The Organization for Economic Co-Operation and Development’s (“OECD”) new Common Reporting Standard (“CRS”) will allow over 100 governments to access the personal financial data of overseas account holders and owners of trusts and foundations. This article is part of a series on the new regime.
Beginning with the first inter-governmental data exchange in 2017 (retroactive to January 1, 2016), CRS will radically transform the private wealth landscape. The existing private wealth management and offshore world as we have known it for generations will change significantly.
CRS has been put forward as a means to curb illegal acts such as money laundering, terrorist financing and tax evasion. However, many who preserve, manage and grow assets abroad do so for legitimate reasons, such as to facilitate family governance, succession planning, estate administration, and philanthropic activities. By treating all persons with offshore holdings as if they were guilty of criminal offenses, CRS infringes on innocent persons’ and families’ personal privacy and tramples on their due process rights.
By putting financial data in the hands of governments with limited oversight and data safeguards and virtually no legally enforceable rights of action against misuse or leaking of data, CRS jeopardizes the safety of innocent account holders and their families. Major corporations and governments are susceptible to damaging breaches, as evidenced by the 2016 hack of Democratic National Committee emails, the 2015 hack of U.S. federal employee records, and the 2014 JPMorgan Chase data breach. Public disclosure of one’s data can disrupt and damage familial, professional, and social relationships, sometimes irretrievably. For some, public knowledge of one’s wealth can even bring on coercive pressures including persecution, extortion, and kidnapping.
Concerned families should consult their wealth advisors to learn more about the risks posed by the CRS regime. Together with advisors, trust and foundation holders can evaluate any potential exposure and devise solutions that respect CRS disclosure requirements while protecting their legitimate interests. By acting expeditiously, families can comply with CRS requirements and safeguard their privacy.
By putting financial data in the hands of governments with limited oversight and data safeguards and virtually no legally enforceable rights of action against misuse or leaking of data, CRS jeopardizes the safety of innocent accountholders and their families.