Public Speaking

CRS Account Monitoring: what are the reporting implications of “change of circumstances”?


 

PAST EVENTS:

HONG KONG, WEDNESDAY 6 MARCH 2019, 9.00-12.30


GENEVA, TUESDAY 19 MARCH 2019, HOTEL LE RICHEMOND, 9.30-14.30

ZURICH, THURSDAY 21 MARCH 2019, ZUNFTHAUS ZUR WAAG, 9.30-14.30




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Death or change of tax residence of account holder - account closure - protector or trustee removal/retirement - distribution to beneficiary - share redemption - conversion from Passive NFE to Active NFE - conversion from Passive NFE to Reporting FI...


Overview


In anticipation of Financial Institutions filing their 2018 CRS Financial Account Data, this technical session will explore and explain the concept of a “change of circumstances” to a Financial Account. The session will explain the CRS requirement that Financial Institutions monitor the status of Financial Accounts. The rules will be explained and then illustrated by a series of examples, key areas of uncertainty will be highlighted.




Key Areas

  • The scope of the requirement to monitor the status of Financial Accounts;

  • The scope of the requirement placed on Financial Institutions to institute practices and procedures to identity a change of circumstances;

  • Financial Account monitoring and the OECD Implementation Report 2018, key implications.



AGENDA


MONITORING FINANCIAL ACCOUNTS


Reporting implications of events affecting an Account Holder

  • Death;

  • Incapacity;

  • Change of Tax Residence;

  • Account Closure;


Reporting implications of events affecting an equity and debt holder of an Investment Entity Trust:

  • Redemption, assignment and cancellation of debt;

  • Interest payment to debt holder;

  • Settlor exclusion of benefit;

  • Settlor surrender of power to revoke;

  • Protector removal/retirement;

  • Discretionary Beneficiary removal/exclusion;

  • Fixed Interest Beneficiary removal/exclusion/surrender of life interest;

  • Distribution to Beneficiary;

  • Trustee retirement/removal;


Reporting implications of the events affecting an Investment Entity Company:

  • Redemption, Transfer, Conversion and Cancellation of a Debenture;

  • Interest Payment to Debenture Holder;

  • Share Redemption;

  • Share Transfer.


 

MONITORING ENTITY STATUS


The reporting implications of the following events affecting an Entity Account Holder will be discussed:


Status conversion from Passive NFE to Active NFE:

  • Whether status may be changed on a current date, prior year or succeeding year basis;

  • Voluntary conversion to Active NFE status;

  • Involuntary conversion to Active NFE status;

  • Areas of uncertainty.

Status conversion from Passive NFE to Reporting Financial Institution (RFI):

  • Whether status may be changed on a current date, prior year or succeeding year basis;

  • Voluntary conversion to RFI status;

  • Involuntary conversion to RFI status;

  • Areas of uncertainty.


Status conversions prohibited by the CRS:

  • Active NFE to RFI Investment Entity conversions that are prohibited;

  • RFI to Active NFE conversions that are prohibited;

  • Areas of uncertainty.


 


ACCOUNT CLOSURE RULES


Account Closure Rules explained in context of:

  • Termination of a Trust;

  • Liquidation of a Company;

  • Pre-Liquidation automatic Active NFE status change;

  • Areas of uncertainty.


 


PRACTICAL CASE STUDIES


Reporting implications explored and explained

  1. Investment Entity Financial Institution Trust with underlying Passive NFE Company and bank account. Change of circumstances: Discretionary Beneficiary removed, additional protector appointed followed by trustee retirement and appointment of new trustee, bank account closure.

  2. Company with underlying bank account and investment in a mutual fund, issues debenture stock, followed by company status conversion to Investment Entity Financial Institution followed by shareholder sale of shares to new shareholder, company redeems interest in mutual fund.

  3. Passive NFE Trust with underlying Passive NFE company with various bank and portfolio accounts. Change of circumstances: Beneficiary surrenders life interest and subsequently passes away. Trust terminates, with absolute vesting of trust fund in three remainder beneficiaries. Shares in Passive NFE company transferred to three remainder beneficiaries.

  4. Active NFE holding company with various bank accounts and shares held as nominee intra-group. Change of circumstances: Holding company involuntary conversion to Custodial Institution status.

  5. Passive NFE company with various bank and portfolio accounts enters voluntary liquidation, fol- lowed by transfer of shares to new shareholder and repayment of various loans, company eventually liquidated.


 








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