When you think of bank secrecy, what comes to mind? Peace of mind, trust, and the understanding that your finances are protected from outside interference? For decades, this was the reality for many bank clients. But in the era of globalization and the automatic exchange of financial information through CRS (Common Reporting Standard), everything has changed. Now, the question of "what remains confidential?" has become increasingly important.
The CRS system, which allows countries to exchange tax information automatically, has ushered in a new era of financial transparency. But does that mean bank secrecy has lost its power? Which of your financial data is still protected by secrecy, and which must be disclosed to tax authorities in other countries? Let’s explore this together.
CRS is a global standard for the automatic exchange of tax information, developed by the Organization for Economic Cooperation and Development (OECD). Its primary goal is to combat tax evasion and ensure transparency in financial transactions. Countries that have signed onto CRS are required to collect information about the financial accounts held by their residents and exchange that information with other jurisdictions.
This means that if you have financial assets or accounts in a country that is part of the CRS, that information may be transmitted to tax authorities in your home country. This was previously difficult to achieve, but now it has become a reality.
Long before CRS, bank secrecy was a fundamental tool for protecting financial privacy. It meant that banks were obligated to keep client account information confidential and not disclose it without the client’s consent. In many countries, strict laws protected this information, and violating them could result in significant fines.
However, as global financial markets and technology evolved, as well as the scope of tax evasion, bank secrecy began to pose a barrier to the fight against financial crime. Governments realized that achieving financial transparency and combating money laundering required sharing information about financial transactions at the international level.
With the introduction of CRS, the concept of bank secrecy has undergone significant changes. Now, banks are obligated to collect and transmit information about their clients’ accounts to tax authorities if those clients reside in a different country. This means that if you have an account in a foreign bank that is subject to CRS rules, tax authorities in your home country can access that information.
Specifically, CRS requires banks to:
Thus, even if you could previously keep your finances under the protection of bank secrecy, now that information can be disclosed to tax authorities in other countries.
Despite all the changes, some aspects of bank secrecy still hold true. Here’s what remains confidential:
Imagine the following scenario: Elena, a Ukrainian citizen, has an account at a bank in Switzerland. Previously, she could be confident that her financial data would remain secret, as Switzerland was known for its strict bank secrecy. But with Switzerland joining the CRS system, her account falls under the obligation to exchange information with Ukrainian tax authorities. This means that if Elena did not declare her assets properly, she could face penalties for tax evasion.
Bank secrecy, as we once knew it, has undergone significant changes in the era of CRS. Globalization of finance and the fight against tax evasion have led to the fact that many of our financial data can now be disclosed to tax authorities in other countries. However, some aspects of confidentiality remain, and it is important to know how to protect your finances in this new world of transparency.
If you want to learn more about bank secrecy and the impact of CRS on your finances, contact our experts. We can help you organize your financial affairs correctly and avoid unpleasant consequences. Schedule a consultation now!
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Serhii Floreskul
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Violetta Loseva
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