CRS and FATCA have been introduced worldwide in recent years. They are the ultimate tools for snooping governments to discover the wealth of their citizens and residents overseas.
Like all big government projects CRS and FATCA are destined to fail. In this article we’ll look at why they will fail. I’ll also show you with some loopholes to help you keep your financial privacy.
CRS and FATCA are Recent Developments
FATCA is the Foreign Accounts Tax Compliance Act. It was introduced by the US government in 2010 as part of a job creation bill. It was supposed to generate more tax revenue to create jobs in the US.
CRS is the Common Reporting Standard. It was introduced in 2017?? The Paris based OECD developed CRS. Governments around the world were pressured to sign up to CRS. All the major tax havens are part of CRS.
Both CRS and FATCA seek to automatically exchange financial information between governments. They oblige banks to confirm the country of residency of each client who controls an account. If the client is a US resident they send the account information to the US government under FATCA. If they are a resident of any other country, CRS applies and the bank will be obliged to send the information to that country.
This means that private financial information is being sent to the tax authorities in your country of residency. This information is likely also available to hackers and other bad actors.
CRS and FATCA have abolished bank secrecy. Fortunately there are a few exceptions and workarounds.
How are CRS and FATCA Enforced
CRS and FATCA are enforced by a series of agreements between governments. They are integrated with the KYC procedures of banks and other financial institutions. Any bank not complying faces fines and censures from their regulators. As part of the pressure on overseas banks to comply with FATCA the US government threatens a withholding tax on coupons and dividends. They also have the sanction of excluding a foreign bank from the US banking system and dollar payments.
Which Countries are Not Part of CRS and FATCA
As of 2023 there are still 54 countries that are not part of the Common Reporting Standard. The US government has signed Inter Governmental agreements with 111 Countries. You can see the list of the countries that have signed an IGA with the US government here. It’s worth noting that even countries that haven’t signed an IGA with the US government may have banks that are exchanging information under FATCA.
How Can I Avoid Having my Privacy Attacked by CRS and FATCA
The only way for banks to enforce CRS and FATCA is through a process of self certification. A new client must tell the bank the country where they are a resident and a citizen. If you have documents showing you’re a resident of a non-CRS country you won’t be subject to CRS. If you don’t have a US passport or US address you won’t be subject to FATCA.
It’s possible to get a tax residency in a third country, where you’ll never live. This can be used when opening bank accounts. It means that any CRS data exchange will be sent to a country where you have no connection. There are also countries that are part of CRS but choose only to send data. They don’t receive data on their citizens and residents. These are known as voluntary privacy countries.
Why CRS and FATCA will Fail
CRS and FATCA generate too much data. Governments don’t have the resources to investigate everyone. As more people become aware of these dystopian tools they’ll take avoidance action. Nobody wants to have their financial privacy compromised in this way. There are so many loopholes that everyone should be able to find one that works for them with little effort.
