Financial Crime World

Bermuda’s Financial Institutions Face Key Changes Under Common Reporting Standard Regulations

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The Bermuda Government has introduced significant changes to the way financial institutions operate in the island nation through the updated International Cooperation (Tax Information Exchange Agreements) Act 2005 and the highly anticipated Common Reporting Standard Regulations. These regulations outline the obligations that Bermuda Reporting Financial Institutions must comply with, introducing key changes to their operations.

Key Obligations for Bermuda Reporting Financial Institutions

  • Notify the Ministry of Finance of their status as a reporting entity by July 14, 2017, and submit contact details for a principal point of contact.
  • Establish written policies and procedures to cover all obligations under the CRS.
  • Identify the tax status of all account holders or relevant controlling persons, regardless of their jurisdiction (the ‘Wider Approach’ to due diligence).
  • File CRS reports or nil returns (if applicable) by December 31, 2017.

Exemptions and Simplifications

  • Dormant depository accounts with balances of less than $1,000 and meeting certain criteria are excluded from reporting requirements.
  • UK FATCA/CDOT reporting can now be done on the Electronic Reporting Portal, easing administrative burdens for Bermuda Reporting Financial Institutions during the transitional year.

Offences and Penalties

  • Contravention of the regulations, providing materially inaccurate self-certifications, tampering with information, and hindering the Ministry of Finance in its functions are punishable by fines or penalties up to $10,000.

Due Diligence and Compliance

Bermuda Reporting Financial Institutions must become familiar with the CRS Regulations and Guidance, review third-party contracts, notify/register on the Electronic Reporting Portal, file CRS reports or nil returns (if applicable), and complete due diligence on pre-existing entity and low-value individual accounts by December 31, 2017.

Next Steps

  • The Bermuda Ministry of Finance is expected to publish a list of Reportable Jurisdictions around the end of April 2017, with subsequent lists published annually.
  • Bermuda Reporting Financial Institutions should ensure that they have adequate processes in place to identify where existing customers or clients are resident when new jurisdictions are added to the list.

Seeking Guidance

Bermuda Reporting Financial Institutions are advised to seek guidance from tax and legal advisors if uncertain about their obligations under the CRS. The regulations are intended to increase transparency and cooperation among financial institutions, but also introduce significant compliance requirements that must be met to avoid penalties.