The Common Reporting Standard (“CRS”), as created and drafted by the OECD in 2014 pursuant to a meeting of the G-20 nations in Australia, calls for the automatic exchange of financial account information between agreeing jurisdictions. In many instances, CRS is similar to the U.S. legislative mandate entitled the “Foreign Accounts Tax Compliance Act (“FATCA”) which was enacted in 2010 as a means of targeting US taxpayers who do not report financial accounts established in Financial Institutions outside of the US in order to maximize tax revenues through combating evasion and avoidance, which is sometimes called Global FATCA or, “FATCA on Steroids”, attempts to achieve exactly the same effect through participating jurisdictions agreeing to exchange certain financial account information on a country’s citizens were not only accounts are established, but also on the entities holding the accounts which are maintained by non-residents of a country utilizing the same purposeful reasons for which FATCA was enacted.
To date, 109 nations have signed on to become signatories to the CRS compact or Multilateral Competent Authority Agreement (“MCAA”) with the first reporting scheduled for September 2017.
This mandate has created great consternation not only among financial planners and advisors, but also and more importantly among international investors seeking privacy and confidentiality in their financial affairs without the desire for governmental intrusion into their transactions and acquisitions.
One country which is conspicuously absent from the list of 109 participants is the United States, the world’s largest financial centre. Their prime reasoning for non-participation, among many, is that it does not need to engage with the CRS because FATCA essentially achieves the same purpose as it pertains to monitoring the activities of US citizens and taxpayers. In other words, the US wished not to become a “police force” for other countries financial reporting deficits. Although flawed, this logic has created multiple and varied opportunities to now view the US as one of the largest “tax havens” on the planet for non-US investors, business persons and financiers. In the meantime, the strong interest that some U.S. states (e.g., Delaware, South Dakota, Wyoming, Nevada, etc.) have in upholding the secrecy and confidentiality afforded by their company-formation rules, reaffirms the position as the US currently being the “go to” jurisdiction for not only company formation but also the “go to” jurisdiction for the stashing of the world’s wealth. Bloomberg reported in January 2017, “By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.”
Out of necessity, ADAM affiliates and advisors need to become more aware and knowledgeable regarding this current state of affairs in order to better inform their clients about possibilities in preserving their clients’ wealth and business affairs in a safe and stable jurisdiction with the utilization of the strongest currency in the financial world. More on this later..
Contribution by: Robert Payne, J.D., LL.M