Ecuador
Overall findings
Ecuador’s legal framework implementing the AEOI Standard is not in place in accordance with the requirements of the AEOI Terms of Reference. While Ecuador’s international legal framework to exchange the information with all of Ecuador’s Interested Appropriate Partners (CR2) is consistent with the requirements, Ecuador’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has significant deficiencies in areas that are fundamental to the proper functioning of the AEOI Standard. More specifically, deficiencies have been identified in Ecuador’s enforcement framework and in relation to the scope of Financial Accounts.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Conclusions on the legal framework
General context
Ecuador commenced exchanges under the AEOI Standard in 2021.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Ecuador:
issued SRI Resolution No. NAC-DGERCGC19-000000045 in 2019, amended by SRI Resolution No. NAC-DGERCGC21-00000006 in 2021 and further amended by Resolution No. NAC-DGERCGC23-00000007 in 2023; and
issued SRI Resolution No. NAC-DGERCGC19-000000062 in 2019 and SRI Resolution No. NAC-DGERCGC23-00000003 in 2023.
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 October 2019. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2019 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2020.
With respect to the exchange of information under the AEOI Standard, Ecuador is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2021.
Detailed findings
The detailed findings for Ecuador are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (see Annex B).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Ecuador’s domestic legislative framework is not in place as required as it does not contain several key aspects of the CRS and the Commentary. Significant deficiencies have been identified in relation to the framework to enforce the requirements (SR 1.4). Moreover, there are deficiencies in relation to the scope of Financial Accounts required to be reported (SR 1.2). Most significantly, Ecuador’s domestic legislative framework does not incorporate a framework for enforcement to address all possible non-compliance by Reporting Financial Institutions, does not include strong measures to ensure that valid self-certifications are always obtained for New Accounts and has provided for a category of jurisdiction-specific Excluded Accounts that does not meet the requirements.
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Ecuador has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Ecuador has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in a manner that is largely consistent with the CRS and its Commentary. However, a deficiency has been identified. More specifically, Ecuador has provided for a category of jurisdiction-specific Excluded Accounts that is not in accordance with the requirements.
The scope of Financial Accounts, including the provision of Excluded Accounts is material to the proper functioning of the AEOI Standard.
Ecuador should amend its domestic legislative framework to remove Dormant Accounts from its jurisdiction-specific list of Excluded Accounts as these have been defined in a manner that does not meet the requirements of the AEOI Standard.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Ecuador has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Ecuador does not have a legislative framework in place to enforce the requirements in a manner that is consistent with the CRS and its Commentary as significant deficiencies have been identified. More specifically, Ecuador’s domestic legislative framework:
does not include rules to prevent all Financial Institutions, persons or intermediaries from adopting practices intended to circumvent the reporting and due diligence procedures as required;
does not impose sanctions for the provision of a false self certification by Account Holders and Controlling Persons; and
does not provide for sanctions on Reporting Financial Institutions for failing to apply the due diligence procedures as required and for failing to keep records.
These are key elements of the required enforcement framework and are therefore material to the proper functioning of the AEOI Standard
Ecuador should amend its domestic legislative framework to include rules to prevent all Financial Institutions, persons and intermediaries from adopting practices intended to circumvent the due diligence and reporting procedures, rather than just those on whom the AEOI Standard imposes an obligation.
Ecuador should amend its domestic legislative framework to include sanctions on Account Holders and Controlling Persons for the provision of a false self-certification.
Ecuador should amend its domestic legislative framework to include sanctions for failure to apply the due diligence procedures.
Ecuador should amend its domestic legislative framework to include sanctions for failing to keep records in accordance with the AEOI Standard.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Ecuador’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Ecuador’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Ecuador and that meet the required standard in relation to confidentiality and data safeguards). (SRs 2.1 – 2.3)
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Ecuador has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Ecuador put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Ecuador’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Comments by the assessed jurisdiction
Ecuador has made some amendments to its legal framework that were finalised shortly before the publication of this report that have not yet been assessed through the peer review process. Ecuador believes these have addressed some of the recommendations described in this report. Ecuador has also initiated the process for further changes to address remaining recommendations.