In addition to monitoring the timeliness of the delivery of each jurisdiction’s commitment to implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters (AEOI Standard), the Global Forum conducts peer reviews to ensure its implementation is both complete and effective. This chapter provides an overview of the methodology used for the peer reviews. It also includes a summary of the findings from the assessments of the legal frameworks put in place by each jurisdiction to implement the AEOI Standard.
Peer Review of the Automatic Exchange of Financial Account Information 2020
2. Peer reviews of the AEOI Standard’s implementation
Abstract
In addition to the monitoring the timeliness of the delivery of the commitments made to implement the AEOI Standard, the Global Forum conducts peer reviews to ensure the implementation is both complete and effective. These are conducted in accordance with the agreed Terms of Reference for the AEOI reviews (www.oecd.org/tax/transparency/documents/aeoi-terms-of-reference.pdf).
Global Forum AEOI peer reviews: A multifaceted assessment process
The Global Forum conducts various peer review processes in order to cover the various requirements in the AEOI Terms of Reference. The Global Forum designed the timing and content of each of the processes to best assess the particular requirements in question. The various processes are as follows:
Reviews to provide assurance jurisdictions are meeting the legal and operational requirements with respect to confidentiality and data safeguards. Given the sensitivity of the taxpayer information involved, the Global Forum conducts the reviews in advance of exchanges commencing. This is to identify issues early, to facilitate jurisdictions addressing them prior to exchange. The Global Forum provides assistance to address any issues as necessary. The Global Forum then conducts a further review in relation to confidentiality and data safeguards after exchanges have commenced, in order to provide continuing assurance. The Global Forum also has a mechanism to react to breaches of confidentiality or the safeguarding of data.
Peer reviews of the legal frameworks in place to implement the AEOI Standard. These reviews cover the domestic legislative frameworks in place to implement the AEOI Standard (i.e. to require Financial Institutions to conduct the due diligence and reporting rules) and the international legal frameworks (i.e. to exchange the information). The results of these reviews are the focus of this report. Further information on the processes and the conclusions is below.
Peer reviews of the effectiveness in practice of each jurisdiction’s implementation of the AEOI Standard, including the operational frameworks to ensure compliance by Financial Institutions and the systems and processes in place to transmit the information. The Global Forum has commenced the effectiveness reviews, now that a number of exchange cycles have taken place. It expects to publish the results in 2022.
The Global Forum conducts these reviews in stages, to match the timings of the implementation process. This ensures that issues are identified early, supporting the effectiveness of the AEOI Standard during the implementation process. Further details on the staging of the various reviews (the “Staged Approach”) are available in Annex A.
Focus of this report: Peer reviews of the AEOI legal frameworks
This report focuses on the results of the peer reviews of the legal frameworks put in place to implement the AEOI Standard, including determinations on the extent to which each jurisdiction put the necessary frameworks in place. The results relate to all jurisdictions that committed to commencing exchanges under the AEOI Standard in either 2017 or 2018. Next year, the results in relation to jurisdictions committed to commencing exchanges in 2019 will be included, and so on (i.e. the Global Forum conducts the reviews of the legal frameworks in the early years of implementation and publishes the results two years after the exchanges are due to commence). Furthermore, where jurisdictions have addressed issues in relation to their legal frameworks, reassessments will be conducted and the results will be included in future reports.
Peer reviews of the legal frameworks
The AEOI Terms of Reference group the requirements with respect to the legal frameworks according to two Core Requirements (CRs). The first CR relates to the domestic legislative framework and the second CR relates to the international legal framework. These are set out below:
CR1 Legal Framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
CR2 Legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Annex C reproduces these CRs, along with their associated Sub-Requirements.
Details of the Global Forum’s peer review processes used to assess these requirements are set out below. For each of them, the Global Forum Secretariat conducts an initial in-depth analysis, before sending it to all AEOI Peers1 for input. The AEOI Peer Review Group (APRG)2 then approves the analysis and any recommendations, before all AEOI Peers adopt them.
Peers reviews in relation to Core Requirement 1
The AEOI Terms of Reference refer to the detailed due diligence and reporting procedures that Financial Institutions must follow contained in the AEOI Standard. These procedures are to ensure that Financial Institutions report the correct information on Financial Accounts and their Account Holders to the tax authority. It is therefore crucial that each jurisdiction properly reflects these requirements in its domestic legislative framework.
The Global Forum therefore carries out a detailed analysis and review of each jurisdiction’s domestic legislative framework implementing the AEOI Standard. Where the review identifies gaps then it makes recommendations for the jurisdiction to address them. The particular elements reviewed are as follows:
The detailed due diligence and reporting rules, as well as the framework to enforce the requirements, that each jurisdiction has introduced in its domestic legislative framework to implement the AEOI Standard. This includes a review of: (i) each jurisdiction’s implementation of the scope of Reporting Financial Institutions, (ii) the scope of the Financial Accounts they must review, (iii) the detailed due diligence procedures that Financial Institutions must use to identify the Reportable Accounts, (iv) the information that must be reported and (v) the legal framework to enforce the requirements. The Global Forum conducts a detailed gap analysis to verify each jurisdiction has correctly implemented each key element of the procedures.
The Non-Reporting Financial Institutions and Excluded Accounts provided for by each jurisdiction. This consists of a specific review to ensure that the Non-Reporting Financial Institutions and Excluded Accounts provided for by each jurisdiction meet the requirements of the categories of Non-Reporting Financial Institutions and Excluded Accounts contained in the AEOI Standard or have substantially similar characteristic to those categories and pose a low-risk use for tax evasion.
A review of any other legal frameworks jurisdictions rely on for the implementation of the AEOI Standard. The scope of this review depends on how a particular jurisdiction has implemented the AEOI Standard. Some jurisdictions have cross-referenced pre-existing legislative provisions to define Controlling Persons and/or to enforce the due diligence and reporting requirements, rather than include bespoke provisions in their legislative framework implementing the AEOI Standard. This review may therefore involve: (i) a review of a jurisdiction’s definition of “beneficial owner” contained in its legislative framework implementing the Financial Action Task Force (FATF) Recommendations, where relied upon for the identification of Controlling Persons, and/or (ii) a jurisdiction’s pre-existing penalty and enforcement framework where it is relied upon to ensure compliance with the AEOI Standard.
Peers reviews in relation to Core Requirement 2
The AEOI Terms of Reference contain requirements with respect to both the contents of the international agreements used to exchange the information and the scope of the network of exchange relationships. These requirements are also essential for the AEOI Standard to operate effectively.
The Global Forum therefore has peer review processes with respect to the international legal frameworks for exchange to ensure each jurisdiction meets these requirements. Where the review identifies gaps in a jurisdiction’s implementation then it makes recommendations for the jurisdiction to address them. The particular processes are as follows:
There is a process to facilitate jurisdictions in identifying their Interested Appropriate Partners (i.e. those jurisdictions interested in receiving information from a jurisdiction and that meet the expected standards in relation to confidentiality and data safeguards).
A jurisdiction may trigger a peer review mechanism if it becomes concerned with respect to delays in a particular potential partner putting in place an exchange agreement with them.
There is also a peer review process in relation to the contents of the exchange agreements put in place to ensure they are in accordance with the requirements of the AEOI Terms of Reference.
Conclusions of the various assessments and publication of the results
Once the Global Forum has completed the reviews of the legal frameworks in relation to Core Requirements 1 and 2, it draw overall conclusions with respect to the extent to which each jurisdiction is considered to have the required legal frameworks “in place”.
In order to support it in this exercise, the APRG established an AEOI Assessment Panel of 13 experts drawn from AEOI Peer jurisdictions with a mandate of analysing the results of the peer reviews and preparing a short report on each jurisdiction that set out the extent to which each jurisdiction has the necessary legal frameworks in place. The reports include determinations on the extent to which each jurisdiction has the legal frameworks in place, including in relation to each of the Core Requirements as well as overall. The AEOI Assessment Panel consults each Assessed Jurisdiction in relation to its report and invites input on all of the reports from AEOI Peers. The APRG then discusses and approves the reports and the AEOI Peers adopt them for publication.
This report, for the first time, contains the results from the completion of the process to draw conclusions with respect to the legal frameworks of the 100 jurisdictions who committed to implementing the AEOI Standard in time to commence exchanges in either 2017 or 2018. The jurisdiction-specific reports are presented in Chapter 3.
Interpreting the results
The determinations made with respect to each Core Requirement and the overall determination are either: “In Place”, “In Place But Needs Improvement” or “Not In Place”. Further details on how to interpret each of these determinations are set out in Table 2.1 below.
Table 2.1. The determinations
A global effort with very encouraging results: Conclusions from the peer reviews
When considering the results it should be noted how extraordinary the progress has been to implement the AEOI Standard. Following the commitments by 100 jurisdictions to implement the AEOI Standard in time to commence exchanges by 2017 or 2018, they moved in record time to put in place the necessary legal frameworks. In a scale perhaps unprecedented, around 100 jurisdictions simultaneously enacted detailed due diligence and reporting requirements for Financial Institutions to follow. Furthermore, around 7 000 bilateral exchange relationships have been put in place to date to exchange the information, the vast majority of which through the signature and activation of a new international legal instrument (the CRS MCAA). This represents a remarkable amount of change over just a few years.
Iterative peer review process helped jurisdictions respond to deficiencies
The Global Forum conducted reviews of the domestic and international legal frameworks the around 100 jurisdictions put in place to implement the AEOI Standard. This included a review of over 550 jurisdiction-specific exclusions from the AEOI Standard. The purpose of conducting these reviews during the implementation process was to highlight issues early to support the effectiveness of the AEOI Standard from the start.
This approach worked. Many jurisdictions were quick to address the issues raised to ensure a complete implementation of the required legal frameworks. Several jurisdictions made amendments before the reviews were even completed and the recommendations issued. Where the Global Forum made recommendations, 64 jurisdictions were quick to bring into effect amendments to their due diligence, reporting and enforcement frameworks and requested a reassessment by the Global Forum. The reassessments showed that these amendments successfully addressed over 400 recommendations. Furthermore, over 50 jurisdiction-specific exclusions from the AEOI Standard that were found to insufficiently meet the requirements were removed and therefore brought within the scope of the requirements. It is expected that several more jurisdictions will make such changes. In some cases this has been delayed due to the impact of the COVID-19 pandemic. The Global Forum will continue to reassess any amendments made to the legal frameworks and will publish updated analysis and conclusions accordingly.
Summary of the main findings
There is a very high level of compliance of the legal frameworks put in place to implement the AEOI Standard with the AEOI Terms of Reference. Of the 100 jurisdictions committed to commencing exchanges in 2017 or 2018, virtually all of them (98) have an international legal framework that is fully in accordance with the AEOI Terms of Reference. The Global Forum has therefore issued them a determination of “In Place” for CR2. Furthermore, the majority of jurisdictions (54) have domestic legislative frameworks that are also fully in accordance with the AEOI Terms of Reference. The Global Forum has therefore issued these jurisdictions with a determination of “In Place” for CR1. Fifty-four jurisdictions received an overall determination of “In Place”.
By far the next largest group of jurisdictions (34) are those for which the Global Forum issued a determination of “In Place” for CR2 and “In Place But Needs Improvement” for CR1. Their peer review reports include one or more recommendations to amend their domestic legislative framework in order for it to be fully consistent with the AEOI Terms of Reference. Consequently, 34 jurisdictions received an overall determination of “In Place But Needs Improvement”. In total, 88% of the jurisdictions have domestic and international legal frameworks that are fully or substantially in place. This demonstrates a generally high level of compliance with the Terms of Reference.
Following the Global Forum’s peer reviews, 88% of the jurisdictions have been determined to have domestic and international legal frameworks that are fully or substantially in accordance with the AEOI Terms of Reference.
Of the remaining jurisdictions (12), 10 have implemented a domestic legislative framework which contains many of the requirements, but includes deficiencies that could undermine the AEOI Standard’s operation. The remaining two jurisdictions have not yet implemented a domestic legal framework. They have not yet brought into effect the necessary primary and secondary legislations containing the due diligence and reporting procedures, which is also necessary to activate the international legal framework. Twelve jurisdictions have therefore received an overall determination of “Not In Place”. Figure 2.1 summarise the distribution of the peer review results.
Figure 2.1. Overall determinations at a glance
Horizontal analysis of common areas in need of improvements
While the results of the peer reviews show a generally high level of compliance with the requirements, it is also possible to identify some commonalities where recommendations are made. Some of these are highlighted below. The Global Forum will work with the jurisdictions concerned to assist them in addressing all of the issues where recommendations have been made.
The most common issues relate to the following:
The AEOI Standard permits jurisdictions to provide for jurisdiction-specific Non-Reporting Financial Institutions and Excluded Accounts that have substantially similar characteristics to the provisions in the AEOI Standard and pose a low risk of being used for tax evasion. In some cases, following the peer review, the Global forum has found that the entries provided for are not sufficiently similar to the categories in the AEOI Standard. This is the largest category of remaining recommendations.
The AEOI Standard requires jurisdictions to have in place various legislative provisions to enforce the requirements. The reports identify that these provisions are sometimes incomplete. This includes cases where jurisdictions rely on their pre-existing and general enforcement frameworks, which do not fully reflect the requirements specific to the AEOI Standard. For example, the requirement to having powers that can be used to address avoidance of the due diligence and reporting requirements, the ability to impose sanctions on Account Holders and Controlling Persons for submitting false self-certifications and having record-keeping obligations that cover the full scope of the records required to be kept under the AEOI Standard. Recommendations relating to the enforcement frameworks represent the next largest category of issues. This is of course a particularly important area of the requirements and all of the jurisdictions with legal frameworks that have been determined to be “Not In Place” have multiple recommendations with respect to their enforcement frameworks.
Several more specific recommendations have also been made in cases where jurisdictions have looked to summarise the detailed definitions in the AEOI Standard or have otherwise omitted some elements of the definitions that are needed to ensure their full and proper operation.
Jurisdiction-specific conclusions
Table 2.2 contains a summary of the determinations made with respect to legal frameworks introduced by each jurisdiction to implement the AEOI Standard. Further details on the analysis and reasons for the determinations can be found in Chapter 3.
Table 2.2. Overview of the determinations on the legal frameworks for the assessed jurisdictions
Notes
← 1. All jurisdictions committed to implementing the AEOI Standard and that have passed domestic legislation to that effect.
← 2. A peer review group of the Global Forum consisting of 33 members which replaced the former AEOI Group (www.oecd.org/tax/transparency/documents/aprg-members.pdf).