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Cayman Islands Financial Institutions Warned of Penalties for Non-Compliance

The Cayman Islands Department for International Tax Cooperation (DITC) has issued new guidelines outlining the circumstances under which financial institutions may face penalties for failing to comply with international tax regulations.

Key Guidelines and Requirements

  • Review and Update Procedures: Financial institutions must review their procedures, processes, and controls to mitigate the risk of penalties.
  • Registration on DITC Portal: Institutions must register on the DITC portal by the notification deadline to avoid penalties.
  • CRS Return Compliance: Failing to submit a CRS return or filing one based on a self-certification provided by an unauthorized person may result in penalties.
  • Written Policies and Procedures: Financial institutions must maintain written policies and procedures to ensure compliance.

Penalties for Non-Compliance

The DITC will investigate non-compliance issues and may impose monetary penalties of up to $50,000 on financial institutions and their directors, managers, and general partners.

Notification and Appeals Process

  • Breach Notice: The DITC will issue a Breach Notice in cases of non-compliance.
  • Penalty Notice: A Penalty Notice will be issued if the breach is not rectified.
  • Appeals Process: Financial institutions can appeal penalty notices by submitting a written representation responsive to the Breach Notice.

Key Takeaways

  • Review procedures, processes, and controls to mitigate the risk of penalties.
  • Ensure timely classification and registration of entities via the DITC portal.
  • Verify that Authorizing Person and Principal Point of Contact (PPOC) is correct.
  • Maintain written policies and procedures.

Next Steps

Financial institutions in the Cayman Islands are advised to take immediate action to ensure compliance with the guidelines. This includes reviewing legal entities, maintaining written policies and procedures, and ensuring timely classification and registration of entities via the DITC portal.

For additional information and guidance, 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

Email addresses and contact information can be found in the Tax News Update: Global Edition (GTNU) version of this Alert.