Deadline Alert: KY BO Register Isn’t FATCA/CRS Controlling Person Reporting
Certain Cayman Islands entities must provide beneficial ownership information to their Cayman Islands corporate service providers (CSPs) by June 29, 2018. This requirement should not be confused with the obligation to report Controlling Persons under FATCA Intergovernmental Agreements (IGAs) and CRS.
The Cayman Islands created a centralized beneficial ownership register in 2017 that provides United Kingdom (UK) law enforcement and tax authorities with beneficial ownership information for certain Cayman Islands entities.
Both in scope and out of scope Cayman entities must coordinate with their licensed Cayman Islands CSPs to ensure the appropriate information is provided. At this point, the register data is not available to the public.
Cayman Register Beneficial Owner v FATCA/CRS Controlling Person
For FATCA IGA and CRS purposes, Controlling Persons are the natural persons who exercise control over a Passive Non-Financial Entity (NFE). This includes the natural person on whose behalf a transaction is being conducted and those persons who exercise ultimate effective control through indirect means. A Controlling Person can include a senior managing official.
Cayman Islands applies a 25% control standard for its FATCA IGA and a 10% control standard for CRS. [For a discussion of the change in CRS control standard from 25% to 10% see my May 7, 2018 post: CRS: Why Is Cayman Asking for Even More Controlling Persons?]
The beneficial owner of a company for Cayman register purposes includes an individual who:
Holds directly or indirectly, more than 25% of the shares in the company;
Holds directly or indirectly, more than 25% of the voting rights in the company;
Holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company; or
Has the absolute and unconditional legal right to exercise, or actually exercises, significant influence or control over the company through the ownership structure or interests described in the above three bullets - other than solely in the capacity of a director, professional advisor or professional manager.
In Scope / Out of Scope Obligations
There have been a number of amendments to the Beneficial Ownership Regulations. To ensure that you are categorizing your company appropriately as in or out of scope, it is important to consult with your CSP.
Even if you self-classify your company as being out of scope, there are still register obligations that must be discussed with your CSP. Although an out of scope company is not required to prepare and maintain a beneficial ownership register, it is required to provide its CSP certain information outlining why an exemption is applicable to the company.
BO Public Register on the Horizon
Currently, the Cayman beneficial owner register is not available to the public. However, the UK is demanding that its Overseas Territories make the beneficial ownership of all companies registered in the respective territories public by December 31, 2020. If they do not, the UK government will issue an order in council to force any noncompliant territory to do so.
According to the UK, beneficial owners use their corporate anonymity to launder money and to evade paying taxes. The UK’s expectation is that each Overseas Territory will create a public register generally equivalent to the UK company register.
Cayman Islands Premier Alden McLaughlin’s representatives are in discussions with the UK regarding the “constitutional overreach by forcing the Cayman Islands to adopt public registers of beneficial ownership.”
The U.K. Crown dependencies (Jersey, Guernsey and the Isle of Man) are not included in the UK’s call for public registers.
Both in scope and out of scope entities are required to provide their Cayman Islands CSP with certain data. If your CSP has not already solicited the necessary information from you regarding your entities, you should contact your CSP immediately to ensure that you meet the June 29, 2018 beneficial owner register deadline.
As a reminder on the FATCA/CRS front, you must report Passive NFE Controlling Persons as part of your overall FATCA/CRS annual reporting by July 31, 2018.