Answers for CRS test quiz

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  1. A trustee reports on all its trustee-documented trusts it administrates. Can the trustee report on a trust which is categorized as a NFE?
No. A trustee-documented trust is only relevant to trusts which are FIs. If a trust is a NFE, the FI responsibl efor reporting will be the FI where the bank accounts are maintained. Note that a trust which is an investment entity, the Financial accounts are the equity and debt interest in the investment entity, whereas if the trust is a NFE, the Financial Accounts are the bank accounts maintained by a FI.
  1. Is an irrevocable life insurance policy that prohibits policyholder access to assets a reportable account?
Yes. In spite of the Standard definition of a cash value policy, other benefits from investment-linked insurance are not exempt from the exclusion of cash value. Note that the CRS commentary pt. 76 mentions indemnity insurance, yet gives non-indemnity insurance as (personal injury and sickness) examples. Non indemnity includes life insurance.
  1. If property ownership is not a Financial Account, are dividends from a company collecting rent classed as passive income?
Yes. Direct ownership of property is not a financial asset. Receiving rental income directly if owning the property is not passive income. Yet if dividends are paid out from a company collecting rent, the dividends are regarded as passive income.
  1. Does the use of Corporate Directors mean the company is a Financial Institution?
No. The provision of a corporate director by a company services provider does not constitute to the company being managed by the corporate services provider, as such directors would not conduct as a business, any of the Standard definition activities. A corporate director, in its capacity as director of a company, does not invest, administer or manage funds or money (as a business) on behalf of other persons in its capacity as corporate director.

  1. Does an entity holding a professionally managed investment fund mean the assets are professionally managed and hence is an investment entity?
No. Management of collective funds by fund manager does not constitute management of assets of an entity's assets. However if a FI chose to invest the assets in a fund, i.e. discretionary management of the assets, then the assets would be managed by a FI and hence the entity would be categorized as an investment entity.
  1. If a trust is classed as an investment entity, does it make a difference on who are reportable persons if the settlor and beneficiaries are entities?
Yes. The account holders of an investment entity are those that hold equity and debt interest. This is defined in the Standard as Settlor, protector, identifiable beneficiaries and trustees, all with no de minimis threshold. Yet if any of these are entities, the reportable persons would be the controlling persons of the entities. These are identified using AML / KYC thresholds which are more than 25% shareholdings or entitled to more than 25% of trust's income / assets, i.e., a much higher de minimis.
  1. What is debt interest of a investment entity?
Debtors who have secured assets. Debt equity is defined as those who have secured assets and are entitled to reportable payments on the assets or on releasing the security on the assets.
  1. Must custodian bank of a Cash Value insurance policy undertake the Standard's due diligence on the policyholder(s)?
No. A bank is not the custodian FI of a Cash Value insurance policy. A bank is not considered the FI maintaining the Financial Account which is a cash value insurance policy. See citations from the standard.
  1. Are the controlling persons of trust which is classed as a NFE precisely the same as those having an equity interest if the trust was classed as an investment entity?
No. The account holders of a trust which is categorised as a NFE are the controlling persons. This is base AML procedures which incorporate de minimis thresholds. It also does not explicitly include protector. Whereas the account holders of an investment entity are those that hold equity and debt interest. These are settlor, trustees, protector and identifiable beneficiaries, all without de minimis threshold.

Option for jurisdiction: Note with respect to trusts that are Passive NFEs, a jurisdiction may allow Reporting Financial Institutions to align the scope of the beneficiary(ies) of a trust treated as Controlling Person(s) of the trust with the scope of the beneficiary(ies) of a trust treated as Reportable Persons of a trust that is a Financial Institution.
  1. Does the Standard allow self-certification to be verbally provided?
Yes. Self certification may be provided in any manner, see example par 9 tp the Commentary on Section IV.
  1. When an account is closed, what value must be reported?
No value is reported. Only the fact that an account has been closed.
  1. Must a Financial Institution try look-through to the controlling persons of an account belonging to a non-participating Financial Institution?
Never. If the non-participating FI is an investment entity then it is deemed to be a passive NFE (even if it is an active NFE), and is hence subject to look-through as are all other passive NFEs. Note in teh Standard, that if the non-participating FI is not an investment entity, such as depository FI, custodial FI or Specified insurance company, then there is no due diligence on the FI. FATCA requires at least a report on the payment to the non-participating FI