OECD CRS FAQ On Equity Interest Of A Financial Institution Held By A Financial Institution

This episode looks at an often-cited but rarely analysed source: the OECD CRS FAQ on General Reporting Requirements, specifically Page 2, Question 7, dealing with the look-through requirement.

The key issue:

Does the FAQ require look-through where an equity interest in a Financial Institution is held by another Financial Institution?

📘 What the OECD CRS FAQ Says

The FAQ issued by the Organisation for Economic Co-operation and Development addresses when a reporting Financial Institution must apply a look-through approach.

In Page 2, Question 7, the FAQ refers to situations where an “entity” holds an account and discusses when controlling persons must be identified.

Notably:

• The FAQ uses the generic term “entity”

• It does not explicitly state that this includes Financial Institutions

• It does not override the CRS definition of non-reportable entities

🧱 The Structural Context

Under the CRS framework:

• Financial Institutions are generally non-reportable persons

• Due diligence applies only to Reportable Accounts

• Accounts held by non-reportable entities are not subject to look-through

The FAQ does not amend these structural definitions—it provides interpretative clarification.

⚖️ The Interpretative Question

The debate arises from how the word “entity” in the FAQ should be read:

Interpretation A:

“Entity” includes all entities, including Financial Institutions → look-through applies universally.

Interpretation B:

“Entity” must be read consistently with the CRS structure → look-through applies only where the entity is a Reportable Person (e.g., Passive NFE), not where it is a Reporting FI.

The FAQ does not expressly state that Financial Institutions lose their non-reportable status for equity interest purposes.

🎯 Why This Matters

If the term “entity” in the FAQ were interpreted to automatically include Financial Institutions:

• The FI “blocker” principle would weaken

• Duplicate reporting risks could arise

• The “closest FI” allocation model could be disrupted

If interpreted consistently with the CRS definitions:

• Financial Institutions remain non-reportable persons

• Look-through applies to Passive NFEs

• Reporting responsibility remains structurally allocated

🔑 Key Takeaway

The OECD CRS FAQ on General Reporting Requirements refers broadly to an “entity” but does not explicitly extend look-through to Financial Institution entities.

Whether that silence implies inclusion or exclusion remains the crux of the interpretative debate.

For trustees and compliance professionals, the critical lesson is:

CRS interpretation must align FAQ guidance with the core structural definitions of the Standard itself.