Between 2017 and 2019, the OECD published FAQs and addendums to CRS to close loopholes—such as residence by investment, broad-based retirement plans, nil-value reporting on settlors, and the treatment of cash. FATCA, however, never addressed these loopholes. Eventually, the OECD abandoned the “whack-a-mole” approach and instead introduced Mandatory Disclosure Rules (MDR). But MDR was largely ineffective: few countries implemented it, and promoters in non-participating jurisdictions or under lawyer privilege were exempt.

Example: a UK non-resident trust classified as a custodial institution with a trustee in Svalbard. It owns an investment entity company but reports nil, since the equity interest is in an FFI custodial institution. The trust, itself an FFI, has no reporting duties because Svalbard is excluded from the U.S. IGA. This makes the trust a non-participating FFI—yet it avoids FATCA’s 30% withholding, since it receives no U.S.-sourced income.

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