The CRS law is not the same in all countries, which also includes laws, IT systems, and many dedicated resources. In fact, the Standard itself is continuously undergoing amendments. However, we can identify some common points as the backbone of the CRS. Financial institutions must report information on reportable accounts to their tax authority, which will be in charge of sending such information to its counterparts via special software. The financial institutions which must report are the following:
- Depository entities (banks, brokers, etc.),
- Insurance companies,
- Custody entities (trusts and foundations, among others),
- Investment companies, which are divided into two:
- Financial advisors who manage accounts,
- Companies whose assets consist of a portfolio of assets managed by type A consultants.
Of the 4 types mentioned, entities type 1, 2 and 4a are always regulated by local regulators who will make sure to obtain such information. The big question today is regarding 3 and 4b, which are not always regulated, and no one obliges and put pressure on them to report. Each country must be analyzed to know how reporting will work in these cases.
In countries such as New Zealand, the reporting responsibility in case of trusts lies on professional trustees, with serious penalties in case of non-compliance. This resulted in a highly successful compliance with trusts reporting in 2017.
But, what is happening with trusts, foundations, and companies incorporated in Panama, the Bahamas, BVI, Belize, etc. who manage assets and fall under the definition of items 3 or 4b and should report? It is already provided for in the local legislation that these entities must register and report, but until there is no effective compliance mechanism, reporting will be minimal. How much time is left for its full implementation? The future is uncertain, only those predicting it can know…