating certain accounts as Reportable Accounts if they meet specific criteria

High-Value Accounts

For high-value accounts, RFIs must review electronically searchable data and, if necessary, review the customer master file and documents to ensure compliance with regulations.

Special Due Diligence Rules

The CRS also provides for special due diligence rules for financial accounts held by individual beneficiaries, such as:

  • Cash value insurance contracts or annuity contracts
  • RFIs may not consider an individual beneficiary a reportable person unless they have actual knowledge or reason to know that the beneficiary is a reportable person.

Alternative Procedures

The regulations provide for alternative procedures for financial institutions resident in participating jurisdictions. A financial institution is considered “resident” if it can be enforced by the jurisdiction’s laws, and subject to reporting obligations if:

  • It is incorporated under those laws
  • Has its place of management in the jurisdiction
  • Is subject to financial supervision there

Impact on Banking and Financial Sectors

The implementation of the CRS will have a significant impact on the banking, custodial, depository, and insurance sectors, as RFIs must treat certain accounts as Reportable Accounts and report information to the tax authorities. This includes:

  • Pre-existing individual accounts that meet specific criteria
  • New individual accounts

Commitment to Compliance

“We are committed to ensuring compliance with international standards and promoting transparency in our financial transactions,” said [Name], a spokesperson for the Kenyan government. “The CRS is an important step in this effort, and we are working closely with international partners to ensure its successful implementation.”

Contacts

For additional information on the CRS and how it affects your business, please contact:

  • Ernst & Young (Kenya), Nairobi: Francis Kamau, Christopher Kirathe, Hadijah Nannyomo, Robert Maina, David King’ori, Stanley Maina, Elizabeth Hellen, Denis Maina, Elsie Kimeli
  • Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris: Bruno Messerschmitt
  • Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London: Kwasi Owiredu
  • Ernst & Young LLP (United States), Pan African Tax Desk, New York: Brigitte Keirby-Smith, Dele A. Olagun-Samuel

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition version of this Alert.