The international compliance landscape entering 2026 is markedly different from what it was even three years ago. The convergence of regulatory tightening, technological advancement, and political will has created an environment in which cross-border structures face more scrutiny, more reporting obligations, and more enforcement activity than at any point in modern history. For international entrepreneurs and the professionals who advise them, staying ahead of these developments is not merely prudent — it is essential for the continued viability of their structures.

Crypto-Asset Reporting Framework (CARF)

The OECD's Crypto-Asset Reporting Framework, finalised in 2023, is entering its implementation phase across early-adopter jurisdictions. CARF extends the automatic exchange of information principles — already established through CRS for traditional financial accounts — to transactions involving crypto-assets. Under CARF, crypto-asset service providers (CASPs) — including exchanges, custodians, and decentralised finance platforms that meet certain criteria — will be required to collect and report information on their users' transactions to the tax authority of the jurisdiction where the CASP operates.

That information will then be automatically exchanged with the tax authorities of the users' jurisdictions of tax residence. The data reported under CARF is comprehensive: the identity of the user (name, address, date of birth, tax identification number), the types and amounts of crypto- assets transacted, the aggregate gross proceeds from dispositions, and the aggregate fair market value of crypto-assets transferred.

For individuals who have used cryptocurrency as part of their international financial arrangements — whether for investment, payment, or asset holding — the reporting obligations are about to become significantly more extensive. The timeline varies by jurisdiction. The EU has incorporated CARF into its Directive on Administrative Cooperation (DAC8), with implementation expected from 2026. The UK, Switzerland, Canada, Australia, and several other jurisdictions have announced their adoption timelines.

By 2027, the framework is expected to be operational across most major financial centres.

The EU Unshell Directive (ATAD III)

The European Commission's proposal for a directive laying down rules to prevent the misuse of shell entities for tax purposes — commonly referred to as the Unshell Directive or ATAD III — continues to progress through the legislative process. While the original timeline has been delayed, the directive's intent remains firmly on the EU's agenda. The proposed rules establish a "substance test" for EU entities.

An entity that derives more than 75% of its income from passive sources (royalties, dividends, interest, real estate income) and that conducts more than 60% of its relevant economic activity on a cross-border basis will be required to demonstrate minimum substance in its jurisdiction of incorporation. The minimum substance indicators include: own premises or premises available for the entity's exclusive use; at least one own and active bank account in the EU; and at least one director who is resident in or near the jurisdiction, who is not a director of unrelated entities, and who is authorised to make decisions in relation to the entity's activity — or, alternatively, a majority of the entity's employees who are resident in or near the jurisdiction and are qualified to carry out the entity's activity.

Entities that fail the substance test will be deemed "shell entities" and will lose access to certain tax treaty benefits and EU directive benefits. The home member state may also deny tax deductions for payments made to or through such entities. While the directive targets primarily intra-EU holding structures, its influence extends further. The substance criteria it establishes are likely to become a benchmark for what constitutes adequate substance in any jurisdiction — not just within the EU.

Banks, auditors, and tax authorities worldwide are increasingly applying substance tests that mirror the ATAD III criteria.

Beneficial ownership registries: expanding and interconnecting

The trend toward beneficial ownership transparency continues to accelerate. The US Corporate Transparency Act is now fully operational, with millions of entities having filed their initial BOI reports with FinCEN. The EU's beneficial ownership directive requires member states to maintain central registries, with law enforcement and obliged entities (banks, lawyers, accountants) having direct access.

The next frontier is interconnection. The EU's Beneficial Ownership Registers Interconnection System (BORIS) aims to link national registries across all member states, creating a unified database accessible to authorities and obliged entities throughout the bloc. While full implementation is still in progress, the direction is clear: beneficial ownership information will be increasingly centralised, cross- border, and accessible.

For international structuring, the practical implication is that beneficial ownership must be consistent, accurate, and up to date across every jurisdiction where an entity exists. Discrepancies between the information filed in the US (with FinCEN), in the UK (with Companies House), and in the EU (with national registries) will be detectable — and will trigger compliance flags with both regulators and financial institutions.

Banking compliance: the ongoing tightening

Financial institutions continue to raise the bar on onboarding and ongoing monitoring. The themes from our June 2024 analysis on banking de-risking have intensified. Banks are not merely enforcing existing KYC obligations — they are proactively reassessing their client portfolios and exiting relationships that do not meet their evolving risk appetite. Several trends are notable. First, the frequency of periodic reviews has increased.

Many institutions now conduct enhanced due diligence reviews annually rather than every three years. Second, the depth of documentation required has expanded. Banks are increasingly requesting evidence of operational substance — not merely formation documents and beneficial ownership declarations, but proof of actual business activity: contracts with clients, invoices, bank statements from other institutions, employment records, and tax filings.

Third, the consequences of non-cooperation have become more severe. Clients who fail to respond to documentation requests within the specified timeframe face account restrictions or, increasingly, outright closure. The compliance departments of major banks operate under regulatory pressure, and they have limited patience for clients who do not engage proactively with the review process.

— Fidelys Partners —