The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has imposed penalties on two wealth managers for contraventions of the Common Reporting Standard (CRS) regulations.
The Organisation for Economic Co-operation and Development (OECD) developed the CRS regulation, which was established in the UAE with effect from 1 January 2017. It was created to determine the financial information that must be shared with regards to assets and taxable sums held by an individual in multiple countries – ultimately to combat tax evasion.
Sarwa Digital Wealth
The wealth manager was fined by the FSRA because the regulator said it failed to:
- Apply due diligence procedures as required by the CRS regulations by not conducting reviews to confirm reasonableness of self-certifications received with respect to new individual accounts;
- Document its due diligence procedures and keep records of the due diligence procedures performed, including any evidence relied upon for performance of the due diligence and the measures undertaken to obtain those records; and
- Report information as required by the CRS regulation in a “complete and accurate manner” by failing to report at least 219 reportable accounts.
On 9 June 2022, the FSRA imposed a AED254,000 penalty on Sarwa and directed the wealth manager to undertake action to ensure compliance with the CRS regulation.
Sarwa appealed the penalty and the FSRA reduced it to AED36,000 due to the following reasons:
- It submitted its 2020 CRS return in good faith, based on the incorrect advice of its tax adviser;
- It has a good history of compliance and this is the first instance of non-compliance;
- It is willing to re-submit the correct information required to be reported; and
- It will within a scope and timeframe to be approved by the FSRA undertake a review and remediate its systems, controls, policies and procedures to ensure compliance with the CRS regulation.
ADS Investment Solutions
The wealth and asset manager was fined by the FSRA because the regulator said it failed to:
- Report the information required by the CRS regulation in a “complete and accurate manner”, by failing to collect and report the taxpayer identification number for five reportable accounts; and
- Apply due diligence procedures as required by the CRS regulation, by not conducting reviews to confirm reasonableness of self-certifications received with respect to new individual accounts and new entity accounts.
On 9 June 2022, the FSRA imposed a AED30,000 penalty on ADS and directed the wealth manager to undertake action to ensure compliance with the CRS regulation.
ADS did appeal the decision. But the FSRA has concluded it did not provide a sufficient basis for the regulator to change or cancel its decision or vary the amount of penalty. Therefore, the FSRA decided to uphold its original fine.
Emmanuel Givanakis, chief executive of the FSRA, said: “The ADGM is committed to ensuring its regulations are complied with, including those related to tax reporting, which are based on international obligations and standards. A key objective of the FSRA is to promote and enhance the integrity of the ADGM financial system. Accordingly, the FSRA supports initiatives to make tax systems more transparent, and to prevent practices intended to circumvent tax reporting.”