Sint Maarten
This report analyses the implementation of the AEOI Standard in Sint Maarten 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
Sint Maarten’s legal framework implementing the AEOI Standard is in place but needs improvement in order to be fully consistent with the requirements in the AEOI Terms of Reference. While Sint Maarten’s international legal framework to exchange the information with all of Sint Maarten’s Interested Appropriate Partners (CR2) is consistent with the requirements, its domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has deficiencies significant to the proper functioning of elements of the AEOI Standard. More specifically, deficiencies have been identified in relation to the scope of Financial Accounts and there are deficiencies in the enforcement framework.
Overall determination on the legal framework: In Place But Needs Improvement
Effectiveness of AEOI in practice
Sint Maarten’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 reflects the fact that, despite committing to commence exchanges in 2018, Sint Maarten only recently put in place a domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures and an international legal framework to exchange information with all Interested Appropriate Partners (CR2). There are therefore fundamental deficiencies 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
Sint Maarten committed to commence the exchanges under the AEOI Standard on a non-reciprocal basis in 2018 (i.e. it will send but not receive information), although was delayed in delivering its commitment and is expecting to commence exchanges in September 2022.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Sint Maarten:
enacted amendments to the General National Ordinance on National Taxes (amended by National Ordinance No. 38 of 2020); and
introduced National Decree No. 77 of 2021, in force from 31 January 2022 and with retroactive effect from 1 January 2018.
Under this framework Reporting Financial Institutions were required to apply the due diligence procedures in relation to New Accounts from 1 January 2018. With respect to Preexisting Accounts, Reporting Financial Institutions were required to apply the due diligence procedures on Preexisting Individual Accounts and Entity Accounts by 31 December 2018.
With respect to the exchange of the information under the AEOI Standard, Sint Maarten has the Convention on Mutual Administrative Assistance in Tax Matters in place1, which entered into force from 10 October 2010, and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2022.
In order to provide for the effective implementation of the AEOI Standard, in Sint Maarten:
the Sint Maarten’s Competent Authority for purposes of the AEOI Standard 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 Sint Maarten’s exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place through the Multi Data Exchange System; and
the Common Transmission System (CTS) will be used to carry out the exchanges of information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Sint Maarten’s legal frameworks implementing the AEOI Standard concluded with the determination that Sint Maarten’s domestic legal framework is In Place But Needs Improvement and its international legal framework is In Place. This has been taken into account when reviewing the effectiveness of Sint Maarten’s implementation of the AEOI Standard in practice and where particular identified gaps in Sint Maarten’s legal frameworks directly impact its implementation in practice, these are mentioned below.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Sint Maarten 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.
Determination: In Place But Needs Improvement
Sint Maarten’s domestic legislative framework is in place and contains most of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures, but it needs improvement in relation to the due diligence procedures that must be applied to Financial Accounts (SR 1.2) and the framework to enforce the requirements (SR 1.4). Most significantly, Sint Maarten’s legislative framework does not fully incorporate the definition and processes related to the identification of Controlling Persons of trusts and similar arrangements.
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Sint Maarten 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.
Sint Maarten has defined 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 a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. Most significantly, Sint Maarten’s legislative framework:
does not incorporate the definition of Documentary Evidence in accordance with the CRS and its relevant Commentary; and
does not fully incorporate the definition of Controlling Persons as required and does not fully incorporate the due diligence procedures to identify Controlling Persons.
The due diligence procedures are material to the proper functioning of the AEOI Standard.
Sint Maarten should amend its domestic legislative framework to require Reporting Financial Institutions to always identify and determine the reportable status of the Controlling Persons of trusts and similar legal arrangements in accordance with the AEOI Standard.
Sint Maarten should amend its domestic legislative framework to ensure that its Financial Institutions apply the definition of Controlling Persons in the AEOI Standard.
Sint Maarten should amend its domestic legislative framework to require Reporting Financial Institutions to only use Documentary Evidence in relation to the due diligence procedures for Preexisting Entity Accounts in accordance with the conditions in the AEOI Standard.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Sint Maarten 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.
Sint Maarten has a legislative framework in place to enforce the requirements in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. More specifically, Sint Maarten’s legislative framework:
does not include rules to prevent all relevant persons (including Reporting Financial Institutions, other persons and intermediaries) from adopting any practices intended to circumvent the reporting and due diligence procedures as required; and
does not impose sanctions on Account Holders and Controlling Persons for the provision of a false self-certification.
These are the key elements of the required enforcement framework relates to and are therefore material to the proper functioning of the AEOI Standard.
Sint Maarten should amend its legislative framework to prevent Financial Institutions, intermediaries and other persons from adopting practices intended to circumvent the reporting and due diligence procedures.
Sint Maarten should amend its domestic legislative framework to include sanctions on Account Holders and Controlling Persons for the provision of a false self-certification.
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.
Sint Maarten’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 Sint Maarten’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Sint Maarten 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.
Sint Maarten 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.
Sint Maarten 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.
Sint Maarten’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
Notwithstanding the many setbacks that Sint Maarten has faced during the last few years, political instability and a major hurricane among others, Sint Maarten can announce that its domestic and international legal framework are already in place.
Sint Maarten has started working on the Action Plan to meet the Confidentiality and Data safeguard requirements.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Sint Maarten 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.
As Sint Maarten has only recently put in place a domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures, it has not yet put in place an administrative framework to ensure compliance by Reporting Financial Institutions or to collaborate with exchange partners (CR1 Effectiveness in practice). Sint Maarten’s implementation is therefore non-compliant with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures. Sint Maarten should therefore 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.
Sint Maarten has not yet implemented a framework to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. The key findings were as follows:
While Sint Maarten is taking initial steps to understand its population of Financial Institutions using relevant information sources, such as a list from the Central Bank of Curaçao & Sint Maarten, the Foreign Financial Institutions list for FATCA purposes and a list of entities registered for tax purposes, Sint Maarten has not yet taken action to ensure that Reporting Financial Institutions are classifying themselves correctly under its domestic rules and reporting as required.
So far, Sint Maarten has assigned the equivalent of one full time staff to work on the implementation of the AEOI Standard.
Sint Maarten has not yet developed procedures or carried out activities to enforce the requirements, including through the inspection of records of Reporting Financial Institutions and the application of dissuasive penalties and sanctions for non-compliance.
Sint Maarten does not have a framework to ensure self-certifications are obtained as required or to follow up with Reporting Financial Institutions that report undocumented accounts. It also does not have a framework to take action to address the circumvention of the requirements, which reflects the lack of a legal basis to prevent all relevant persons from adopting practices intended to circumvent the reporting and due diligence procedures.
It is noted that Sint Maarten does not have a jurisdictions-specific list of Non-Reporting Financial Institutions or Excluded Accounts for ongoing monitoring.
Sint Maarten was not able to confirm that it will collect and monitor 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. Sint Maarten stated that it will collect and monitor information on the number of undocumented accounts reported by its Reporting Financial Institutions, although as no information has been reported so far, it is unclear how this will be done. This information is crucial to implementing the requirement to follow up on undocumented accounts. It was also not possible to obtain feedback from its exchange partners, as information was not exchanged until September 2022.
Based on these findings it was concluded that Sint Maarten 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. Sint Maarten should continue its implementation process accordingly, including by addressing the recommendations made.
Sint Maarten should develop an overarching compliance strategy to underpin its compliance activities, informed by a risk assessment that takes into account a range of relevant information sources.
Sint Maarten should develop and implement effective procedures to identify its population of Financial Institutions to ensure that they correctly apply the definitions of Reporting Financial Institution and Non-Reporting Financial Institution and report information as required, specifically including non-regulated entities that are Financial Institutions for the purposes of the AEOI Standard.
Sint Maarten should develop and implement an appropriate framework, including in-depth reviews, to verify whether Reporting Financial Institutions are effectively implementing the AEOI Standard. This should include procedures to monitor and verify whether Reporting Financial Institutions are obtaining self-certifications as required and procedures to follow up with Reporting Financial Institutions that reported undocumented accounts to ensure that the requirements are being complied with.
Sint Maarten should develop and implement effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions, including the application of dissuasive penalties and sanctions as appropriate, and routinely apply them where non-compliance is identified.
Sint Maarten should put in place a clearly defined policy to ensure that, where circumvention of the AEOI Standard is identified, action is taken to address it. Reference is made to the recommendation made when assessing Sint Maarten’s legal framework implementing the AEOI Standard.
Sint Maarten should implement systems to monitor the reporting of Tax Identification Numbers, dates of birth and undocumented accounts by Reporting Financial Institutions to inform its compliance strategy.
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 Sint Maarten 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.
Sint Maarten has not yet put in place procedures to collaborate with its exchange partners to address errors or suspected non-compliance notified by them to Sint Maarten.
Based on these findings it was concluded that Sint Maarten is not meeting expectations in relation to collaborating with tis exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Sint Maarten should therefore continue its implementation process accordingly, including by addressing the recommendation made.
Sint Maarten should develop and implement effective procedures to address errors or suspected non-compliance by its Reporting Financial Institutions notified to it by its exchange partners.
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.
As Sint Maarten only recently put in place the international legal framework to exchange the information with all Interested Appropriate Partners and intends to commence exchanges under the AEOI Standard by September 2022, its exchange partners have not been able to provide input on the exchanges in practice. It has therefore not been possible to assess the implementation of these requirements (CR2 Effectiveness in practice). Sint Maarten is therefore determined to be non-compliant with the requirements. As it was not possible to conduct the assessment, a detailed analysis in relation to each SR has not been necessary.
Assessed jurisdiction’s comments on the assessment of effectiveness in practice
It is worthy to note that Sint Maarten has not yet started to collect or exchange information. It is therefore impossible to assess the effectiveness in practice of Exchange of information. However, Sint Maarten remains committed to be compliant with the Exchange of information.
Note
← 1. Through a territorial extension by the Netherlands.