TECHNIC AL
efforts to focus on essential data that is of long-term interest, such as the tax residency of the investor, can help reduce compliance effort required to meet the reporting requirements.
Funds must also have comfort that the right safeguards are in place across their various third party providers in terms of cross-border data transmission. Taking steps to understand the unique regional requirements for data security, privacy and encryption that allow for centralisation of data and data processing across third party providers will be critical to defining a cost-effective future state operating model. The recently successful challenges to the Safe Harbour Rules for data transfer between the EU and the US highlight that this is a complicated area of the law which can change rapidly.
Develop assurance frameworks Given the number of stakeholders potentially involved in supporting a hedge fund’s AEOI compliance program, a final consideration is the need for a robust assurance framework. Such frameworks are expected to be necessary, particularly for larger funds, to allow comfort to be gained that all necessary procedures are being undertaken effectively to meet their compliance requirements on an ongoing basis. Within larger hedge fund organisations, it is not unusual to see operational oversight teams in place to monitor and oversee activities of specific external service providers, with agreed procedures in place to periodically assess performance to ensure continuity and quality of service provision as well as readiness for future compliance requirements.
The months ahead The coming months are a key period for hedge funds in respect of their AEOI compliance programs. The opportunity should be taken to assess, or reassess, readiness for AEOI compliance and the effectiveness of the operating models in place to do so. Ultimately this will be a balancing act between reliance funds should be able to place on the competence and capability of third party service providers, and reasonable steps that should be taken to ensure all the right pieces of the compliance puzzle are not only in place but will operate accurately, efficiently and cost effectively. THFJ
ABOUT THE AUTHORS
Amit Thaker is a Senior Manager in EY’s Financial Services Operational Tax and Technology group focusing on the Wealth and Asset Management sector in the UK. Stuart Chalcraft is a Tax Partner in EY’s Financial Services business and leads its Wealth and Asset Management AEOI group in the UK.
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