Private capital and investment managers may have FATCA and CRS firmly on their radar, but a closer look at day-to-day operations tells a more complicated story.
While reporting deadlines are broadly being met and regulatory frameworks are reasonably well understood across the industry, the operational reality for many compliance teams remains laborious. Staff continue to spend considerable time chasing documentation, validating investor data and reconciling inconsistencies between internal records and third-party providers. The problem, according to RegTech firm Label, is not a knowledge gap — it is the way compliance frameworks have been built from the ground up.
Fragmented data is the root of the problem
In many organisations, investor tax data does not exist as a single, coherent dataset. Instead, it sits scattered across onboarding platforms, fund administrators, internal systems and external reporting providers, with each holding its own version of documentation, classifications and underlying records.
Whilst each component may function adequately in isolation, the combined effect creates significant fragmentation. The same investor data ends up duplicated across multiple systems, interpreted differently depending on the environment, and only consolidated when reporting season arrives, Label said. A disproportionate share of compliance effort is consequently devoted to reconciling data rather than proactively managing it.
Remediation as the norm, not the exception
Label highlights recurring remediation cycles as one of the clearest signs that this fragmented architecture is not working. Documentation gaps, classification errors and data inconsistencies routinely surface in the weeks before reporting submissions are due, prompting teams to undertake extensive outreach to investors and cross-system reconciliations that have come to be treated as standard procedure.
In reality, these exercises are symptomatic of an underlying data problem, it said. Where documentation is properly validated at onboarding and tax data is maintained consistently throughout the investor lifecycle, the majority of these last-minute issues can be identified and resolved far earlier.
Legacy frameworks struggling to keep pace
Many of the compliance frameworks currently in operation were built over a decade ago, designed primarily to meet new regulatory obligations as quickly as possible at the time, it said. That urgency led to operating models built around existing systems, manual workflows and a heavy reliance on external providers.
The environment has since shifted considerably. Investor populations are larger and more globally distributed, fund structures have grown more complex, and reporting obligations now routinely span multiple jurisdictions. The infrastructure underpinning many compliance programmes, however, has not kept pace — leaving firms managing frameworks that are increasingly difficult to scale without adding significant manual effort.
A structural shift towards structured tax data
What is beginning to emerge across the industry, Label notes, is a more fundamental rethink of how these programmes are designed. Rather than treating documentation, data management and reporting as three separate processes, firms are starting to manage tax data as a structured, consistent dataset maintained throughout the investor lifecycle.
This means validating documentation at the point of onboarding, standardising key tax data elements and keeping that data consistent across systems. Material changes to an investor’s tax profile can then be caught and addressed as they occur, rather than discovered during a periodic reporting cycle.
Technology alone is not enough
Technology is undoubtedly an important enabler here — particularly in areas such as document processing and automated data validation. But Label is among those arguing that technology alone does not resolve the full operational challenge.
Increasingly, firms are adopting hybrid operating models that pair technology with specialist operational expertise. Managed services and hybrid arrangements allow organisations to retain control over their core compliance framework whilst drawing on external support for documentation review, classification governance and reporting preparation. The goal is not simply to get through each annual reporting cycle, but to build a compliance programme that is consistent, scalable and less reliant on manual coordination.
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