CRS: Bahamas Changes Controlling Person Threshold – Who Is Next?
The Bahamas issued revised CRS Guidance Notes on August 3, 2018. Included in the revisions is a change in the definition of Controlling Person. The Bahamas will now use a 10% threshold for CRS reporting commencing in 2019.
Controlling Person Defined
The Bahamas CRS Guidance provides the following definition for Controlling Person:
Any natural person that holds directly or indirectly more than twenty-five percent (25%) of the shares or voting rights of an Entity as a beneficial owner.
Any natural person that owns or controls 25% or more of any class of the person’s voting securities, excluding any securities that the security holder, if a registrant, holds in the course of a public distribution; or
Any natural person who is able to affect materially the control of the person, whether alone or by acting in concert with another person.
The OECD advised that for purposes of determining Controlling Persons thresholds under CRS, a CRS jurisdiction must follow its own domestic AML/KYC legislation.
The Bahamas Guidelines for Supervised Financial Institutions on the Prevention of Money Laundering & Countering the Financing of Terrorism (AML Guidelines) states:
For the purposes of these Guidelines, the Central Bank defines “controlling interest” as an interest of ten percent or more in a corporate entity’s voting shares.
Referencing its AML/KYC procedures, the Bahamas states in its revised CRS Guidance the threshold for identifying Controlling Persons shall be 10% for reporting commencing in 2019.
Caymans Islands and Now Bahamas
The Cayman Islands announced in March that it updated its CRS self-certifications to require that Passive Non-Financial Entities (NFEs) disclose individuals with direct or indirect ownership or control of 10% or more of the shares or voting rights of the Passive NFE. Like almost all CRS jurisdiction, the Cayman Islands’ threshold was 25%. [See my May 7, 2018 blog: CRS: Why Is Cayman Asking for Even More Controlling Persons?]
The following summarizes the applicable thresholds for the Cayman Islands and the Bahamas:
Who Is Next?
Is this change in Controlling Person standard a pattern to soon be followed by other jurisdictions? Many AML/KYC programs are based on a 25% standard. However, there are a few jurisdictions that have a lower threshold:
British Virgin Islands 10%
It will be important to watch these jurisdictions to see whether they also will align their CRS legislation definition of Controlling Person with their AML legislation.