This page was last updated in April 2025.
Library | FATCA & CRS explainers and references
Welcome to our FATCA and CRS library. Scroll down for our explainers on:
What is FATCA and CRS about?
What are the key operational processes or ‘building blocks’?
What do we see in the market?
Click for information on:
FATCA - quick references:
CRS - quick references:
EU Directive 2011/16 (‘DAC2’)
EU Directive 2023/2226 (‘DAC2.0’)
What is FATCA and CRS about?
FATCA and CRS aim to prevent offshore tax evasion by requiring financial institutions worldwide to report customer and investor data to their local tax authorities, including reporting on foreign entities in which taxpayers hold a substantial ownership interest or of which they are controlling persons. The local tax authorities then automatically share the information with the tax authorities in the customers' or investors' home countries. Tax authorities in the home countries use the data to verify the completeness and accuracy of their taxpayers personal and corporate income tax returns.
FATCA is launched by the U.S. to combat tax evasion by U.S. taxpayers and is implemented globally through agreements with local governments (or ‘Intergovernmental Agreements’/ IGAs) or, in some cases, directly with financial institutions. In certain countries, financial institutions must report U.S. taxpayer information directly to the U.S. Internal Revenue Service (‘IRS’) instead of through local tax authorities.
CRS is developed by the OECD as a global framework to combat tax evasion by taxpayers and is implemented in local legislation. In the EU CRS is implemented in the EU Directive on administrative cooperation in the field of taxation, EU Directive 2011/16, or the ‘DAC’. In EU context CRS is also referred to as ‘DAC2’.
FATCA and CRS are closely aligned with the goals of the Financial Action Task Force (FATF), which combats money laundering and terrorist financing. FATCA, CRS and FATF promote transparency, especially around beneficial ownership (UBO) information, ensuring that authorities have access to the true ownership of financial assets.
FATCA came into effect 1 July 2014. In most EU countries CRS came into effect 1 January 2016. In the remainder of countries, and many countries in Asia, CRS came into effect 1 January 2017. Countries continue to join the CRS framework annually.
Non-compliance with FATCA and CRS can result in penalties. Additionally, non-compliance with FATCA may also result in withholding tax on U.S. income for non-U.S. financial institutions. This FATCA U.S. withholding tax is usually withheld by U.S. withholding agents, including Qualified Intermediaries.
The key processes or ‘building blocks’ of FATCA and CRS:
| Legal entity management |
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| Organizations must assess their FATCA and CRS classification to determine if they qualify as a Financial Institution with reporting obligations. If they do, they should register with the IRS and, in some cases, with local tax authorities. |
| Product analysis |
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| Financial Institutions must periodically assess new and changed products to determine if they qualify as Financial Accounts under FATCA or CRS. For Investment Entity-Financial Institutions, the equity and debt interest holders are the Financial Account holders. |
| Customer or investor due diligence |
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| Financial institutions must continuously identify new customers or investors and track changes in circumstances to ensure accurate determination of their tax residence for their UBOs, and collect all reportable data. |
| Annual reporting |
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| Financial Institutions must annually report on customers, investors, or UBOs tax resident in a reportable jurisdiction. FATCA and CRS reports include personal details, year-end account values, and payment information. Before reporting, data must be validated, filtered, and reconciled to ensure accuracy. |
What do we see in the market?
In the decade since the introduction of FATCA and CRS, these regimes have significantly transformed the landscape of automatic information exchange. However, despite their longstanding presence, the attention for FATCA/CRS continues to grow. Key factors driving this increase include:
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Governments are intensifying enforcement efforts, with a particular focus on the quality and completeness of data submissions. With AI and big data playing a growing role, financial institutions must prioritize accurate and comprehensive data reporting.
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As data protection regulations, such as GDPR, gain prominence, many organizations are required to redesign processes to ensure they meet both FATCA/CRS and data privacy requirements.
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Financial institutions are increasingly stretched, balancing the demands of FATCA/CRS compliance with AML and sanctions requirements. This resource strain, especially in sectors like asset management, has led to a shift toward outsourcing FATCA/CRS compliance to maintain expert knowledge and ensure long-term sustainability.
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High turnover rates in financial institutions create a continuous need for FATCA/CRS training to maintain compliance and ensure new staff are fully equipped to handle these regulations.
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The CRS/DAC2 model rules will be updated effective 2026, primarily impacting the reporting requirements (known as CRS 2.0). These updates are part of EU Directive 2023/2226 (‘DAC8’) and aim to help tax authorities better interpret existing data by introducing additional data fields.
Additionally, DAC8 expands the scope of CRS by including digital assets, ensuring alignment with the Crypto Asset Reporting Framework (CARF) and promoting a level playing field in reporting for digital and crypto assets. Some Financial Institutions have not consistently collected or recorded all the mandatory data in recent years. As a result, additional effort will be required to improve the availability of the necessary information.