Custodial institutions and fiduciary structures may both “hold assets,” but legally they are completely different. The distinction comes down to the relationship, the level of discretion, and who is allowed to act on behalf of the owner. Under EU regulations, this difference determines why custodians remain allowed for Russians, while fiduciary services are banned.

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• Holds assets securely.
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• Cannot touch, manage, or move anything without explicit instruction.
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• Their duty is pure safekeeping.
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• Authorized to make decisions for your benefit.
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• Can buy, sell, and manage assets without constant permission.
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• Their duty is loyalty and prudent management.
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• Custodian: Principal–Agent or Bailor–Bailee. A contract for safekeeping and execution of instructions.
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• Fiduciary: Fiduciary–Beneficiary. A relationship of trust requiring good faith.
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• Custodian: Safekeeping and exact execution of instructions.
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• Fiduciary: Loyalty and prudence in managing assets.
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• Custodian: No discretion. Cannot make independent decisions.
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• Fiduciary: High discretion. Expected to make judgment calls.
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• Custodian: Holder of assets; operational, mechanical role.
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• Fiduciary: Manager of assets; judgment and strategy.
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• Custodian: Banks, brokerages, central securities depositories.
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• Fiduciary: Trusts (trustees), estates (executors), guardianships.
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• Custodian: Negligence — loss of assets or failure to follow instructions.
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• Fiduciary: Breach of fiduciary duty — conflicts, self-dealing, bad decisions.
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• Custodian: The client owns assets directly and gives instructions.
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• Fiduciary: The fiduciary controls assets; beneficiaries benefit but often do not control.
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Top Company (Custodial Institution)

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• The company’s articles and memorandum allow its shares to transfer automatically to designated third parties (typically family members) upon the shareholder’s death.
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• This mechanism does not create a trust, because there is no fiduciary relationship—only a custodial structure.
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• Therefore, it does not fall under EU trust-related sanctions, which target fiduciary and trust-like arrangements.
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• The company’s place of effective management (POEM) is in Svalbard, a CRS non-participating jurisdiction.
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• As a result, the top company is treated as a Non-Reporting Financial Institution (FI) for CRS purposes and has no CRS reporting obligations.
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• Its CRS classification is driven entirely by its activities and professional management, not by the tax residency of its shareholders.
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• Because the bottom company’s portfolio is professionally managed by a bank (a Financial Institution), it is classified as an:
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• Investment Entity (Professionally Managed)
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• This makes it a Financial Institution for CRS purposes, regardless of who owns it.
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• The bottom company has one equity holder: the top company (a non-reporting custodial FI located in Svalbard).
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Under CRS rules:

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• An equity interest held by a Financial Institution is not a “Financial Account”,
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• unless the entity is an Investment Entity in a non-participating jurisdiction.
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• Here, the shareholder is an FI in a non-participating jurisdiction, but not an Investment Entity.
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• Therefore, the holding is not a reportable account.
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3. The top company is a Non-Reporting FI located in a CRS non-participating jurisdiction (Svalbard).
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7. The bottom Investment Entity sees its owner as a Non-Reporting FI.
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11. Because of this, the bottom company:
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• Does not look through the top company,
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• Does not identify controlling persons,
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• Does not report the ultimate Russian shareholder under CRS.
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4. The Russian resident owner is not reported because the ownership is held through a recognized FI in a CRS-non-participating jurisdiction.
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8. No Exchange on Demand (EoD) applies because the Person with Significant Control (PSC) is resident in Svalbard — a territory with no tax information exchange agreements whatsoever due to treaty...

While custodians and fiduciaries are closely related, they serve fundamentally different roles in wealth management and trust structures. Importantly: all fiduciaries are custodians in some sense, but not all custodians are fiduciaries.

Role: Safeguard and protect client assets.

Core Function: Holding assets securely against loss, theft, or error.

Key Responsibilities:

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• Physical and electronic safekeeping of assets
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• Settling trades and processing corporate actions (dividends, stock splits)
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• Providing accurate statements and transaction records
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Standard of Care: High duty of care focused on security and accuracy.

Analogy: Like a bank’s safety deposit box—keeps valuables safe, but doesn’t decide what to do with them.

Role: Act in the client’s best interest.

Core Function: Provide advice or make decisions for the sole benefit of the client.

Key Responsibilities:

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• Actively managing portfolios
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• Exercising discretion over assets
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• Ensuring decisions align with the client’s objectives
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Standard of Care: Fiduciary duty — the highest legal standard, encompassing:

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• Duty of Loyalty: Client’s interests come first
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• Duty of Care: Prudent, informed decisions
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• Duty of Good Faith: Honesty and fairness
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Analogy: A financial advisor or trustee who manages your portfolio according to your goals.

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• Custodian: Holds and safeguards assets; client retains decision-making power.
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• Fiduciary: Actively manages assets and makes decisions in the client’s best interest.
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Overlap:

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• Firms like Fidelity or Vanguard are custodians for client accounts but act as fiduciaries when managing portfolios.
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• A trustee is both a custodian and a fiduciary: safeguarding assets while managing them for beneficiaries’ benefit.
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Takeaway:

Think of custodians as safe hands and fiduciaries as trusted decision-makers. The distinction is crucial for wealth planning, legal compliance, and understanding your protections and responsibilities.