Enacted in response to the surprising revelation of the extent to which U.S. taxpayers had been using accounts at Swiss banks to hide assets from the IRS, FATCA significantly increases the reporting responsibilities for both financial institutions and U.S. individuals and entities associated with non-U.S. assets. Read more about FATCA (PDF).
The CRS is referred to as “GATCA," the global equivalent of FATCA, although its reporting requirements are broader in scope. Over 100 countries have signed up for the CRS, but the U.S. has not adopted it. This has led to controversy and accusations that its failure to join has ironically made the U.S. the largest tax haven in the world. Read more about the CRS (PDF).
There has been a growing trend to establish central databases of true owners, who are defined as those who own or control the entity through direct or indirect ownership of a sufficient percentage of shares or voting rights. Controversy continues over whether such databases should be available to the public, and whether trusts should be included in these registries.
FATCA sparked resentment and pushback from foreign countries, financial institutions and individuals. The CRS hasn't provoked such resistance, perhaps because by the time reporting started in 2017, this global trend for information exchange was already too far along to stop. Although controversy regarding beneficial ownership registries remains, regions have taken action toward establishing these databases, with varying levels of enforcement and success.
Banks must go to great lengths to identify and verify the sources of wealth and proof of identity for any individuals looking to open accounts. These practices make it difficult — if not impossible — for certain individuals to open accounts or have access to financial services in certain areas. In addition, privacy and data security are major concerns for those affected.
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