Financial Crime World

Cayman Islands Financial Institutions Face Penalties for Non-Compliance with CRS Guidelines

The Department for International Tax Cooperation (DITC) in the Cayman Islands has released new guidelines outlining the circumstances under which financial institutions may face penalties for failing to comply with the Common Reporting Standard (CRS). These guidelines aim to enhance compliance and reduce non-compliance among financial institutions.

Penalties for Non-Compliance

According to the guidelines, penalties may be imposed for a range of non-compliance issues, including:

  • Failure to establish and maintain policies and procedures
  • Failure to register on the DITC portal by the notification deadline
  • Filing a CRS return based on self-certification provided by an unauthorized person
  • Failure to submit a CRS return

Mitigating Risk of Penalties

To avoid triggering penalties, financial institutions are advised to:

  • Review their procedures, processes, and controls to mitigate the risk of penalties
  • Ensure timely classification and registration of entities via the DITC portal
  • Maintain written policies and procedures
  • Review those procedures annually
  • Review processes and controls for obtaining and validating self-certifications and collecting, digitizing, and storing self-certification forms

Notification Process

The guidelines provide a notification process for financial institutions that fail to comply with CRS regulations. A Breach Notice will be issued before a Penalty Notice, giving the affected party 60 days or more to request the DITC not to impose a penalty. The Breach Notice will outline:

  • The factual basis for the proposed penalty
  • The proposed penalty amount
  • The deadline for responding

Appeals Process

Financial institutions that receive a Penalty Notice may appeal the decision to a court within 60 days or more after receiving the notice.

DITC’s Approach

The guidelines are designed to enhance compliance rather than generate revenue, and the DITC is expected to take a flexible approach when reviewing penalty abatement requests. However, financial institutions are advised to comply fully with the guidelines to avoid triggering penalties and appeals processes.

Contact Us

For additional information on this Alert, please contact Ernst & Young’s Financial Services Organization at [insert contacts’ names and email addresses].