19 Oct 2018 China detains Ms. Rebecca Lin, Singapore based Executive Director, UBS for assisting covert illegal outflows of Chinese residents as well as establishing CRS avoidance structures, such as non reporting Investment Entities. Many other International banks such as Julius Baer plying their international wealth management trade to Chinese residents have recalled staff travelling to China and forbade future travel. No doubt China will get UBS to divulge names of Chinese resident clients. This puts a bit of a damper on Singapoer and Hong Kong bankers assisting Chinese residents. Co-incidentally, China government this week mandatred all lawyers and other advisors to divulge names of clients they assiste dto obtain foreign residence or citizenship by investment. Tied with te OECD announcement this week on addressing residence by investment schemes, one can expect a sudden end to residence by investment schemes being sold in China.
OECD clamps down on residence by investment schmemes. OECD publishes initiative against 21 blacklisted jurisdictions providing residence and investment by investment schemes.
HK repeals non reporting FI status for ORSOs. In December 2017, the OECD conducted an assessment on Hong Kong’s inclusion of Mandatory Provident Fund schemes, ORSO registered schemes, ORSO pooling agreements and approved pooled investment funds as jurisdiction-specific low-risk non-reporting financial institutions and concluded that these entities should not be considered as NRFIs. To meet the international requirements, the Government will commence a legislative amendment exercise to remove these entities from the list of NRFIs under the Inland Revenue Ordinance.
Gibraltar pension plans next on the chopping block: Gibraltar trustee based pension segergated saving shams have not yet adopted the OECD updated CRS FAQ in June 2018, that compartmentalised savings accounts do not qualify as being equivalent to Broad Participation Retirement Plans, and hence do not qualify as non reporting FIs, which Gibraltar trustees promote in their marketing material.
Non cash value insurance policies loopholes closed: Life insurance Asian subsidiaries of insurers based in Switzerland and UK overseas territory, Bahamas insurers have exploited the non cash value insurance policy. These insurers ensured the policyholders signed a confidential rider that they could no longer access the policy assets. In effect, converting the policies to irrevocable non cash value policies, which were out of scope of the CRS. The June 2018 OECD CRS FAQ update mandates that if no-one can access the policy assets, then the reportable person will be the policy owner. It will be interesting to see how these policyholders pay taxes on the previously undeclared insurance policy assets as the policy is irrevocable.
OECD reviewing the recent practise of listing private investment companies on small stock exchanges such as Malta and Dutch Caribbean exchange,, without any trading occuring, to exploit the FATF AML rules taht FIs do not have to identify beneficial owners of listed entities. CRS can override this by requiring FIs to identify significant shareholders owning more than 5% by obtaining this info directly from stock exchange.
OECD reviewing jurisdiction CRS guidance which wrongly opine that cash is not a financial asset, merely because it was omitte dfrom the CRS list of financial assets. This affects teh categorisation of Active NFE type A and investment entities.