The common reporting standard: impact on financial services institutions.

• Author: Hintzke, Denise

The Common Reporting Standard (CRS) is the standard for automatic exchange of financial account information (AEOI) developed by the Organisation for Economic Co-operation and Development (OECD). CRS is a broad reporting regime that draws extensively on the intergovernmental approach to the implementation of the Foreign Account Tax Compliance Act (FATCA), PL. 111-147, and, similar to FATCA, CRS requires financial institutions resident in participating jurisdictions to implement due-diligence procedures, to document and identify reportable accounts, and to establish a wide-ranging reporting process.

On July 21, 2014, the OECD released the first version of the Standard for Automatic Exchange of Financial Account Information in Tax Matters, which contained the different model competent authority agreements (MCAAs) to be signed by the participating jurisdictions (including a multilateral MCAA, a bilateral MCAA, and a nonreciprocal MCAA); the CRS itself, which provided the documentation and due-diligence rules applicable to the financial institutions; as well as commentaries on the provisions of the MCAA and the CRS user guide. By December 2015, over 95 jurisdictions signed or were committed to sign the CRS. More than 50 jurisdictions are considered "early adopters," which means that they will exchange information on financial accounts automatically starting in 2017. The rest of the jurisdictions have committed to automatically exchange information starting in 2018.

Timing

The information to be exchanged corresponds to the prior year. Therefore, financial institutions that fall within the definition of a reporting financial institution in any of the early-adopter jurisdictions will need to implement CRS onboarding and due-diligence requirements starting Jan. 1, 2016, to ensure that they are capturing the information needed to perform the reporting in 2017, thereby allowing their jurisdiction to send information before September 2017 to the jurisdictions with which it has agreed to automatically exchange information.

With respect to preexisting accounts, reporting financial institutions in early-adopter jurisdictions need to complete the review of their high-value individual accounts by Dec. 31, 2016. Therefore, reporting financial institutions in these jurisdictions will be required to report, at a minimum, new individual and entity financial accounts identified as reportable as well as high-value preexisting accounts identified as reportable...