Trustees have never had more reason to ensure that their internal systems and controls are fit for purpose.
The main drivers behind the need to assess these are:
- Increasing global scrutiny of wealth management structures by tax authorities
- Global transparency and exchange of information
- The establishment of beneficial ownership registers
- The pressure on and from regulators to demonstrate commitment to high levels of anti-money laundering, anti-bribery and corruption, and anti-terrorist financing and proliferation legislation
It is therefore vitally important that Trustees keep up-to-date and accurate books and records, particularly accounting records.
- Ethical obligation
Most professional Trustees are well aware of the importance of properly managing trust accounting. Mistakes made in relation to trust accounting usually have more to do with honest mistakes and bad systems than malice. Nonetheless, an honest mistake can have severe effects for both the Trustees’ reputation and that of the client, which is not a mistake a Trustee can afford to make.
The ICAEW (Institute of Chartered Accountants in England and Wales) provides the following principle note on the preparation of accounts by Trustees;
“Trustees have a fundamental duty to maintain and prepare accounts and to attend to compliance obligations such as completion of tax returns. Members are reminded that they have a particular responsibility, in view of their professional expertise, to ensure such accounts or other relevant returns are completed and/or maintained to appropriate standards.”
- Global transparency
The Common Reporting Standard (CRS), formally referred to as the Standard for Automatic Exchange of Financial Account Information, is an information standard for the automatic exchange of information (AEoI), developed in the context of the Organisation for Economic Co-operation and Development (OECD). The legal basis for the exchange of data is the Convention on Mutual Administrative Assistance in Tax Matters and the idea is based on the USA Foreign Account Tax Compliance Act (FATCA) implementation agreements.
CRS was adopted on January 1, 2016 by applying specific amendments to the directive for administrative cooperation in the field of taxation. First reporting is taking place in 2017.
The following 54 countries have committed to start reporting in 2017: Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands and United Kingdom.
The following 48 will start to report in 2018: Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Bahrain, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Dominica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Lebanon, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Saint Maarten, Switzerland, Turkey, United Arab Emirates, Uruguay and Vanuatu.
- Regulatory scrutiny and requests for information
Tax avoidance and wealth management have become highly politicised globally and, within the next two years, authorities in revenue hungry countries will have access to a huge volume of information on individuals.
Trustees should expect high profile, big impact, clients (Politically Exposed People, Commercially Exposed People and Media Exposed People) to be targeted first. It is vital that Trustees have accurate and properly prepared books, records and reconciled Trust accounts that clearly show the segregation of income and capital. These may need to be provided in the likelihood of requests for information from regulators and tax authorities.
How Dixcart Can Assist and Who to Contact
The Dixcart Group offers over 45 years of experience in acting as Professional Trustees in 10 jurisdictions, and over 65% of its staff are professionally qualified accountants, lawyers and company secretaries.
Our expert team of professionals can assist Trustees to regularise their client accounting function, to review account preparation systems, procedures and controls and/or to act as an outsourced Trust accounting provider.
Please email Christine Breitler at the Dixcart office in Switzerland: firstname.lastname@example.org or phone: +41 22 518 0001 to arrange a meeting to discuss your requirements.