The September deadline is fast approaching for Cayman-domiciled financial institutions that fall within the scope of the monetary authorities to submit their CRS Compliance Forms. CRS reporting is not simply an annual return of numbers; it’s also a matter of governance and compliance. There are similar requirements for CRS reporting in China.
In many jurisdictions, Common Reporting Standard (CRS) returns are already due. In-scope financial institutions (FIs) are generally aware of their annual return reporting date. However, it’s not their only CRS obligation.
In the Cayman Islands, a separate CRS Compliance Form must be submitted by September 15th. The form requires more information about governance and compliance, including:
- That the FI has registered with the Cayman Islands Monetary Authority
- That it collected the necessary self-certification forms
- That it maintains written CRS compliance policies and procedures
It’s worth noting that China is extending a similar requirement to all in-scope FIs, whether or not they are licensed by the Asset Management Association of China (AMAC). This is important because while Asia-based asset managers have traditionally chosen the Cayman Islands to domicile funds, many are now looking at options closer to home, with Hong Kong becoming increasingly popular.
FIs in China should consider how they will source and verify the information demanded for CRS compliance well in advance of submission.
What is the Cayman CRS Compliance Form?
In-scope FIs are obligated to submit their CRS returns as an annual filing to local tax authorities. These returns include figures that provide transparency regarding holdings and assets as well as income and are used for anti-tax evasion purposes. More than 100 jurisdictions participate in CRS, which has been developed and guided by the Organisation for Economic Co-operation and Development (OECD) since 2014.
On the CRS Compliance Form, in-scope FIs are required to provide additional and designated assurances regarding their adherence to respective CRS obligations.
The form asks for relevant details on how FIs reach their CRS reporting result, which may include:
- Background and profile data
- Registered and licensed status
- Evidence to support and classify the reported status
- Which party carried out anti-money laundering and countering financing of terrorism obligations
- CRS process governance including establishment and maintenance of policies and procedures
- Whether FIs have obtained the necessary self-certification forms to support their CRS reporting
In short, the form is a means to check and support that the reported data is backed by a robust process based on a solid understanding of CRS fundamentals.
Similar requirements in China
China has implemented similar reporting requirements for FIs; however, the submission process and details differ depending on the AMAC licensing status.
In 2023, a new CRS Form was published for non-AMAC licensed FIs. This form is due to be submitted by June 30 each year, one month after the submission deadline of the annual CRS return.
This enhanced requirement means that all in-scope FIs, with or without an AMAC license, are obligated to provide more CRS compliance information. Although the applicable form, name, and submission channel are different, in substance the contents and required information are the same, covering the underlying governance, control, and compliance in relation to the CRS.
The consequences of non-compliance
Failure to comply with the CRS can result in penalties. Regulators may request further information or documentation, or even conduct an audit of an entity’s CRS processes. This can increase the administrative burden on firms already stretched due to increased scrutiny regarding anti-money laundering and know your customer procedures.
Despite the challenges, CRS compliance is becoming increasingly important, particularly for small and mid-sized firms that may struggle to understand the complex and time-consuming compliance process.
It’s crucial that firms ensure full compliance with CRS reporting requirements to avoid potential penalties, increased scrutiny, and reputational damage.
CRS compliance: an opportunity to become better
There is an upside to all this. The form gives clarity on the priorities and expectations of the regulator. It functions as a quality assurance checklist, letting FIs understand what they need to do to stay on the right side of CRS obligations and regulations, and what process should be in place to keep them in good standing in the long term.
About CSC
CSC provides tailored administration and strategic outsourcing solutions to support the complex operations of alternative asset managers across jurisdictions and asset types while adhering to global regulations and compliance. A market leader, we work with funds of all sizes, from start-ups to the largest and most experienced fund managers in the world. Founded in 1899, CSC prides itself on being privately held and professionally managed for more than 120 years. We are the trusted partner of choice for more than 90% of the Fortune 500® and more than 70% of the PEI 300. CSC has office locations and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia Pacific, and the Middle East. We are a global company capable of doing business wherever our clients are—and we accomplish that by employing experts in every business we serve. We are the business behind business®. Learn more at cscgfm.com.