The CRS contains the reporting and due diligence standard that underpins the automatic exchange of financial account information. A jurisdiction implementing the CRS must have rules in place that require financial institutions to report information consistent with the scope of reporting set out in Section I and to follow due diligence procedures consistent with the procedures contained in Section II through VII. Capitalized terms used in the CRS are defined in Section VIII.
The financial institutions (FI’s) covered by the standard include custodial institutions, depository institutions, investment entities and specified insurance companies, unless they present a low risk of being used for evading tax and are excluded from reporting. The financial information to be reported with respect to reportable accounts includes interest, dividends, account balance, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account. Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the standard includes a requirement to look through passive entities to report on the relevant controlling persons.
The due diligence procedures to be performed by reporting financial institutions for the identification of reportable accounts are described in sections II through VII. They distinguish between individual accounts and entity accounts. They also make a distinction between pre-existing and new accounts, recognizing that it is more difficult and costly for financial institutions to obtain information from existing accountholders rather than requesting such information upon account pening.
For Pre-existing Individual Accounts FI’s are required to review accounts without application of any de minimis threshold. The rules distinguish between Higher and Lower Value Accounts. For Lower Value Accounts they provide for a permanent residence address test based on documentary evidence or the FI would need to determine the residence on the basis of an indicia search. A self-certification (and/or documentary evidence) would be needed in case of conflicting indicia, in the absence of which reporting would be done to all reportable jurisdictions for which indicia have been found. For Higher Value Accounts enhanced due diligence procedures apply, including a paper record search and an actual knowledge test by the relationship manager.
For New Individual Accounts the CRS contemplates self-certification (and the confirmation of its reasonableness) without de minimis threshold.
For Pre-existing Entity Accounts, FIs are required to determine:
a) whether the entity itself is a Reportable Person, which can generally be done on the basis of available information (AML/KYC procedures) and if not, a self-certification would be needed; and b) whether the entity is a passive NFE and, if so, the residency of controlling persons. For a number of account holders the active/passive assessment is rather straight forward and can be made on the basis of available information, for others this may require self-certification. Pre-existing Entity Accounts below 250,000 USD (or local currency equivalent) are not subject to review.
For New Entity Accounts, the same assessments need to be made as for Pre-existing Accounts. However, as it is easier to obtain self-certifications for new accounts, the 250,000 USD (or local currency equivalent) threshold does not apply.
The financial institutions (FI’s) covered by the standard include custodial institutions, depository institutions, investment entities and specified insurance companies, unless they present a low risk of being used for evading tax and are excluded from reporting. The financial information to be reported with respect to reportable accounts includes interest, dividends, account balance, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account. Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the standard includes a requirement to look through passive entities to report on the relevant controlling persons.
The due diligence procedures to be performed by reporting financial institutions for the identification of reportable accounts are described in sections II through VII. They distinguish between individual accounts and entity accounts. They also make a distinction between pre-existing and new accounts, recognizing that it is more difficult and costly for financial institutions to obtain information from existing accountholders rather than requesting such information upon account pening.
For Pre-existing Individual Accounts FI’s are required to review accounts without application of any de minimis threshold. The rules distinguish between Higher and Lower Value Accounts. For Lower Value Accounts they provide for a permanent residence address test based on documentary evidence or the FI would need to determine the residence on the basis of an indicia search. A self-certification (and/or documentary evidence) would be needed in case of conflicting indicia, in the absence of which reporting would be done to all reportable jurisdictions for which indicia have been found. For Higher Value Accounts enhanced due diligence procedures apply, including a paper record search and an actual knowledge test by the relationship manager.
For New Individual Accounts the CRS contemplates self-certification (and the confirmation of its reasonableness) without de minimis threshold.
For Pre-existing Entity Accounts, FIs are required to determine:
a) whether the entity itself is a Reportable Person, which can generally be done on the basis of available information (AML/KYC procedures) and if not, a self-certification would be needed; and b) whether the entity is a passive NFE and, if so, the residency of controlling persons. For a number of account holders the active/passive assessment is rather straight forward and can be made on the basis of available information, for others this may require self-certification. Pre-existing Entity Accounts below 250,000 USD (or local currency equivalent) are not subject to review.
For New Entity Accounts, the same assessments need to be made as for Pre-existing Accounts. However, as it is easier to obtain self-certifications for new accounts, the 250,000 USD (or local currency equivalent) threshold does not apply.
