Fintechs get ready for new operational reporting requirements
Blog by Mark Schofield, Director – Business Tax, S&W (Bronze sponsor of IFGS)
Fintech has been successful in disrupting and transforming financial services worldwide. A wide range of innovative products and services are now available to customers. This innovation has in many respects run ahead of due diligence and reporting obligations which are largely still based on traditional financial services products. Due diligence and reporting rules which were drawn up 15 years ago no longer reflect the dynamic fintech landscape.
International organisations such as the OECD, and local tax authorities, have acknowledged this potential gap and have spent the past couple of years drawing up new regimes, and expanding old ones, to capture demographic and financial information on the holders of fintech products. These regimes are now ready to go, and fintechs need to get ready to meet these new requirements.
There are three areas of focus – e-money providers, crypto firms, and payments service providers.
E-money providers – Common Reporting Standard 2 (CRS2).
With the rise of digital transactions, tax authorities have recognised the need for comprehensive reporting to monitor e-money flows and ensure tax compliance. The amendments to the existing Common Reporting Standard aim to close gaps in information and bring e-money providers into the fold of global tax transparency.
E-money providers will need to enhance customer due diligence procedures to align with the new requirements, develop or update systems to capture the required data, and validate and submit reporting files on an annual basis.
The regime is live from 1 January 2026. More information about CRS2 is available here.
Crypto firms – Crypto-Asset Reporting Framework (CARF).
Tax authorities have likewise recognised that they do not have the information they need to monitor crypto-asset revenues, especially when it comes to sharing details of trades that are conducted across borders.
Because taxes may need to be paid on crypto transactions, tax authorities are aware that there are and will continue to be gaps between what is declared and what should have been paid and collected.
Crypto firms will need to conduct due diligence to identify reportable crypto users, collect and analyse relevant data points, and generate and submit returns to their local tax authority annually.
Like CRS2, CARF goes live on 1 January 2026. You can find more information here.
Payment service providers – Central Electronic Systems of Payment information (CESOP).
The EU has introduced a new regime to give tax authorities in member states information to detect possible e-commerce VAT fraud carried out by sellers in other members states or in a non-EU country.
CESOP requires payment service providers established in the EU to collect and report information on cross-border payments. This presents challenges in analysing significant cross-border transaction flows and reporting relevant information on a quarterly basis in formats predefined by each member state.
CESOP is live right now. You can find more information here.
Operational reporting requirements are hotting up for fintechs. If you would like to discuss any aspect of this further, please get in touch with Mark Schofield or Will Webber.
