ZATCA issues new requirements mandating all KSA Reporting Financial Institutions to file an audited FATCA and CRS certification of compliance on an annual basis

On Thursday, 18 August 2022, Ministerial Resolution No. 131 was issued which requires all Reporting Financial Institutions in the Kingdom of Saudi Arabia (KSA) to annually file an audited Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) certification of compliance to the Zakat, Tax and Customs Authority (ZATCA).

Authorities across both the Middle East region and globally are intensifying their FATCA and CRS enforcement efforts and have taken similar certification and/or review based approaches to ensure that Reporting Financial Institutions are complying with their obligations. 

Accordingly, the new requirements in KSA mandate Reporting Financial Institutions (which generally includes banks, investment firms/funds and certain insurance companies) to be audited for FATCA and CRS purposes, and to file an annual certification of compliance to ZATCA. 

The resolution states that the audit review process should include the following: 

  • Verifying the classification of the entity as a Reporting Financial Institution;
  • Confirming if the Reporting Financial Institution has implemented appropriate systems and internal processes to enable it to comply with the regulations; and
  • Carrying out sample testing to ensure effective practical implementation in relation to:
    • New and pre-existing accounts – specifically, that the proper due diligence procedures are being carried out with respect to account holders; and
    • Reportable and non-reportable accounts – to check that reporting is accurate, and there is no under or over reporting.

The deadline for filing the audit certificate is 1 August annually, noting that FATCA and CRS certifications must be issued separately (given the differences between the regulations). 

Further information has also been provided detailing the financial penalties for non-compliance, the specific procedures for imposing fines and the power for ZATCA to conduct additional reviews itself.

It is important to note that although the deadline for filing the first annual audit certificate is 1 August 2023, the review will be conducted in relation to the previous calendar year i.e., 1 January 2022 to 31 December 2022. 

Given that the FATCA and CRS regulations have been in force in KSA for over five years, the expectation is that Reporting Financial Institutions should already be in compliance and that FATCA and CRS implementation is by now, business as usual.

However, for KSA Reporting Financial Institutions that are either not diligently complying with the regulations or would like to ensure that they are well prepared for the annual audit, the time to act is now – as this would allow you to identify and rectify any potential implementation gaps or non-compliance issues prior to the cut-off date of 31 December 2022. 

As a brief summary, the FATCA & CRS general compliance requirements include the following:

  • Registering on the relevant portals
  • Obtaining a Global Intermediary Identification Number
  • Updating new account holder onboarding forms
  • Conducting the due diligence reviews on pre-existing accounts
  • Establishing an internal governance framework
  • Providing training to staff
  • Reporting reportable accounts

Deloitte has a dedicated FATCA and CRS team that has been supporting leading regional and global financial institutions with their compliance requirements over the past ten years. 

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