Montserrat
This report analyses the implementation of the AEOI Standard in Montserrat with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Montserrat’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Montserrat’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of Montserrat’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
Montserrat’s implementation of the AEOI Standard is not compliant with the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. This is because there are fundamental issues with respect to ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1) and with respect to exchanging the information in an effective and timely manner (CR2).
Overall rating in relation to the effectiveness in practice: Non-Compliant
General context
Montserrat commenced exchanges under the AEOI Standard on a non-reciprocal basis in 2017 (i.e. it sends but does not receive information).
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Montserrat:
introduced the Tax Information Exchange (FATCA Agreement) (UK IGA) (CRS) (Montserrat) (Implementation) Regulations 2016, as amended in 2019.
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.
Following the initial Global Forum peer review, Montserrat amended its legislative framework to address issues identified, effective from 5 July 2019.
With respect to the exchange of information under the AEOI Standard, Montserrat:
has the Convention on Mutual Administrative Assistance in Tax Matters in place1 and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017; and
put in place a bilateral agreement.2
Table 1 sets out the number of Financial Institutions in Montserrat that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Montserrat requires the reporting of Financial Accounts held by all non-residents some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Montserrat’s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by Montserrat in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Montserrat’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Montserrat:
the Comptroller of Inland Revenue (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Montserrat ‘s exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by the Comptroller of Inland Revenue, which ensure the validation of the data reported by Financial Institutions before it is exchanged with Montserrat’s exchange partners; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Montserrat’s legal frameworks implementing the AEOI Standard concluded with the determination that Montserrat’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Montserrat’s implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Montserrat are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Montserrat’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Montserrat has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Montserrat has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Montserrat has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Montserrat has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Montserrat’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Montserrat’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Montserrat and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Montserrat has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Montserrat put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Montserrat’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Assessed jurisdiction’s comments on the assessment of its legal frameworks
The assessment presented in this report is accepted. However, notwithstanding the Confidentiality and Data Security assessment, Montserrat continues to be committed to ensuring that there is transparency in the tax systems and to exchange information with other partners where required. We continue to work with the United Kingdom to complete the required review and corresponding action plan. This will enable Montserrat to meet all of the international Confidentiality and Data Safeguard standards.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Montserrat are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Montserrat’s implementation of the AEOI Standard is non-compliant with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures. More specifically, there are fundamental issues in relation to Montserrat ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with its exchange partners to ensure effectiveness (SR 1.6). Montserrat should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Montserrat implemented some of the requirements in accordance with expectations. However, fundamental issues were identified. The key findings were as follows:
Montserrat lacks an overarching compliance strategy and a risk assessment to ensure that Financial Institutions have correctly implemented the requirements under the AEOI Standard in practice. This includes the lack of defined procedures to review and verify compliance. Furthermore, in practice, no dedicated AEOI-related compliance activities have yet been undertaken. There also does not appear to be a formalised plan or activity undertaken to ensure that the interaction between Montserrat’s AEOI and AML frameworks always results in reporting in accordance with the AEOI Standard.
Montserrat has worked effectively to understand its population of Financial Institutions, utilising various relevant information sources, such as the Foreign Financial Institution list for FATCA purposes and the records of registered entities at the company and business names register of the Financial Services Commission. While reminders to report have been sent, Montserrat does not appear to be taking any further action to ensure Reporting Financial Institutions are classifying themselves correctly under its domestic rules and reporting information as required.
Montserrat allocated financial and human resources to the Exchange of Information unit at the Comptroller of Inland Revenue, although the adequacy of its resourcing is unclear.
Montserrat did not demonstrate how it verifies compliance by Reporting Financial Institutions, such as through desk-based checks or in-depth reviews that include the review of the records held by Reporting Financial Institutions, nor how it effectively addresses non-compliance. There are also no clearly defined procedures in place and effective actions taken to ensure self-certifications are obtained as required.
Montserrat also does not have clearly defined procedures to follow up with Reporting Financial Institutions when undocumented accounts are reported, nor does it have procedures to address circumvention of the due diligence and reporting procedures by Financial Institutions, persons or intermediaries.
Montserrat will monitor the application of its one category of jurisdiction-specific Excluded Account (dormant accounts) as part of its more general monitoring activities (it does not have a jurisdiction-specific list of Non-Reporting Financial Institutions).
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
Montserrat was not able to confirm that it collects and monitors information on the proportion of Financial Accounts that are reported that include information on the Tax Identification Numbers and dates of birth with respect to the individuals associated with them. These data points are key to exchange partners to effectively utilise the information and are important to developing an effective compliance strategy to ensure the AEOI Standard is being effectively implemented. Montserrat was not able to confirm that it collects and monitors information on the number of undocumented accounts reported by its Reporting Financial Institutions. This information is crucial to implementing the requirement to follow up on undocumented accounts.
Based on these findings it was concluded that Montserrat is not meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. More specifically, fundamental issues have been identified, including with respect to lacking an effective compliance strategy and not implementing an effective enforcement framework to address non-compliance by Reporting Financial Institutions. Montserrat should therefore continue its implementation process accordingly, including by addressing the recommendations made.
Montserrat should develop and implement a documented and overarching compliance plan, informed by a risk assessment, to underpin its compliance activities, including actively monitoring the interaction between its AML framework and its CRS framework to ensure that the collection and reporting of information is always in accordance with the AEOI Standard.
Montserrat should put in place and implement effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions and take enforcement activities where non-compliance is identified.
Montserrat should develop and implement effective procedures to monitor and verify whether Reporting Financial Institutions are obtaining valid self-certifications as required, including dedicated communication activities, with a particular focus on self-certifications obtained after the opening of a Financial Account.
Montserrat should put in place a clearly defined policy that, where circumvention is identified, action is taken to address it.
Montserrat should implement systems to collect and monitor information on the reporting of Tax Identification Numbers, dates of birth and undocumented accounts to inform its compliance strategy.
Montserrat should develop and implement a clearly defined policy to follow up where undocumented accounts are reported by the Reporting Financial Institutions.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
It should be noted that, as Montserrat exchanges information on a non-reciprocal basis and does not therefore receive information, it is not required to have in place procedures to notify its exchange partners. SR 1.6 b) has therefore not been assessed in this case.
In order to collaborate on compliance and enforcement, it appears that Montserrat has not yet implemented the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations, although no such notifications have yet been received.
Based on these findings it was concluded that Montserrat is not meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Montserrat is encouraged to continue its implementation process accordingly, including by addressing the recommendation made.
Montserrat should develop and implement procedures to respond to notifications received under Section 4 of the MCAA or equivalent.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
Montserrat’s implementation of the AEOI Standard is non-compliant with respect to exchanging the information effectively in practice and in a timely manner. Fundamental issues were identified, as Montserrat has still not undertaken the exchanges that should have taken place in 2021 (SR 2.6). Notwithstanding that, Monserrat appears on track with the other requirements as it linked to the Common Transmission System and commenced exchanges, including sorting, preparing and validating the information as required (SRs 2.4, 2.5 and 2.7) and appears ready to send corrections, amendments and additions if needed (SR 2.9). The requirements in relation to the receipt of the information (SR 2.8) have not been assessed as Montserrat exchanges information non-reciprocally, so does not receive information.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
While the exchanges due in 2021 are yet to take place, for the previous exchange cycle, Montserrat’s exchange partners reported rejecting only a low number of files received when compared to other jurisdictions. More specifically, in the previous exchange cycle, one of Montserrat’s exchange partners reported rejecting more than 50% of the files received, due to the technical requirements not being met and the issues appear to have been successfully addressed.
Based on these findings it was concluded that Montserrat is fully meeting expectations in relation to sorting, preparing and validating the information. Montserrat is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Montserrat linked to the CTS.
Based on these findings it was concluded that Montserrat is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Montserrat is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
While Montserrat exchanged information for reporting periods 2017, 2018 and 2019 in calendar year 2020, it has subsequently faced significant technical issues and has consequently not yet carried out the exchanges that were due to take place in 2021.
Based on these findings it was concluded that Montserrat is not meeting expectations in relation to exchanging the information in a timely manner. More specifically, fundamental issues have been with respect to the timeliness of exchanges. Montserrat should continue its implementation process to ensure its effectiveness, including by addressing the recommendation made.
Montserrat should ensure it sends information to all of its exchange partners in a timely manner.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Montserrat’s exchange partners did not raise any concerns with respect to Montserrat’s use of the agreed transmission methods and therefore with Montserrat’s implementation of this requirement.
Based on these findings it was concluded that Montserrat is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Montserrat is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
It should be noted that, as Montserrat exchanges information on a non-reciprocal basis and does not therefore receive information, it is not required to have in place systems to receive the information and provide status messages. SR 2.8 has therefore not been assessed in this case.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
While it is unclear whether Montserrat’s approach will ensure that corrected, amended or additional information is provided in a timely manner, it has not been tested and no such concerns were raised by Montserrat’s exchange partners in previous years and therefore with respect to Montserrat’s implementation of these requirements.
Based on these findings it was concluded that Montserrat appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Montserrat is encouraged to continue to ensure the ongoing effectiveness of its implementation.