Amendments to AEOI and new crypto reporting standard: implementation in Switzerland 

On 10 October 2022, the OECD presented the final text containing the amendments to the Common Reporting Standard (CRS) along with the Crypto-Asset Reporting Framework (CARF), a new AEOI specifically for virtual assets. The general thrust of both remains the same as in the drafts that were put out for public consultation in the spring. We reported in depth on the OECD’s plans and the consultation (SBA news articles dated 11 May and 30 June 2022).

CRS: OECD expands regulations

The first part of the OECD’s recent publication deals with amendments to the CRS. From the Swiss banks’ perspective, some of the changes are welcome. They include the creation of a new category for charities that qualify as financial institutions under the CRS. There are also new exemptions for e-money accounts and capital contribution accounts. Existing exemptions in the Swiss AEOI Ordinance which had been criticised by the OECD thus now become an international standard. However, the substantial increase in the amount of information to be reported for every customer relationship (for example, whether self-certification has been obtained, whether the account is a new one and what type of account is being reported) will create huge amounts of extra work for the banks. Making the necessary adjustments to their reporting systems will be a major challenge, because many of the data required under the new system are not available in the stipulated form. The benefits for the tax authorities resulting from all that extra work are questionable, since the additional information is not suitable for tax collection purposes.

CARF: separate reporting standard for virtual assets

The OECD took the view that the CRS could not be extended to incorporate reporting of all virtual assets within the existing regulations. It therefore came up with the CARF, which has now been finalised: a standalone reporting regime designed from scratch and entirely independently of the CRS. It will be implemented by the majority of banks in addition to the CRS and FATCA. The OECD has opted for a standalone regime to enable the US to participate in global crypto AEOI. There are already indications, however, that the US will not sign up to the CARF. As previously with AEOI, that would mean the OECD strategy had failed, rendering the additional burden on the banks even more unnecessary.

The OECD did not accommodate the banks’ main demand, that virtual assets be integrated into the existing CRS rather than creating a new regime. In the meantime, the banking sector has secured some improvements to the required duties of due diligence. The duties set out in the CARF have now been brought closely into line with those in the CRS, with the result that the amount of work the banks have to do in order to implement them is likely to be somewhat less than originally envisaged.

Key decisions on implementation still pending

To date, the OECD has simply published the final text of the provisions. Key elements of the transposition of the rules into national law, such as a binding plan for implementation, the required multilateral agreement (MCAA) and the updated XML schema, are still unresolved. With regard to the CARF, the OECD is also still to decide whether it is to be a global minimum standard with quasi-mandatory implementation or merely a voluntary model framework.

Implementation in Switzerland unlikely before 2026

Switzerland will, unquestionably, update AEOI in accordance with the OECD rules. However, the amendments to the legal basis for AEOI in Switzerland will have to make their way through the regular legislative process, which means that the earliest realistic date for implementation is 1 January 2026. Moreover, the SIF considers that a binding OECD implementation schedule is essential, so that the more than 100 AEOI states can implement the changes simultaneously.

With regard to the CARF, nothing can be done until a decision has been taken on whether it constitutes a minimum standard. If it does, Switzerland would also implement it; though here again there is no realistic prospect of implementation before 1 January 2026. The first exchange of data on virtual assets would then take place in 2027. Since the new OECD rules contain little by way of detail, questions of interpretation will play a key role in the Swiss implementation. The SBA will be actively representing its member banks’ interests in this process as well.