Relationship Managers have one of the most difficult jobs in the world when it comes to GATCA. Typically in any financial services business, it only makes sense to have a relationship management structure at all if the value of business associated with the clients is significant. This means that relationship managers are dealing mostly with high and ultra high net worth individuals as well as the various collective investment vehicles they and their fund managers put together. Same thing happens with family offices. The problem is that the clients in these scenarios are always very smart, very educated and very connected.

In this world, there is no facile discussion of ‘fairness’ in tax. Everyone knows the rules. The regulators write the rules (usually quite badly) and those who have the wherewithal figure out where the holes are and how to ‘optimise’ their net worth. Trust me, if you had a half million pound cheque handed to you, I guarantee your first call would be to an accountant. In the tax world there are rules and degrees of interpretation. When I was growing up in the north of England, my football team, Newcastle United, were famous for their exploitation of the offside rule. As soon as the opposing midfielder got the ball, the entire defensive line would run quickly past the opposing team’s forward so that the mid-fielder couldn’t pass the ball without breaking the offside rule. No-one called it unfair. There were (and are) rules of the game. In some cases, you can use those rules to your advantage. Those who do, often win.

So, the land of the relationship manager is strewn with difficulties and challenges. On the one hand, their main job is to provide a link between the financial firm and the client in such a way as to (i) keep them engaged with your firm and (ii) preclude them form taking their money elsewhere. Depending on the value of the clients, that will usually mean wining and dining (well someone has to do it) and also knowing enough professionally to add value for the client in the use and growth of their wealth.

The problem is that today’s relationship manager also has a key role to play in protecting the financial stability and reputation of the firm he or she works for. Many of today’s regulators have also spent time in the commercial sector. In fact, in several jurisdiction I could mention, there’s something like a revolving door between the large consulting and accountancy firms and the offices of the regulatory bodies. That’s why I remain rather bemused by the way most regulation is not well structured for its intent or its regulatees. However, I digress.

Apart from the vexing moral question of the difference between tax avoidance (entirely legal) and tax evasion (entirely illegal), the GATCA regulations, meaning FATCA, CRS and BEPS, set out to use the financial sector as both unpaid watchdog and unpaid whistle blower. For most financial firms, much of the expenditure in meeting these compliance objectives, is administrative and systemic – reviewing paper and electronic records and setting up control procedures and on boarding policies. However, the relationship manager has also been put on the front line through the concepts and ‘reason to know’ and ‘actual knowledge’. These are particularly difficult in a GATCA world. They were hard enough when it was only FATCA – the RM had only to make sure that anything that was said or implied by their client (at any time, formal or informal), didn’t give the impression of US status. In a conversation at a bar for example, that might be reference to where the client was born, where his parents grew up, whether he or she was educated in the US (leads to the Green card test) or even how many holidays they had taken in the US. Any of these could lead, in the most innocuous of discussions, to ‘reason to know’ that the account record may be unreliable. That puts great pressure on the RM both to know the rules themselves and to apply the correct procedures, both of which can also of course, cause a very big relationship problem through perceived intrusive questioning.

As FATCA evolves into GATCA with the coming of CRS, this problem gets amplified a hundred-fold for RMs. Now, its not just the US to worry about. There are a hundred plus jurisdictions signed up or committed to CRS within the next two years. So, if you’re an RM in a medium to large financial firm, you know that your firm is going to have to create a data file in which each client’s account details, may need to be reported to their home tax authority (without their knowledge or consent). If you have 15 high net worth clients with 19 tax residencies (some might have dual citizenship), that means you’ll need to know how each of those jurisdictions determines tax liability just so that you can figure out whether anything your client says would trigger the ‘reason to know’ or actual knowledge rules.

Now, in the real world, its unlikely to get that complex, but GATCA is going to put a strain on RMs as the body of knowledge they need to have at their disposal gets ever larger and the resources of the firm available to give them those resources AND keep them up to date becomes more strained.

That was one of the reasons we built the GATCA Resource Library and the GATCA App. Between the two, RMs can get access to all the background documents for these regulations both online (at gatca.info) and offline (via the app).

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