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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Bottom Company (Professionally Managed Investment Entity)

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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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Conclusion – Why This Structure Breaks the Reporting Chain

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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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13. 
    

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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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1. 
   
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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 restrictions (Treaty of Svalbard, Article 8).
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Result

The structure legally severs CRS and EoD reporting chains. The bottom company, though a Financial Institution, has no reportable accounts and no reporting obligation. The top company is completely outside CRS, and Svalbard’s treaty status prevents targeted information exchange.