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Case Study
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Case Study

How banks can fight tax crime, be compliant and reduce costs parallelly

EY teams helped a major international bank leverage technology to establish effective control over its customer tax compliance procedures.


Can automation be both cost-effective and effective against tax crime?

New global tax regulations have been effective at combating tax evasion, but implementation can be expensive.

In 2010, the US Government passed FATCA (Foreign Account Tax Compliance Act), a piece of landmark financial regulation that requires financial services firms around the world to report on any foreign assets held by US-based account holders.

The compliance program – an effort to identify and remediate instances of tax evasion – was then replicated globally with the introduction of the Common Reporting Standard (CRS) in 2014. Developed by the OECD, the CRS applies similar principles to FATCA, but on a global basis, resulting in inter-governmental sharing of customer tax data across more than 100 jurisdictions that have adopted the CRS.

However, despite being an effective tool for combating tax fraud, FATCA and CRS have been expensive to implement for financial institutions globally – with hundreds of millions of dollars in costs being incurred across the financial services industry.

One global bank feared that the same would be true of its CRS compliance implementation. Though eager to comply with regulatory standards and supportive of their aims in cracking down on tax crime, it also wanted to find a way to manage compliance costs. To this end, it turned to EY teams to help it develop a cost-effective solution for supporting effective regulatory compliance.

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Leverage automation to create continuous compliance

Automated compliance solutions provide a cost-effective way of supporting tax authorities.

The bank initially put out RFPs for seven different areas they believed would need to be addressed – with the initial intention of engaging seven separate service providers. However, EY teams evaluated the problem and recognized it could help the client address all their needs with a single solution. Starting in 2016, EY teams were brought on board to build and provide this all-in-one solution.

Going live in 2018, the solution had two main components: an automated reporting engine and a data classification engine.

The core of the solution was built on Microsoft stack technology, and provides a broad range of customer tax solutions. These allow the client to comply with its detailed customer tax compliance requirements in a cost-effective and automated way.

The EY Customer Tax Operations and Reporting Services (CTORS) solution suite can be provided to clients as a managed service, through our Microsoft Azure hosted instances. Alternatively, it can be deployed directly to clients via either on-premises or cloud environments.

The data classification engine and reporting engine adopted by the bank helps in several ways. It helped automated review of tax status changes when a customer changes their personal details (for example, following a change of address). It provides automated determination of customers whose details are required to be reported. And it automates the production of filings to be submitted to global tax authorities.

The solutions are also fully maintained by EY teams, determining that tax rules and requirements within the solutions remain in step with an ever-changing regulatory landscape. Based in offices around the world and providing coverage of more than one hundred global tax jurisdictions, EY teams could observe local regulatory conditions and update the platform accordingly, with the bank’s compliance measures shifting in turn.

For example, if tax regulation changed in Malaysia, the regional EY teams would flag this, and update the impacted solutions. The bank’s compliance would be guaranteed, without internal stakeholders needing to lift a finger. This information then populates a library of tax regulation information, which can be used for other clients.

In addition to the managed service elements, the solution also gives the bank enhanced access to customer and operational data – providing an opportunity to generate much deeper insights around customer behavior and other operational risks.

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Helping reduce costs for banks, while combating global tax fraud

EY solution is becoming an industry standard for supporting regulatory compliance.

Thanks to the EY solution, the bank now has a powerful, cost-effective, and automated solution, that supports full compliance within global tax regulations. It also has enhanced visibility of its tax risk and status, and enjoys lowered operational costs. The systems developed by EY teams have now taken over the daily data processing for millions of the bank’s clients, and the bank is now fully equipped to help tax authorities identify and target tax evasion around the world.

But the impact of the project has gone beyond just the bank itself. Parallel to the development of the initial project, EY teams also worked to develop a global tax compliance solution, using the work with the initial client as a pilot.

The solution now services around 500 global cross-sector FS clients, from small wealth managers all the way up to major banks and insurers. In fact, we estimate that around 80% of tax reported in the UK alone has been done so via EY services and solutions. It is now more than a one-off solution – rather, it is a powerful, connected tax compliance utility service.

All this is helping banks and authorities everywhere reduce costs, fight tax crime, and build trust in the global financial services (FS) industry as a whole.

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