Dominica
This report analyses the implementation of the AEOI Standard in Dominica 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
Dominica’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Dominica’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 Dominica’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
Dominica’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. While Dominica is partially compliant with respect to exchanging the information in an effective and timely manner (CR2), there are fundamental issues with respect to ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1).
Overall rating in relation to the effectiveness in practice: Non-Compliant
General context
Dominica committed to commence exchanges under the AEOI Standard on a non-reciprocal basis in 2018 (i.e. it sends but does not receive information), although actually commenced the exchanges in 2021.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Dominica:
enacted the Automatic Exchange of Financial Account Information (Common Reporting Standard) Act, 2019; and
made reference to the Money Laundering (Prevention) Statutory Rules and Orders No. 4 of 2013 for the purposes of the identification of Controlling Persons under the AEOI Standard.
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2019. With respect to Pre-existing Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2019 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2020.
Following the initial Global Forum peer review, Dominica amended its legislative framework to address issues identified, effective from 14 July 2021.
With respect to the exchange of information under the AEOI Standard, Dominica is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2020.
Table 1 sets out the number of Financial Institutions in Dominica that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or relating 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 Dominica requires the reporting of Financial Accounts based on a prescribed list of exchange partners and 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 Dominica’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 Dominica 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 Dominica’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 Dominica:
the International Tax Affairs Unit of the Inland Revenue Division (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 Dominica’s exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place with an AEOI portal that allows for XML Schema file upload; 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 Dominica’s legal frameworks implementing the AEOI Standard concluded with the determination that Dominica’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Dominica’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 Dominica 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.
Dominica’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.
Dominica 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.
Dominica 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.
Dominica 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.
Dominica 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.
Dominica’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 Dominica’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Dominica 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.
Dominica 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.
Dominica 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.
Dominica’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Dominica 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.
Dominica’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, while Dominica is meeting expectations with respect to collaboration with its exchange partners to ensure effectiveness (SR 1.6), there are fundamental issues with respect to ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5). Dominica 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, Dominica implemented some of the requirements in accordance with expectations. However, fundamental issues were identified. The key findings were as follows:
Dominica has an overarching strategy to ensure compliance with the AEOI Standard and has begun implementing certain elements. However, the strategy is limited in detail and is not based upon a risk assessment. There also does not appear to be a formalised plan or activity undertaken to ensure that the interaction between Dominica’s AEOI and AML frameworks always results in reporting in accordance with the AEOI Standard.
Dominica has undertaken some work to identify its population of Financial Institutions, utilising lists of regulated entities and has taken action to ensure that Reporting Financial Institutions are classifying themselves correctly under its domestic rules and reporting information as required. However, plans are not yet adequately developed to allow them to also identify any relevant non-regulated entities to ensure that they also report information as required.
The institution responsible for implementing Dominica’s compliance strategy appears to have the necessary powers and resources to discharge its functions. With respect to resourcing, Dominica has assigned the equivalent of two full time staff to monitor and ensure compliance by Reporting Financial Institutions, which will have access to the AEOI portal to conduct risk assessments on particular Financial Institutions.
Dominica has plans to carry out verification activities, including desk-based and onsite audits of Reporting Financial Institutions, although these plans are not very developed. For example, they contain limited detail in relation to planned activity to review self-certification procedures and to follow up on undocumented accounts. Furthermore, Dominica does not have clear or documented processes in place with respect to addressing circumvention of the AEOI Standard by Reporting Financial Institutions, persons or intermediaries. Dominica also does not have procedures in place to apply penalties and sanctions for non-compliance when it is identified.
It is noted that Dominica does not have jurisdiction-specific lists of Non-Reporting Financial Institutions or Excluded Accounts for ongoing monitoring.
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.
With respect to the Financial Account information collected and sent by Dominica, the presence of the key data point of the Tax Identification Numbers appeared to be in line with most other jurisdictions. While the collection and reporting of dates of birth is generally higher across jurisdictions, Dominica nevertheless reported a much lower rate of collection of dates of birth when compared to other jurisdictions. This is a key data point for exchange partners to effectively utilise the information. Follow-up discussions confirmed that Dominica is aware of this issue and is taking steps to address it. Dominica stated that no undocumented accounts were reported.
Due to the delay in the exchange of data in 2021, full information on the success of Dominica’s exchange partners in matching information from Dominica with their taxpayer database is not available. Two exchange partners highlighted issues with respect to the information received, such as a lower proportion of accounts with valid TINs and a lower proportion of accounts with dates of birth than that received for other jurisdictions. Follow-up discussions confirmed that Dominica is aware of these issues and is seeking to improve the situation.
Based on these findings, it was concluded that Dominica 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 implementing a compliance strategy based on risk assessment and to further developing and implementing plans to undertake verification activities to ensure that information reported by Reporting Financial Institutions is complete and accurate and to ensure that valid self-certifications are always obtained when required. Dominica should therefore continue its implementation process accordingly, including by addressing the recommendations made.
Dominica should further develop and implement an overarching compliance strategy that is informed by a risk assessment that takes into account a range of relevant information sources.
Dominica should expand the information sources it uses to identify non-regulated entities that are Financial Institutions for the purposes of the AEOI Standard to ensure they report information as required.
Dominica should implement its framework and take appropriate actions to verify that Reporting Financial Institutions are effectively implementing the AEOI Standard and are reporting complete and accurate information, including in-depth reviews and reviewing the records they hold, as well as ensuring that the interaction between its AML and AEOI frameworks results in the collection and reporting of information in accordance with the AEOI Standard.
Dominica should further 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.
Dominica should put in place and implement a clearly defined policy to ensure that Reporting Financial Institutions understand the requirements in respect of undocumented accounts.
Dominica 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.
Dominica 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.
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 Dominica 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 Dominica implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, Dominica has the necessary systems and procedures to process them as required.
Based on these findings it was concluded that Dominica is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Dominica is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
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.
Dominica’s implementation of the AEOI Standard is partially compliant with respect to exchanging the information effectively in practice and in a timely manner. More specifically, while Dominica is meeting expectations with respect to sorting, preparing and validating the information (SR 2.4), and providing corrections, amendments or additions to the information (SR 2.9), there have been significant issues with respect to Dominica correctly transmitting the information and in a timely manner (SRs 2.5 – 2.7). This reflects the significant delay in commencing exchanges, including the exchanges commencing later than nine months after the end of calendar year to which the first information reported by Reporting Financial Institutions related. It is noted that this issue appears to be addressed for future exchanges. The requirements in relation to the receipt of the information (SR 2.8) have not been assessed as Dominica exchanges information non-reciprocally, so does not receive information. While Dominica has shown improvement over time, Dominica should continue its implementation process to ensure its effectiveness, including by addressing the recommendation made.
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).
One exchange partner highlighted a particular issue with respect to preparation and format of the information sent by Dominica. This related to the file preparation requirements. More generally, two (or 4%) of Dominica’s exchange partners reported rejecting more than 25% of the files received, of which one reported rejecting more than 50% of files received, due to the technical requirements not being met. This is broadly in line with the general experience of other jurisdictions. It was noted that Dominica has already successfully addressed the issue raised.
Based on these findings it was concluded that Dominica is fully meeting expectations in relation to sorting, preparing and validating the information. Dominica 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, Dominica linked to the CTS.
Based on these findings it was concluded that Dominica is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Dominica 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.
Dominica committed to commence exchanges under the AEOI Standard in 2018 but its implementation of the technical requirements was significantly delayed. Dominica commenced exchanges of information under the AEOI Standard in December 2021, exchanging information that related to the 2020 calendar year. Dominica now has systems in place to receive information from Reporting Financial Institutions and to report the information to partners within nine months of the end of the calendar year, meaning that the issues that prevented timely reporting should now be addressed for future exchanges.
Based on these findings it was concluded that, while the issues should be addressed for future exchanges, Dominica is so far not meeting expectations in relation to exchanging the information in a timely manner. More specifically, fundamental issues have been identified in relation to the exchanges until 2021. Dominica should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
Dominica 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 Dominica’s exchange partners did not raise any concerns with respect to Dominica’s use of the agreed transmission methods and therefore with Dominica’s implementation of this requirement.
Based on these findings it was concluded that Dominica is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Dominica 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 Dominica exchanges information on a non-reciprocal basis and does not 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.
Dominica appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by Dominica’s exchange partners and therefore with respect to Dominica’s implementation of these requirements.
Based on these findings it was concluded that Dominica appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Dominica is encouraged to continue to ensure the ongoing effectiveness of its implementation.