Mandatory Disclosure Rules (MDR) are a key part of the global transparency framework designed to identify and deter arrangements that undermine CRS reporting. Rather than focusing only on taxpayers, MDR targets the ecosystem behind tax planning—the intermediaries, promoters, and structures themselves.

Developed by the

Organisation for Economic Co-operation and Development, MDR aims to:

• Define and capture intermediaries involved in CRS avoidance

• Identify those who design, market, or supply such arrangements

• Create early visibility for tax authorities

This shifts the focus from detection after the fact → to prevention and intelligence gathering.

MDR establishes clear rules for who must report, including:

• Advisors designing structures

• Promoters marketing arrangements

• Service providers facilitating implementation

This ensures responsibility does not sit solely with the taxpayer.

Information collected under MDR is shared between jurisdictions through the:

Convention on Mutual Administrative Assistance in Tax Matters

Key feature:

• Spontaneous exchange (not automatic)

• Triggered where a country believes the information may be relevant to another jurisdiction

This allows tax authorities to act quickly across borders.

MDR is fundamentally an intelligence tool.

It enables:

• Identification of emerging avoidance schemes

• Analysis of patterns across jurisdictions

• Early intervention before widespread use

The information collected allows:

Authorities can focus on high-risk taxpayers and structures

The Global Forum on Transparency and Exchange of Information for Tax Purposes can:

• Identify weaknesses in CRS implementation

• Recommend improvements

By requiring disclosure:

• The marketing of avoidance schemes becomes riskier

• Intermediaries face greater scrutiny

• Aggressive planning is discouraged

MDR builds on earlier transparency initiatives, including:

• OECD BEPS Action 12

• UK disclosure regimes (e.g., DOTAS / POTAS)

• EU Mandatory Disclosure Rules (DAC6)

It represents the next evolution of global tax transparency.

Mandatory Disclosure Rules are not just about reporting—they are about changing behaviour.

They aim to:

• Expose CRS avoidance early

• Hold intermediaries accountable

• Enable cross-border intelligence sharing

• Deter aggressive tax planning before it spreads

In today’s environment:

Global transparency doesn’t stop at reporting bank accounts. The OECD introduced Mandatory Disclosure Rules (MDR) to go one step further—targeting the people who design and promote structures that may undermine CRS.

In this episode, we explain what MDR is, who it targets, and why it matters.

Mandatory Disclosure Rules are part of the OECD’s broader transparency framework, developed by the

Organisation for Economic Co-operation and Development.

Their purpose is to:

• Detect arrangements designed to circumvent CRS reporting

• Increase visibility over cross-border tax planning structures

• Shift focus from taxpayers to intermediaries and promoters

MDR is specifically aimed at:

Those who:

• Create or market structures intended to avoid reporting

• Develop offshore arrangements or planning strategies

• Package and sell these structures to clients

This includes professionals who:

• Advise on or implement structures

• Facilitate the setup of entities or accounts

• Provide legal, tax, or financial services connected to the arrangement

Even partial involvement may trigger obligations.

Under MDR, certain arrangements must be reported if they:

• Undermine or bypass CRS reporting

• Obscure beneficial ownership

• Use opaque structures or jurisdictions

• Exploit classification mismatches

These are often referred to as “hallmarks” of avoidance.

If an arrangement meets the criteria:

• The intermediary must report it to tax authorities

• If no intermediary is involved, the taxpayer may have to report

• The information is then shared internationally between jurisdictions

This creates a proactive transparency system, rather than relying solely on CRS data.

MDR significantly expands the compliance landscape:

• It targets intent and design, not just outcomes

• It increases scrutiny on advisors and institutions

• It creates early visibility for tax authorities

Failure to comply can result in:

• Financial penalties

• Regulatory consequences

• Reputational risk

Mandatory Disclosure Rules are designed to:

• Catch structures before they succeed

• Hold intermediaries accountable

• Close gaps in CRS reporting

The message is clear:

Not every Financial Institution (FI) under the Common Reporting Standard (CRS) is required to report. Certain entities are automatically treated as Non-Reporting Financial Institutions because they pose a low risk of tax evasion and serve public or systemic functions.

In this episode, we break down which institutions are exempt—and when those exemptions can be lost.

CRS exempts entities that form part of the state.

This includes:

• National governments

• Political subdivisions (e.g., states, provinces, municipalities)

• Agencies or entities wholly owned by government bodies

These entities are excluded because they perform public administrative functions, not private wealth management.

Certain supranational institutions are also exempt, including:

• World Bank

• International Monetary Fund (IMF)

• European Bank for Reconstruction and Development

To qualify:

• The organization must be primarily composed of governments

• It must operate for public or multilateral purposes

Central banks are automatically treated as Non-Reporting FIs.

Examples include:

• Federal Reserve System

• Bank of England

Also included:

• Entities wholly owned by one or more central banks

These institutions are excluded because they support monetary policy and financial stability, not private investment activity.

CRS exemptions are not absolute.

An otherwise exempt entity may lose its Non-Reporting FI status if:

• It engages in commercial financial activity, or

• Financial accounts are used for private benefit

Examples:

• A government-owned entity operating like a commercial bank

• An account used to channel income to private individuals

A key limitation:

If income or assets held by an exempt entity are used to benefit private persons, then:

• The entity may be treated as a Reporting FI for that period

• CRS obligations can apply for that year

This prevents abuse of public-entity exemptions for private wealth structuring.

Under CRS, the following entities are generally Non-Reporting Financial Institutions:

• Governmental entities

• International organizations

• Central banks

However:

• The exemption depends on function, not just status

• Engaging in commercial activity or benefiting private persons can trigger reporting obligations

CRS exemptions are designed to protect public institutions—not to create loopholes.

In the CRS framework, not every Financial Institution (FI) has reporting obligations. Understanding the difference between Reporting FIs, Non-Reporting FIs, and Excluded Accounts is essential to avoid misclassification and compliance errors.

In this episode, we break down these distinctions in plain English.

A common source of confusion:

• A Non-Reporting Financial Institution = the entity itself is exempt

• An Excluded Account = a specific account is exempt, even if held at a Reporting FI

👉 These are fundamentally different concepts.

Example:

• A bank may be a Reporting FI

• But certain accounts it holds may be classified as Excluded Accounts

Some jurisdictions—like

Germany—have historically designated specific low-risk accounts (e.g., “pocket-money accounts”) as excluded.

A Non-Reporting FI is still a Financial Institution—but:

• It is not required to perform CRS due diligence, and

• It does not report account information to tax authorities

This exemption exists because the entity is considered low risk for tax evasion.

Certain entities are excluded directly by the CRS framework.

These typically include:

• Government entities

• Central banks

• International organizations

• Certain retirement funds

These are considered inherently low-risk.

Countries may designate additional entities as Non-Reporting FIs, provided they meet strict criteria.

These entities must:

• Present a low risk of tax evasion

• Have clearly defined purposes

• Be subject to regulation or restrictions

Each jurisdiction maintains its own list of such entities.

Misunderstanding these categories can lead to:

• Treating an FI as exempt when it is not ❌

• Failing to report required accounts ❌

• Incorrect CRS classification ❌

The analysis must always distinguish:

• Entity-level status (FI vs Non-Reporting FI)

• Account-level status (Reportable vs Excluded Account)

Under CRS:

• Not all Financial Institutions are Reporting FIs

• Non-Reporting FIs are exempt due to low risk

• Excluded Accounts are different—they relate to specific accounts, not entities

• Classification depends on both CRS rules and local jurisdiction lists

Getting this distinction right is critical for accurate CRS compliance.

Canada applies the Common Reporting Standard (CRS) through a structured, multi-step classification system. Unlike many jurisdictions, not every Financial Institution (FI) automatically has reporting obligations—it must first qualify as a Canadian Financial Institution.

In this episode, we break down how Canada determines who reports under CRS.

Before anything else, the entity must qualify as an FI under CRS:

• Depositary Institution

• Custodial Institution

• Investment Entity

• Specified Insurance Company

Only if this threshold is met does the Canadian analysis begin.

To have potential reporting obligations in Canada, two conditions must be met:

The FI must be:

• Tax resident in Canada, or

• A branch located in Canada of a non-resident FI

👉 Important:

If an FI is tax resident in Canada, its foreign branches are excluded from Canadian reporting.

The entity must qualify as a “listed financial institution.”

This concept ensures that the FI:

• Falls within Canada’s regulatory or functional framework

• Includes entities that are professionally managed

• Covers structures such as:

1. Investment entities
2. Professionally managed trusts
3. Entities promoted to the public as investment vehicles

A key nuance in Canada:

An entity may qualify as a listed FI if it is authorized under provincial legislation to carry out financial activities such as:

• Dealing in securities

• Portfolio management

• Investment advising

• Fund administration

👉 Even if it is not formally registered, it may still qualify—

as long as the legal framework permits those activities.

Once an entity is a Canadian FI, the final step is classification:

• Reporting Financial Institution → subject to CRS obligations

• Non-Reporting Financial Institution → exempt

👉 The rule is simple:

Canada introduces an extra filtering layer:

1. Is it an FI?
2. Is it a Canadian FI?
3. Is it reporting or non-reporting?

This contrasts with many jurisdictions where:

• FI status alone often triggers reporting obligations

This structure means:

• Some entities may be FIs under CRS—but not Canadian FIs

• Others may be Canadian FIs—but qualify as non-reporting

• Classification depends on residence, legal status, and activity

Missteps can lead to:

• Missed reporting obligations

• Incorrect filings

• Regulatory exposure

Under Canada’s CRS framework:

• Not all FIs have reporting obligations

• The entity must first qualify as a Canadian Financial Institution

• It must also be a listed FI

• Only then is it tested for reporting vs non-reporting status

Canada’s approach reflects a more layered and jurisdiction-specific implementation of CRS.

One of the most misunderstood aspects of CRS is whether a Financial Institution (FI) must be regulated or supervised to have reporting obligations. While the OECD framework does not require supervision, some jurisdictions initially adopted stricter interpretations.

In this episode, we explain how different countries approached this issue—and where things stand today.

Under the CRS developed by the

Organisation for Economic Co-operation and Development:

• FI status is based on activity, not regulation

• Supervision may be relevant—but is not determinative

• Unregulated entities can still be Reporting Financial Institutions

This principle led to pushback against jurisdictions that tried to impose additional supervision requirements.

Both the Netherlands and Luxembourg initially:

• Required certain FIs—particularly investment entities—to be regulated or supervised

• Limited CRS reporting obligations to supervised entities

However:

• This approach conflicted with OECD guidance

• Both jurisdictions removed the supervision requirement under OECD pressure

Today, Canada stands out as the only jurisdiction with a structured listing requirement.

In Canada:

• An entity must qualify as a Canadian Financial Institution

• It must be recognised (i.e., included within the Canadian framework of FIs)

• Only then can it be a Reporting Financial Institution

To determine CRS reporting obligations in Canada:

Does it qualify as:

• Depositary Institution

• Custodial Institution

• Investment Entity

• Specified Insurance Company

The entity must fall within the definition of a Canadian Financial Institution, based on residence and regulatory framework.

Finally, determine whether:

• The entity has reporting obligations

• Or qualifies as a non-reporting FI under exclusions

The Canadian approach introduces an additional layer:

• Not all FIs automatically become reporting FIs

• Local classification and recognition matter

By contrast, most CRS jurisdictions follow the OECD model more directly:

• If it meets the definition, it is generally an FI

• No supervision requirement applies

• CRS does not require Financial Institutions to be regulated

• The Netherlands and Luxembourg briefly diverged—but aligned with OECD guidance

• Canada applies a more structured, jurisdiction-specific approach

• FI classification and reporting obligations remain jurisdiction-dependent in practice

Understanding local implementation is just as important as understanding the CRS itself.

A common misconception is that an entity must be licensed or regulated to qualify as a Financial Institution (FI) under the Common Reporting Standard (CRS). The OECD guidance makes clear: regulation is relevant—but not decisive.

In this episode, we unpack what the rules actually say and why this distinction matters in practice.

Under the CRS framework (Section VIII), a Financial Institution is defined by function, not by regulatory status.

An entity is an FI if it falls into one of four categories:

• Custodial Institution

• Depository Institution

• Investment Entity

• Specified Insurance Company

These definitions are set out in the OECD Commentary on CRS.

According to OECD Commentary (pp. 159–160):

This means:

• Being regulated supports FI classification

• But lack of regulation does not prevent FI status

CRS is designed around economic activity, not licensing.

An entity may still qualify as an FI if it:

• Holds financial assets for others

• Manages investments

• Generates income from financial activities

—even if it is not formally supervised by a regulator.

• A privately structured investment vehicle

• A trust professionally managed by an investment manager

• A family investment company generating passive income

• An insurance broker (no payment obligation under policies)

• A service provider without custody or investment activity

• A trading company with purely commercial operations

Relying solely on regulatory status can lead to errors:

• Assuming “not regulated” = not an FI ❌

• Failing to apply CRS reporting obligations ❌

• Creating compliance gaps ❌

Correct classification requires analysing:

• Activities

• Income sources

• Functional role

—not just licensing status.

Under CRS:

• FI status is based on what the entity does, not whether it is regulated

• Regulation is a factor, but not a requirement

• Unregulated entities can still be Reporting Financial Institutions

Understanding this distinction is critical for accurate CRS classification and compliance.

In the CRS framework, identifying whether an entity is a Financial Institution (FI) is only half the story. The next critical step is determining where that FI is located, because this defines which jurisdiction is responsible for reporting.

In this episode, we break down how CRS determines FI location—and why the answer isn’t always obvious.

Only Financial Institutions located in a CRS-participating jurisdiction are treated as reporting FIs.

This determines:

• Which country receives and transmits information

• Which rules apply to due diligence and reporting

• Whether accounts are reported at all

For most entities, the rule is straightforward:

👉 The FI is located where it is tax resident.

This means:

• The jurisdiction that treats the entity as a tax resident

• Typically where it is incorporated or effectively managed

This is the primary rule under CRS.

Where an entity is not tax resident in any jurisdiction, CRS looks to other connections.

Location is determined based on:

• Place of incorporation

• Place of management

• Jurisdiction of financial supervision

This ensures that entities cannot fall outside the system simply by lacking formal tax residence.

Where an entity is tax resident in more than one jurisdiction:

👉 The relevant CRS jurisdiction is generally where the financial accounts are maintained.

This determines:

• Which jurisdiction has the reporting obligation

• Which authority exchanges the information

Trusts follow a different approach.

👉 A trust is generally located where one or more trustees are resident.

This reflects the fact that:

• Trustees control the trust

• Trustees are responsible for compliance and reporting

The trustee-based rule does not apply if:

• The trust is already treated as tax resident in another jurisdiction, and

• The required information is being reported there

Example scenarios may include:

• Certain cross-border trust structures

• Trusts with mixed residency elements (e.g., U.S. connections with non-U.S. fiduciaries)

This avoids duplicate reporting.

Determining FI location affects:

• Whether an entity is a reporting FI

• Which jurisdiction performs reporting

• Whether CRS obligations apply at all

Incorrect analysis can result in:

• Reporting gaps

• Duplicate reporting

• Compliance failures

Under CRS, FI location depends on:

• Tax residence (primary rule)

• Operational connections (if no tax residence)

• Account location (for multi-resident entities)

• Trustee residence (for trusts)

Understanding these rules is essential for correctly applying CRS reporting obligations across jurisdictions.