New Developments On International Automatic Financial Information Exchange And Disclosure

We last updated our clients and friends in February 2014 ( Feb 2014 Memorandum) on issues related to the disclosure and automatic exchange of financial information on an international basis.

Since then, the pressure from the OECD, G20 and individual countries has been growing rapidly for broad and automatic exchange of information.

There have been two major developments of which you should be aware, and which are likely to have a significant impact on business over the coming months and years.

Common Reporting Standard

On 21st July, 2014, the OECD released the full version of a new global standard for the exchange of information between jurisdictions. This was developed by the OECD working with G20 countries. The Standard for Automatic Exchange of Financial Account Information in Tax Matters sets the parameters for annual automatic exchange between governments of financial account information. This document includes the Common Reporting and Due Diligence Standard ("CRS"), which will form the basis for the scope and nature of information that will be shared under subsequent agreements between countries. That information will include account balances, interest and dividends received, and sales proceeds from financial assets, as reported to governments by financial institutions, and covering accounts held by individuals and entities, including trusts and foundations. Additional information to be shared will include the name, address, and date and place of birth of relevant individuals (and the same information for individuals who are controlling persons of entities).

The CRS is not legally enforceable, and it requires adoption by participating countries in bilateral or multilateral competent authority agreements. It does, however, standardize and harmonize the type and amount of information that will need to be disclosed in the relevant countries.

Multilateral Competent Authority Agreement

In Berlin on 29th October, 2014, 51 countries signed a Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (the "Multilateral Agreement"). The Multilateral Agreement forms a framework agreement only, and is based on (and takes effect pursuant to) the Convention on Mutual Administrative Assistance in Tax Matters. Each country that has signed the Multilateral Agreement will then notify the OECD once the necessary national laws for implementation are in place. Following that notification, that country will join the...