AEOI - The new requirement under CRS 3.O

It is fair to say that one of the most challenging regulations at the heart of the financial services industry is the AEOI – FATCA and CRS reporting. They are now familiar foes, with the omnipresent threat of severe penalties to Financial Institutions for getting it wrong. And, as with most beasts, they evolve.

Just as we were settling into a rhythm of reporting under CRS, 2024 saw the OECD publish new requirements and the introduction of a new schema, CRS v3.0.  But why change?

Well, the new schema has been primarily designed to accommodate lessons learned since the initial implementation of CRS, but has also taken influence from ‘CARF’, Crypto-Asset Reporting Framework, which was approved by the OECD in 2023.  If you aren’t managing Crypto Assets, don’t be lulled into thinking you can largely ignore the new guidelines; the changes introduced affect all financial institutions, as demonstrated in the change of scope.

CRS 3.0 expands the definition of financial institutions to include newer types of entities like e-money providers, payment institutions, and certain non-traditional financial products that were not previously covered.  Financial Institutions (FIs) must now also report digital financial products, thus creating the synergy with CARF.

As expected, there is also a renewed focus on due diligence, aimed at identifying high-net-worth individuals and entities previously underreported.  Thresholds for reporting have been lowered, and, it will be necessary to identify whether the account is a pre-existing account or new. To prevent improper classification and evasion, there is additional granularity in the classification of entity types, account holders and controlling persons, including the type of account.

FIs will have to work harder when it comes to account reviews.  They will need to be more frequent, using updated indicia or indicators of residency.  Confirmation of holding a valid self-certification for account holders and controlling persons, previously assumed to be the case, will now need to be affirmed in the submission.

Lastly, it will be necessary to identify whether an account is jointly held, and if so, the number of joint account holders. So a fair bit to think about here, including the burning question of ‘when’?  Most jurisdictions have yet to publish local guidelines but the OECD has stated that first exchanges under the amended CRS are expected to commence in 2027.  More information can be found here.

Given the additional due diligence that is going to be required, TCSPs will need to be prepared and will have a busy year ahead.

Quantios will be implementing changes to our core back office platforms to support the data required for the new schema during 2025.  eFileConnect will also be updated with the new the new schema and updated when jurisdictions publish their guidance. These changes won’t just focus on ‘new data fields’ but will aim to provide as much validation as possible to help customers keep on top of the data.

Want to find out more and be involved in shaping the change?  Then get in touch.  We will be running customer working groups early in 2025.  We need your input to validate what we are thinking and to make sure we’ve got the right solution to help you tame the beast!

If you would like to be part of this customer working group please register your interest here.