A Footnote
The OECD’s list of jurisdictions committed to the Common Reporting Standard does not include the United States. In its place is a footnote, more or less unchanged since 2014. It says that the United States has been carrying out automatic exchanges under FATCA since 2015, that it has entered into intergovernmental agreements to do so, and that the reciprocal ones among them acknowledge the need for Washington to achieve equivalent levels of exchange, with a political commitment to adopt regulations and support the necessary legislation.
The whole story is in that footnote: a political commitment, made more than a decade ago, that depends on a law Congress has never passed.
An Old Policy: Attracting the World’s Savings
The asymmetry did not begin with the CRS. It extends an old and fully deliberate tax policy choice. Since the 1920s, interest paid by U.S. banks to nonresident foreign depositors has been exempt from U.S. tax. In 1984, Congress added the portfolio interest exemption, which eliminated withholding on most bonds held by foreigners, with an explicit goal: to finance the federal deficit with the rest of the world’s savings. Nonresidents’ capital gains on securities go untaxed as well. Only dividends bear withholding, at 30% or less depending on the treaty.
A foreigner who puts money in the United States therefore owes, for the most part, no tax there. That leaves the question of whether their home country will hear about it. For a long time, the answer was no. Since 1997, U.S. banks have reported to the IRS the interest paid to residents of Canada, and only Canada. In January 2001, in its final days, the Clinton administration proposed extending that reporting to all foreign depositors. The banking associations of Florida and Texas, whose members have for decades held the rainy-day savings of Latin America’s well-to-do, went on the attack. The Bush administration cut the proposal back to 16 countries in 2002, then let it sit.
It was the Obama administration that dug it up, out of necessity: to get foreign governments to carry FATCA’s water, it had to offer them something. A regulation issued in April 2012 required U.S. banks to report, starting in 2013, interest paid to any nonresident individual. The Florida and Texas bankers sued. Their challenge was rejected by the district court in 2014, then by the U.S. Court of Appeals for the D.C. Circuit in 2015, in an opinion written by Judge Brett Kavanaugh that disposed of it on procedural grounds without reaching the merits. The Supreme Court declined to hear the case in 2016.
What Washington Actually Gives
That 2012 regulation remains, to this day, the foundation of what the United States sends abroad. The content is set by Article 2 of the Model 1A intergovernmental agreements. For a resident of the partner country, the IRS provides the name, address, foreign tax ID number if the bank has it on file, the account number, and three categories of amounts: interest paid on depository accounts, U.S.-source dividends, and other U.S.-source income credited to the account.
The list of what is missing is more instructive. No account balance or value, which is the CRS’s cardinal data point. No gross proceeds from sales of securities. No non-U.S.-source income, so a portfolio of European stocks held at a New York broker generates no entry at all. No depository accounts held by entities. And above all, no look-through: when an account is opened in the name of a company or a trust, U.S. banks do not determine, for exchange purposes, the tax residence of the people who control it. Putting a Delaware LLC or a British Virgin Islands company between yourself and your Miami account is enough to fall out of scope. That is exactly the flaw that wrecked the EU’s Savings Directive in 2005, and the one the CRS was designed to close.
And that assumes the exchange happens at all. The IRS sends data only to countries with which a legal instrument is in place and whose confidentiality safeguards and data use it has vetted. The list, published by revenue procedure and updated periodically, runs to roughly 50 jurisdictions, fewer than half of those that have signed a FATCA agreement. The rest, holding a Model 1B or Model 2 agreement, give and get nothing back.
Why Washington Won’t Join
The official explanation fits in one sentence: the United States has FATCA, the original, and has no need for the copy. It masks three more concrete obstacles.
The first involves treaties. Multilateral exchange under the CRS rests on the Convention on Mutual Administrative Assistance in Tax Matters, as amended by its 2010 protocol. The United States is a party to the original convention, which it ratified in 1991. It signed the protocol in May 2010. The Senate has never given its consent: the Foreign Relations Committee approved it several times, but Sen. Rand Paul, opposed on principle to sharing tax data with foreign governments, blocked every international tax instrument for nearly a decade. Several bilateral protocols finally went through in July 2019. Not that one.
The second is legislative. Nothing would prevent bilateral agreements built on existing treaties. But to send balances and beneficial owners abroad, U.S. banks would first have to be required to collect them, to gather self-certifications of residence, to look through entities. Treasury takes the position that it needs authority from Congress for that. It asked for it in every Obama administration budget proposal from 2013 on, and the Biden administration carried the proposal forward in its own. It has never come to a vote.
The third is political. The coalition of opponents is motley and effective: Florida and Texas banks fearing the flight of Latin American deposits, the trust industry of the Western states, and conservative groups like the Center for Freedom and Prosperity that defend tax competition and the right to financial privacy. They also have an argument that carries real weight: the CRS means handing financial data to authoritarian or corrupt regimes, where it can be used for extortion, kidnapping, or persecution of dissidents. For many Venezuelan or Mexican families, the Miami account is not tax fraud. It is insurance. The argument is sincere for some and convenient for many.
Why No One Makes It
The CRS was imposed on tax havens by threat: G20 gray lists, the EU blacklist, defensive measures. None of those weapons has been pointed at Washington.
The OECD, whose largest funder is the United States and whose standard is a carbon copy of the American law, sticks to its footnote. The Global Forum reviews the United States on exchange on request, where it is rated largely compliant, but not on automatic exchange, since it never committed to it. The European Union built its blacklist criteria in such a way that a network of bilateral automatic exchange agreements with every member state is sufficient: the FATCA agreements do the job, however thin their reciprocal content. The European Parliament denounced the double standard in its July 2018 resolution, and groups like Oxfam and the Tax Justice Network repeat the point at every revision of the list. No European government has seen fit to open that front, least of all in the current trade climate.
The underlying reason is the one that explains all of FATCA: leverage. A Swiss bank cannot do without the U.S. market. The U.S. market can do without Switzerland’s approval.
South Dakota’s “Foreign” Trust
An industry has flourished on this legal terrain. Its capital is Sioux Falls, population 200,000.
South Dakota abolished the rule against perpetuities in 1983, so trusts there can last forever. It has no income tax, no capital gains tax, and no estate or inheritance tax. Its statutes, rewritten almost every year by a task force on which industry professionals sit, allow self-settled asset protection trusts, seal court proceedings involving trusts, and permit “directed” trusts that split the roles of trustee, investment adviser, and protector. Assets administered by the state’s trust companies went from a few tens of billions of dollars in 2010 to more than $500 billion at the start of this decade. Nevada, Wyoming, Alaska, Delaware, and New Hampshire are engaged in the same arms race.
The flagship product for international clients turns on a subtlety of the Internal Revenue Code. A trust is a “U.S.” trust for tax purposes only if it passes two tests: a U.S. court must be able to exercise primary supervision over its administration (the court test), and U.S. persons must control all of its substantial decisions (the control test). Give a single substantial power to a foreigner, typically a protector living outside the United States, and the trust is deemed foreign. It is then treated like a nonresident: its non-U.S.-source income escapes federal tax, and so does its U.S. bank and bond interest.
But for CRS purposes, that same trust, administered by a trustee in Sioux Falls, resides in the United States, a non-participating jurisdiction. It is a reporting institution nowhere. And the FATCA agreements provide for no information to be sent on its settlors or beneficiaries. Foreign for U.S. tax, American for global transparency: the structure slips between the two nets. Practitioners generally add a foreign blocker company beneath the trust to shield the assets from the U.S. estate tax, which hits nonresidents’ U.S.-situs property above $60,000.
The industry made no secret of it. As early as January 2016, a Bloomberg investigation described Rothschild opening a trust company in Reno, Nevada, Trident Trust moving dozens of accounts from Switzerland and the Caymans to Sioux Falls, and a draft presentation by a Rothschild executive calling the United States the biggest tax haven in the world, a line dropped from the final version. The Pandora Papers, in 2021, identified 206 U.S. trusts tied to foreign fortunes from 40 countries, 81 of them in South Dakota alone, some set up by people accused in their home countries of corruption or human rights abuses.
The standard does include a countermeasure: an investment entity from a non-participating jurisdiction that opens an account in Geneva or Singapore must be looked through and its controlling persons reported. But that works only if the country in question doesn’t classify the United States as a participating jurisdiction, which several did in the early years on the grounds that they had a FATCA agreement, before the Global Forum pushed for corrections. And the countermeasure does nothing for assets held in the United States itself.
The Anonymous Company, Literally
The system’s second pillar is companies. In most U.S. states, you can form an LLC in an hour without telling anyone who owns it. The Financial Action Task Force said as much in its 2016 evaluation, rating the United States non-compliant with its recommendation on transparency of legal persons.
Progress came under pressure from the Panama Papers. Since 2017, foreign-owned single-member LLCs have had to obtain a tax ID number and file an annual information return with the IRS. Since 2018, banks have had to identify the beneficial owners of their legal-entity customers above a 25% threshold, but that information, collected for anti-money-laundering purposes, feeds no tax exchange. The Corporate Transparency Act, enacted on January 1, 2021, over the presidential veto of the defense bill it was attached to, was supposed to finish the job with a federal registry kept by FinCEN, confidential but available to law enforcement and, through treaty channels, to foreign counterparts. The FATF took note and upgraded the U.S. rating in 2024.
The registry opened in January 2024. After a year of trench warfare in the courts, Treasury announced in March 2025 that it would not enforce the law against companies formed in the United States, then formalized that in an interim final rule. Only foreign-formed companies registered to do business in a U.S. state remain covered. The Delaware LLC owned by a nonresident, which is to say precisely the vehicle the law was aimed at, is exempt.
The same retreat has hit the neighboring projects. The FinCEN rule extending nationwide the reporting of all-cash residential real estate purchases by companies, successor to the geographic targeting orders launched in Manhattan and Miami in 2016, has had its effective date pushed back. The one bringing investment advisers under anti-money-laundering obligations was delayed by two years. The ENABLERS Act, which would have covered lawyers, company formation agents, and trustees, died in the Senate in late 2022.
What the Flows Say
The effect can be measured. In their 2020 study of the CRS’s impact, Elisa Casi, Christoph Spengel, and Barbara Stage found that cross-border deposits fell in traditional offshore centers after the standard took effect and rose in only one major financial center: the United States. The Tax Justice Network ranked the country second on its Financial Secrecy Index in 2018 and 2020, then first in 2022, with the worst score ever recorded, a rank it has held since.
Caution is in order on the scale, however. Most of the trillions of dollars foreigners hold in the United States are there for reasons that have nothing to do with tax: deep markets, the dollar’s status, legal certainty. Nobody knows what fraction goes undeclared back home, precisely because the information that would tell us isn’t exchanged.
The American Defense
It would be unfair to reduce Washington’s position to cynicism. Its defenders point out that the United States answers information requests, including group requests, from its treaty partners, and that its treaty network is one of the most extensive in the world. That the Qualified Intermediary regime and withholding tax reporting already document a large share of nonresidents’ U.S. income. That the Justice Department has done more than anyone against banks complicit in tax fraud, with investigative tools and penalties unmatched in Europe. And that the IRS’s confidentiality requirements for recipient countries are no pretext: Washington suspended its exchanges with Russia in 2022.
All of that is true, and none of it answers the objection. Exchange on request assumes the foreign tax authority already knows what it is looking for, which was precisely the defect of the pre-2009 system, the one the United States itself found unacceptable when its own taxpayers were at issue.
One Opening: Crypto
Only one area breaks the pattern. In November 2023, the United States co-signed a statement by some 50 jurisdictions pledging to implement the OECD’s Crypto-Asset Reporting Framework, the CRS’s cousin. The 2021 Infrastructure Investment and Jobs Act had already created a broker reporting requirement for platforms, effective for 2025 transactions. The White House working group on digital assets recommended in 2025 that implementation of the OECD framework be studied, and Treasury has begun the regulatory work, with first exchanges on a longer horizon than the 2027 early movers. At the same time, in the spring of 2025, Congress repealed the extension of those requirements to decentralized finance.
The logic is plain. The platforms are global, American taxpayers are all over them, and the IRS needs the foreign data. Where Washington has an interest in receiving, it agrees to give.
The Lever and the Hole
The consequences go beyond the American case. Every financial center told to do more, whether Dubai, Singapore, or Panama, has a ready-made comeback: why us and not Delaware? The standard’s legitimacy takes a hit at the very moment countries of the Global South are contesting, at the United Nations, the OECD’s right to write rules for everyone.
And the first victims aren’t European. France and Germany get some data and can ask for more. The countries of Latin America and Africa, whose elites have traditionally kept their fortunes in Florida or New York, mostly have non-reciprocal agreements or no agreement at all. They hand the IRS the accounts of Americans living in their countries and receive nothing on their own nationals.
The CRS rests on a simple idea: no country can sell other countries’ residents their own tax authority’s ignorance anymore. It holds for more than 120 jurisdictions. It does not hold for the world’s leading financial center, which grasped the value of that information before anyone else, to the point of demanding it from the entire planet, and drew the logical conclusion: what is worth so much to receive is also worth something to withhold.