Concept: Controlling Persons

Under the CRS and FATCA, when an account holder is classified as a Passive Non-Financial Entity (Passive NFE), the Financial Institution must "look through" the entity to identify the natural persons who exercise control over it. These individuals are referred to as Controlling Persons (or Beneficial Owners).

If a Controlling Person of a Passive NFE is a tax resident in a reportable jurisdiction, the account becomes reportable.

Cayman-Specific Ownership Threshold

The Cayman Islands has set the threshold for determining controlling ownership interest in a legal person at 10%.

OECD Standard: The standard OECD CRS guidance suggests a 25% threshold.
Cayman Alignment: The Cayman Islands reduced this to 10% to maintain consistency with local Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.

Determining Control

The rules for identifying Controlling Persons depend on the entity structure:

1. Legal Persons (Corporations/Partnerships)

Control is determined in a three-step cascading test: 1. Ownership: Any natural person who ultimately owns or controls (directly or indirectly) 10% or more of the shares or voting rights. 2. Control by Other Means: If no person meets the ownership threshold, or if there is doubt, any natural person who exercises control over the entity through other means (e.g., veto rights, shareholder agreements). 3. Senior Managing Official: If no natural person is identified under steps 1 and 2, the Controlling Person is deemed to be the Senior Managing Official (e.g., Managing Director, CEO, or General Partner).

2. Trusts

For trusts, the "look-through" rule is extremely broad. Regardless of whether they exercise active control or meet any percentage threshold, the following parties are always deemed to be Controlling Persons: * The Settlor(s) * The Trustee(s) * The Protector(s) (if any) * The Beneficiary(ies) or class of beneficiaries * Any other natural person exercising ultimate effective control over the trust

Self-Certification Requirement

RFIs must obtain a valid Self-Certification from the Passive NFE detailing the names, addresses, tax residencies, TINs, and dates of birth of all Controlling Persons.