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Cayman DITC comprehensive reviews to assess CRS compliance
January 2025
In brief
What happened?
The Cayman Islands Department for International Tax Cooperation (DITC) and the Cayman Islands Compliance Association (CICA) hosted a November 2024 seminar for industry stakeholders where the DITC announced that it will initiate a program of comprehensive reviews to assess financial institutions’ compliance with Common Reporting Standard (CRS) obligations.
Why is it relevant?
DITC reviews will cover multiple aspects of CRS compliance, including governance, implementation of policies and procedures, due diligence, reviews of self-certifications, timely submission of CRS reports, and accuracy and completeness of reportable accounts. Financial institutions will be selected (1) based on the results of a risk assessment and (2) randomly.
Action to consider
As financial institutions begin their 2024 compliance by gathering investor demographic information and finalizing the transactional information to be reported, they are encouraged to (1) revisit existing documentation and internal processes and (2) consider the scope of these comprehensive reviews. Consistent with the DITC enforcement actions these past years, financial institutions must ensure that the mandatory data elements such as the foreign tax identification number (FTINs) and dates of birth (DoBs) are provided for all individual account holders and controlling persons.
In detail
How will financial institutions be notified if they are selected?
Each selected financial institution will receive an initiation letter with a high-level information request and a sample account that will be subject to review. Failure to respond to these comprehensive reviews may result in administrative penalties.
How long will these reviews take and how should financial institutions respond?
An enforcement review could take four to six months based on complexity. The DITC will arrange meetings (on-site or via video conference) with each financial institution to address the review. Automatic exchange of information (AEOI) service providers also will be invited to attend these meetings. In addition, voluntary disclosure, which will be available for financial institutions that receive the initiation letters and are aware of any breaches, may reduce any potential penalties.
What should financial institutions do if they have been selected?
Financial institutions should (1) continue to respond directly to the DITC using the email specified in the notices or queries received and (2) ensure that FI numbers and references are included in their email responses. The DITC will issue breach notices for non-responsive financial institutions.
What are other DITC relevant enforcement actions to be aware of?
Enforcement activities performed by the DITC such as the issuance of “Action Required” Notices, or “CRS Breach” Notices could require:
- XML corrections due to the financial institution’s failure to include in the return critical account holder information, such as account holder TINs or DoBs of individual account holders or controlling persons.
- Explanations related to a reduction in reportable accounts compared to the prior year’s return.
- Requests to clarify a specific account holder’s undocumented status.
- Submission of a previously unsubmitted return.
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