FATCA and CRS: Action required - Update on additional compliance measures introduced in Guernsey

Key points:

1. Guernsey Financial Institution (FI) registration requirement

Bulletin 2021/5 introduced the requirement for all FIs operating in Guernsey, regardless of whether they have a reporting obligation, to register with the Revenue Service (through the IGOR portal) and submit an annual compliance assurance statement. 

This means that both Reporting FIs and Non-Reporting FIs will now be required to register and submit an annual validation requirement.

The deadline for registration on the IGOR portal is 28 February 2022.

2. Notification requirement for failure to obtain valid self-certification form

Bulletins 2021/5 and 2021/6 introduced the requirement for Guernsey FIs to notify the Revenue Service of a failure to obtain a valid self-certification from account holders. The requirement comes into effect from 1 January 2022 with the first deadline to identify and report on self-certification issues to be provided by 31 March 2022. 

With respect to New Accounts (accounts opened on or after 1 July 2014 and 1 January 2016 for FATCA and CRS respectively), where a Guernsey FI fails to obtain a valid self-certification within 90 days of account opening, the FI is required to report the account to the Revenue Service “immediately” (i.e. by close of business on Day 91 of the account being opened). Where the Day 91 reporting deadline falls in January of any year, reporting is required on or before 31 January in that year. 

As clarified in Bulletin 2022/2, for the first year of reporting only, the reporting deadline will be aligned with that for Pre-Existing Accounts and required by 31 March 2022 (i.e. where the Day 91 reporting deadline falls in January 2022).

For Pre-Existing Accounts (accounts in existence as at 30 June 2014 and 31 December 2015 for FATCA and CRS respectively), the reporting requirement includes circumstances where an FI has been required to obtain a self-certification following a change in circumstances (e.g. residence test previously relied upon but change in circumstances triggering self-certification requirement) and where obliged to obtain a self-certification (e.g. “hold mail” instruction discovered and not resolved, potentially leading to account being reported as “undocumented”).

Where the “trigger event” for a Pre-Existing Account occurred prior to 1 Janaury 2022 (and the self-certification remains unresolved), the FI is required to report the account to the Revenue Service by the first deadline of 31 March 2022. 

Where the trigger event occurred on or after 1 January 2022 (and the self-certification remains unresolved), the FI is required to report the account to the Revenue Service on or before 31 January in the following year or on or before Day 91 of discovery (whichever is later). 

The notification requirement will take place via the secure IGOR portal and will require additional details of when the account was opened and date of last correspondence/ contact. 

The expectation from the Revenue Service is that Guernsey FIs will maintain effective account opening and governance procedures for the collection of self-certifications on account opening or following a change in circumstances.

3. Disclosure requirement of non-compliance

Per Bulletin 2021/6, from 15 July 2021 Guernsey FIs are required to disclose full details of any unresolved non-compliance issue to the Revenue Service following its discovery. The expectation is that FIs provide a report within an acceptable short timeframe of the action(s) taken and the timescale to rectify or remediate the issue.

Depending on the factors (whether an isolated or systemic issue, length of time of non-compliance, other compliance deficiencies, etc.) and the severity of risk, the Revenue Service will determine whether further actions are required, including giving directions, appointing an inspector and/ or make a freezing order (see below).

Each non-compliance issue will be reviewed on a case-by-case basis and, where possible, the Revenue Service will seek to agree a remediation plan with the FI prior to invoking further compliance measures.   

4. Introduction of Directions/ Appointment of Independent Inspectors/ Freezing Orders

Bulletins 2021/5 and 2021/6 implemented additional compliance measures for the Revenue Service as follows: 

• Ability to give directions to an FI where necessary or desirable for the purposes of securing compliance with the international tax provisions (Section 171D of the Income Tax (Guernsey) Law, 1975 (the Law).

• Appoint or require an FI to appoint independent inspectors, at the expense of the FI, to investigate where the FI is reasonably suspected of having contravened the international tax provisions (Section 171E of the Law). 

• Where there has been a failure by an FI to obtain a valid self-certification, enable the Revenue Service to make relevant enquiries and, where necessary, serve a notice on that FI to require them to freeze an account, until such time as the account holder provides a valid self-certification (Section 171F of the Law).   

Whereas the provisions under Sections 171D, 171E and 171F of the Law came into effect from 15 July 2021, the practical application will be applied with effect from 1 January 2022.

Further FAQs on the practical application of the Section 171F requirements are expected to be issued in due course by the Revenue Service.

The Revenue Service is required to notify an FI in writing of a decision to give a direction, appoint an inspector, make further enquiries or make a freezing order. 

An FI may appeal against any such decision under Section 171G of the Law by giving the Revenue Service notice, in writing, within 30 days of the decision date. Any appeal must state the grounds of appeal which are limited to matters of law. 

5. 2021 Compliance Assurance Statements

Bulletin 2021/7 revised the questions of the FATCA and CRS Compliance Assurance Statements (introduced in Bulletin 2021/3) for the 2021 reporting period to include a question on the requirement to obtain valid self-certifications and resulting notification requirements where they remain unresolved (see point 2 above).  

With respect to Non-Reporting FIs (NRFIs), once registered on IGOR, further annual certifications are required (including NRFI classification and completion of the shortened NRFI Compliance Assurance Statement).

6. Onsite visits

Bulletin 2021/5 formalised the Revenue Service’s ability to carry out onsite visits to review compliance by Guernsey FIs. Whereas onsite visits have been conducted to date with the consent of the FI, the amendment to the Law now grants the Revenue Service the power to review (subject to a 7-day written notice unless approval is granted by the Bailiff for a shorter period).

In practice, the Revenue Service will usually provide longer notice of any intended visit, allowing the FI to adequately prepare the necessary documentation and complete the questionnaire ahead of the visit.

7. Sanctions

Bulletin 2021/5 amended the FATCA and CRS Regulations to enable the Revenue Service to apply enhanced sanctions and penalties for failure to comply with the FATCA and CRS obligations:

• Additional increased daily penalties (of up to £1,000 per day) where there has been 30 days of continual failure (following the imposition of the initial penalty of £300 and daily penalties of £50) to submit either FATCA or CRS reports by the reporting deadline (30 June).

• In cases where FATCA or CRS reports have been submitted, however found to be incorrect or incomplete due to negligence or fraud:

• Negligence - a penalty of 0.5% of the balance or value of each affected financial account (up to £1,000 where no account balance or value).

• Fraud - a penalty of 1% of the balance or value of each affected financial account (up to £5,000 where no account balance or value).

8. Reportable jurisdictions for 2021

Bulletin 2022/1 confirmed the list of reportable jurisdictions for the 2021 reporting year (to be submitted by 30 June 2022), including the addition of Jamaica, Kenya, Maldives and Trinidad & Tobago and the removal of Liberia. 

For the 2022 provisional list of reportable jurisdictions, the following jurisdictions were added: Jordan, Moldova, Thailand, Uganda and Ukraine.

How can PwC help?

PwC Channel Islands offer a full range of services encompassing all aspects of your FATCA and CRS compliance program, addressing your most pressing issues and helping you achieve, and maintain, a robust system of controls around the Automatic Exchange of Information.

Our tailored Health Check solutions are designed to support your specific business needs, and can include:

• Review of the governance structure surrounding AEoI compliance, and end-to-end business processes and key controls.
• Gap Analysis of existing, or development of, Policies and Procedures supporting AEoI compliance.
• Review of entity classifications, frameworks and materials supporting entity classifications, and reviews against trigger event identification.
• Review of due diligence procedures (including self-certification forms) to ensure compliance with the new Section 171F requirements.
• Sample review testing of xml file against source systems data to assess quality and completeness of reported information.
• Incorporation of and alignment to AML requirements for Account Holders and Controlling Persons.
• A business readiness assessment against a “FATCA/ CRS audit” or enquiry being raised by a relevant Competent Authority.

We would be delighted to discuss how the AEoI specialist team at PwC Channel Islands can assist.