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Financial Institution Compliance Issues in Cayman Islands Pose Penalty Risks

The Department for International Tax Cooperation (DITC) has issued guidelines outlining the circumstances under which financial institutions in the Cayman Islands may face penalties for failing to comply with the Common Reporting Standard (CRS).

Circumstances Leading to Penalties

Financial institutions in the Cayman Islands are required to:

  • Register on the DITC portal
  • Establish and maintain policies and procedures
  • File CRS returns
  • Submit self-certification forms

Failure to comply with these requirements may result in monetary penalties of up to $50,000 for financial institutions and their directors, managers, and general partners.

The DITC has identified several circumstances under which penalties may apply, including:

  • Failing to establish and maintain policies and procedures
  • Failing to register on the DITC portal by the notification deadline
  • Filing a CRS return based on a self-certification provided by a person not authorized to sign on behalf of the account holder
  • Failing to submit a CRS return

Investigation Process

To determine if a penalty is appropriate, the DITC may conduct an investigation, which may include:

  • A compliance questionnaire
  • Desk audit
  • Information notice

Financial institutions should review their procedures, processes, and controls to mitigate the risk of penalties.

Criminal Provisions

The guidelines also address criminal provisions that could apply under the Tax Information Authority Regulations. The Office of the Director of Public Prosecutions will determine whether a penalty is appropriate.

Compliance Recommendations

Financial institutions are advised to:

  • Verify that they are complying with the guidelines to avoid triggering penalties
  • Ensure that the Authorizing Person and Principal Point of Contact (PPOC) provided is correct, as the PPOC is the only person authorized to represent the relevant entity

The DITC has yet to comment on when the notification process will begin, but financial institutions are advised to be prepared to comply with the guidelines immediately. Appeals may also be necessary if a penalty is imposed, and financial institutions should be aware that costs could prove prohibitive if an appeal is required.

Contact Information

For additional information regarding this alert, please contact Ernst & Young LLP (United States), Financial Services Organization:

  • Tara Ferris, Hoboken
  • Deborah Pflieger, New York
  • Jonathan Jackel, Washington, DC
  • Milagros C Gibbons, Hoboken
  • Jeff Rasanen, Boston
  • Remy Farag, New York