Governments around the world are stepping up the fight against tax evasion. Previously, they were content to send requests to one another when they wanted information about the offshore accounts of their citizens. However, there is now a growing consensus that countries should automatically share this information with one another in a process that has become known as automatic exchange of information (AEI).

The best known example of an AEI regulation is the Foreign Account Tax Compliance Act (FATCA), which requires financial institutions around the world to send information about the offshore accounts of American taxpayers to the US Internal Revenue Service. There are many other AEI regulations in other countries and regions, including: the European Union Savings Directive 2 (EUSD 2), the Directive on Administrative Co-operation 2 (DAC 2) and the UK Crown Dependencies and Overseas Territories requirements (CDOT/'UK FATCA').

All of these measures have created a lot of work for market participants – especially FATCA. However, they look modest when compared to the Common Reporting Standard (CRS) – the daddy of all AEI requirements.

CRS is an initiative of the Organisation for Economic Cooperation and Development (OECD). Rather than countries imposing unilateral AEI requirements, CRS is intended to get a large group of countries to agree on a common set of data about offshore account holders, which they will automatically exchange with one another. CRS really gained momentum at the end of October when 51 countries agreed to participate, by signing a multilateral competent authority agreement. Many others have indicated they intend to sign up.

The participation of so many countries in CRS means the volumes of data that must be reported are significant. Many market participants are struggling to file reports on just their US accountholders as part of FATCA. However, they will now have to get used to sending reports on accounts held by citizens of more than 51 nationalities to their respective tax authorities. Also, unlike FATCA, there is no de minimis threshold, which means that all accounts are currently eligible for CRS reporting regardless of the account balance.

A common reporting schema is being developed for CRS. However, authorities in individual countries are likely to amend this to accommodate their local needs. This means financial institutions will need to adopt and maintain many different reporting schemas, along with their associated validation rules and XML schemas.

CRS's ambitious requirements are matched by an equally ambitious implementation timetable. 32 of the countries that signed up to CRS in October have committed to beginning reporting in 2017. This means they must start collecting all of the necessary data in 2016. To put this context, FATCA was signed into law in 2010, but reporting only begins this year.

Many market participants have been overwhelmed by the scale of the requirements that are being introduced by CRS and the speed with which they will come into force. However, the good news is that, if they choose to migrate to the right strategic platform for FATCA, they will be able to leverage it for CRS. Of course, the two regulations differ in terms of their parameters and terminology. However, the processes involved in reporting for both requirements are very similar. Therefore, market participants that choose a flexible, scalable platform for FATCA will also be able to use it for CRS.

When I attended the AEI Forum in London in January, many delegates expressed concerns about the number of different schemas and validation rules they will need to use in order to report to different tax authorities, as part of CRS. Certainly, it would be hard work for market participants to manage all of these schemas and validation rules internally – updating them as the tax authorities issue changes. This why it is important for market participants to partner with a vendor that monitors changes to the schemas and validation rules, and provides updates to its clients.

A final consideration for those preparing for CRS is the usability of their solution. Depending on the size of an institution and the number of US customers it has, it may be possible for business users to manually test the output of their FATCA reporting processes and to sign off on reports one by one. However, as reporting volumes increase massively under CRS, this will be impossible unless users have the benefit of sophisticated dashboards and management information (MI) functionality.

CRS is the most far-reaching AEI regulation to date. However, it is far from unmanageable. By choosing a strategic FATCA solution, market participants can put themselves in the best position to tackle CRS.