Financial Crime World

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Penalties for Contravening the Common Reporting Standard (CRS) Regulations in the Cayman Islands

The Cayman Islands’ regulatory framework outlines severe penalties and procedures for contravening certain regulations, specifically the CRS Regulations. In this article, we will break down the key points regarding penalties, imputed liability of directors, defenses, protection against double jeopardy, limitation periods, and the procedure for imposing an administrative penalty.

Penalties

Penalties are determined on a per-offense basis, with multiple offenses potentially resulting in separate penalties. The maximum penalty amounts are:

  • Primary Penalty: $25,000
  • Continuing Penalty: $10,000

Key Points to Note:

  • Penalties can be imposed for each offense committed.
  • Multiple offenses may result in separate penalties.

Imputed Liability of Directors, etc.

Certain individuals associated with financial institutions (FIs) may be held liable for an offense committed by the FI, including:

  • Directors: Members of a company’s board
  • Managers: Individuals responsible for overseeing the day-to-day operations of an institution
  • Secretaries and Other Officers: Members of a company’s management team
  • Members of Limited Liability Companies (LLCs): Owners of LLCs who are liable for its actions
  • General Partners and Participating Limited Partners: Owners of limited partnerships or exempted limited partnerships
  • Partners in Other Types of Partnerships: Co-owners of other types of partnerships
  • Trustees of Trusts: Individuals responsible for managing a trust’s assets and affairs
  • De Facto Decision-Makers: Individuals who have significant control over the institution

Key Points to Note:

  • These individuals may be held liable even if they did not directly commit the offense.
  • They must exercise reasonable diligence to prevent contraventions.

Defenses

A party may defend against a penalty by proving they had a reasonable excuse. However, certain reasons are invalid defenses:

  • Insufficiency of Funds: This is not considered a valid reason for failing to comply with regulations.
  • Relying on an Agent Appointed under Reg.11: Relying on an agent does not constitute a reasonable excuse.

Individuals held liable as directors, etc., can defend against penalties by proving that they exercised reasonable diligence to prevent the contravention.

Key Points to Note:

  • A party must prove they had a reasonable excuse for failing to comply with regulations.
  • Insufficiency of funds and relying on an agent are not valid defenses.

Protection against Double Jeopardy

A prosecution for an offense does not preclude the imposition of a penalty for the same offense. This means that individuals can be held accountable for the same offense through both the court system and administrative penalties.

Key Points to Note:

  • A prosecution does not prevent the imposition of a penalty.
  • Individuals can be held accountable through both the court system and administrative penalties.

Limitation Periods

The Authority cannot impose a Primary Penalty for certain offenses after a specified period has elapsed. These periods are as follows:

  • Failing to Comply with Part II of the CRS Regulations: The Authority cannot impose a Primary Penalty more than one year after becoming aware of the contravention.
  • Other Offenses under Part 3 of the CRS Regulations: The Authority cannot impose a Primary Penalty after six years from when the contravention occurred or one year after becoming aware of the contravention, whichever is earlier.

There is no limitation period for imposing a Continuing Penalty as long as the conditions under Reg.24(2)(a), (b), and (c) continue to apply.

Key Points to Note:

  • The Authority has limited time to impose penalties.
  • Certain offenses have specific limitation periods.

Procedure for Imposing an Administrative Penalty

The Authority must follow a specific procedure when imposing administrative penalties, including:

  1. Giving the Party a Notice: The Authority must provide a notice that complies with Reg. and informs the party of the proposed penalty.
  2. Providing an Opportunity to Respond: The party is given an opportunity to respond to the notice and provide representations or defenses.
  3. Considering Defenses or Representations: The Authority considers any defenses or representations made by the party before imposing a penalty.

Key Points to Note:

  • The Authority must follow a specific procedure when imposing penalties.
  • Parties have the right to respond to notices and provide defenses or representations.

Please note that this summary is based on a regulatory document and may not be comprehensive or up-to-date. If you are seeking specific advice or information, I recommend consulting the original document or contacting a qualified professional.