What Your Foreign Bank Reports About You, and to Whom

The single most common misconception about banking abroad is that it is private. It is not, and it has not been for years. Under the Common Reporting Standard, banks in participating jurisdictions identify which country each customer is tax resident in and report the account to that country's tax authority — automatically, annually, without a request and without telling you each time.

This is worth understanding properly, because the people it catches out are almost never evading anything. They are people who moved country, kept an old account open, and did not realise a form they signed in a branch determines where their balance gets reported.

Where the obligation comes from

The CRS is an OECD standard, and it takes legal effect through each participating country's own law. In the UK that is the International Tax Compliance Regulations 2015, which require financial institutions to apply the due diligence procedures "set out in the relevant agreement" and to report accordingly.

The same instrument also implements the FATCA agreement, which is the parallel and much older US regime. One statutory instrument, two reporting regimes, because the UK — like most participating countries — signed up to both.

The mechanism is deliberately mechanical. The bank is not exercising judgement about you. It is applying a due diligence procedure written elsewhere and reporting what that procedure produces.

The form you already signed

Every account opened at a participating institution involves a self-certification: a declaration of the country or countries in which you are tax resident, and your taxpayer identification number in each. It is often presented as one more compliance page in an onboarding flow, and it is the most legally significant thing in the whole application.

Two things follow that people consistently miss.

It is a declaration you are responsible for. If it is wrong, that is your problem, and correcting it later is considerably more awkward than getting it right at the time.

It must be kept current. Tax residency changes when you move. The bank does not automatically know, and continuing to hold an account under a stale self-certification means your details are being reported to a country you no longer live in — and not being reported to the one you do.

What actually gets reported

The reportable dataset is narrower than the anxiety around it suggests, and knowing its shape is more useful than imagining the worst. In broad terms it covers who you are and where you say you are tax resident, which account you hold and at which institution, the balance or value at the end of the reporting period, and certain amounts credited during it.

It does not send your tax authority a list of what you spent money on. It is an account-level report, not a transaction-level one.

The indicia problem

The part that surprises people is that the bank does not simply take your word for it. The due diligence procedures require institutions to look for indicators — commonly called indicia — that a customer may be tax resident somewhere other than what they declared.

The kinds of things that count are entirely ordinary: an address in another country, a telephone number there, a standing instruction to transfer funds to an account there, a care-of or hold-mail address. Any of them can trigger a request for further documentation, and unresolved indicia can result in the account being reported to that jurisdiction as well.

This is why a perfectly innocent arrangement — keeping a parent's address on file in your home country while living abroad — can produce a letter asking you to confirm your tax residence. It is the procedure working as designed, not an accusation.

Timing, and why a query arrives long after the year it covers

Reporting is annual and retrospective. Institutions gather information across a reporting period, report after it ends, and the receiving authority gets it later still. The lag is normally months, which produces two consequences worth planning around.

A correction made today does not unmake a report already sent. Fixing a stale self-certification early is therefore worth far more than fixing it when a query arrives — by then the wrong information has already been exchanged and the correction is a conversation rather than a form.

And a question about an account you closed is not a mistake. An account open during part of a reporting period is within scope for that period, so closing it does not remove it from the report.

Entity accounts are in scope too

None of this is limited to personal accounts. Accounts held by companies, partnerships and certain trusts are covered as well, and for some entity accounts the institution must look through the entity to the controlling persons behind it and report those individuals.

The mechanics are set out with some precision. The 2015 Regulations work through the definitions of the accounts in scope, including a US$250,000 balance figure as of 31st December 2015 that governs how certain pre-existing entity accounts are treated.

This is where a structure built for entirely different reasons meets the reporting regime, usually without anyone expecting it. If a company or trust in your affairs exists partly because of a cross-border arrangement, whoever set it up should be able to explain how it is reported. If nobody can, that gap is the thing to close.

What to actually do

• Know which country you are tax resident in, and be able to say why. Residency for tax is a legal test in each country and it is not always where you spend most nights. If it is genuinely unclear, that is a question for an adviser before it is a question for a bank form.
• Update the self-certification when you move. Do it deliberately, in writing, and keep the confirmation. This is the single highest-value thing in this article.
• Expect to be asked, and answer promptly. A request for documentation is routine. Ignoring it is what turns routine into an account restriction.
• Keep your own records of foreign balances. The report goes to your tax authority whether or not you declared the same figures. Consistency between the two is what keeps this uneventful.
• Do not assume non-participation means invisibility. The list of participating jurisdictions is long and has grown, and a bank in a non-participating country may still be caught by FATCA or by its own local rules.

The honest summary

Cross-border banking is legal, normal and — for anyone with income, family or property in more than one country — often unavoidable. What it is not is confidential from tax authorities. Once you accept that as the baseline, the whole subject becomes administrative rather than fraught: declare accurately, keep it current, and keep your records consistent.

If the US is one of the countries in your life, there is a second regime with much sharper edges, and we cover it separately in the FATCA problem for US persons.

For choosing where to hold the money in the first place, expat bank accounts and the multi-currency shortlist are the practical guides, and the global banking regulation guide covers the supervisory side.

This is general information, not tax advice. Tax residency rules differ in every country and the consequences of getting them wrong are personal to your circumstances. Take professional advice.