Have you identified any specific loopholes in the CRS regulations that could be exploited by high net worth (HNW) individuals to hide assets?
To be practical about it, whenever there is a group of people who want to find a way to avoid something, they usually can get around it. People should comply, but many will still use contracts and assets to hide money. That is at their own risk, since they are responsible for not being compliant. Other loopholes include the reporting threshold, where evaders may divide their deposits into smaller separate deposits to avoid any legal consequences regarding their transactions; and and the use of commercial registries that lack in strength and transparency, rendering identifying the real UBO difficult.
Furthermore, it is hard to trace residency in all cases, taking into consideration that some jurisdictions are betting on defending their offshore finance industry by selling tax residency certificates which offer escape routes. Financial institutions often accept the passive residence certificate for CRS purposes despite it being not efficient in tracing residency status.
The above text is taken from the Tax Working Group Virtual Series – “Common Reporting Standards Imminent implications for client tax reporting” – read in full here.