FATCA and CRS – Key Differences
One of the biggest differences between FATCA and CRS is the breadth of its design. Whereas FATCA requires financial institutions to report only those customers who qualify as U.S. persons, CRS involves more than 100 countries. Under CRS, virtually all foreign investments handled by a financial institution become subject to a CRS report.
Due in part to CRS's wider scope, the nature of the relationships between financial institutions' country and regulatory authority has also changed. Under FATCA, each country entered into a separate bilateral intergovernmental agreement with the United States. These agreements had two main objectives:
Require local financial institutions to comply with FATCA reporting standards;
Provide that doing so would not cause financial institutions to breach local data protection laws.
By comparison, CRS represents an international standard, which, by its very nature, is multinational. Countries wishing to take part in the CRS can do so in a variety of ways. For instance, they might:
Ratify a legal instrument, such as a treaty that provides for the automatic, reciprocal exchange of information regarding financial accounts. Such instruments might also include a double taxation agreement that provides for automatic information exchange between the two countries, or a model convention known as the Multilateral Convention on Mutual Administrative Assistance on Tax Matters, which is designed to promote international cooperation for the betterment of international tax laws;
Sign an OECD model competence authority agreement, wherein both parties agree to abide by CRS standards of due diligence and exchange information; and
Enact legislation to impose due diligence requirements on all local RFIs.
