Bermuda

Last updated: 24/10/2014


CENTRAL AUTHORITY FOR REPORTING

The Financial Intelligence Agency (FIA) was established in November 2008 by virtue of the Financial Intelligence Agency Act 2007 (FIA Act) to act as an independent agency authorised to receive, gather, store, analyse and disseminate information relating to suspected proceeds of crime and potential.

Financing of terrorism received in the form of Suspicious Activity Reports (SARs). The FIA may also disseminate such information to the Bermuda Police Service and foreign financial intelligence authority.

The FIA’s powers include the ability to enter into arrangements to exchange information with regulatory bodies and law enforcement agencies globally; to serve a notice to freeze funds for up to 72 hours; and to serve notice for the production of relevant information for suspicious transactions. In carrying out its powers, the FIA has immunity from suit.

The FIA became a member of the Egmont Group in May 2009, at which time it signed several memorandums of understanding with other counterparty agencies to reinforce its commitment to international cooperation towards the prevention of money laundering and terrorist financing.

Representatives of the FIA actively participate in the various working group meetings and plenaries for the Egmont Group.

 


OTHER ANTI-MONEY LAUNDERING REGULATOR(S).

The Barristers and Accountants AML/ATF Board (AML/ATF Board) is the designated by the Minister of Justice under the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing Supervision and Enforcement) Act 2008 (Supervision Act) to be the supervisory authority for regulated professional firms (barristers and accountants) as defined in the Supervision Act.

The National Anti-Money Laundering Committee (NAMLC) was established by virtue of section 49 of the Proceeds of Crime Act 1997 (POCA). NAMLC’s responsibilities include :

  • advising the Minister of Justice in relation to the detection and prevention of money launderingin Bermuda, including the making of any regulations for this purpose;
  • developing  a national plan of action which includes recommendations on effective mechanisms to enable the competent authorities in Bermuda to coordinate with each other concerning the development and implementation of policies and activities to combat money laundering;
  • assistingBermuda in the international effort against money laundering.

The members of NAMLC include an independent Chairman appointed by the Minister of Justice, the Solicitor General, the Financial Secretary, the Permanent Secretary of the Ministry with responsibility for the Police, the Commissioner of Police, the Director of the FIA, the CEO of the BMA, the Director of Public Prosecutions, the Permanent Secretary Ministry of Justice, and the Collector of Customs.

The Bermuda Monetary Authority (BMA) was established by virtue of the Bermuda Monetary Authority Act 1969 as the integrated regulator of the financial services sector in Bermuda. It is responsible for the supervision, regulation and inspection financial institutions operating in or from within Bermuda.

In relation to anti-money laundering and anti-terrorist financing (AML/ATF), the Supervision Actdesignated the BMA as the supervisory authority responsible for AML/ATF regulated financial institutions. AML/ATF regulated financial institutions are banks, investment business companies, long term insurers, insurance managers or brokers of long term insurers, operators of investment funds, fund administrators, money service businesses, trustbusinesses, and corporate service providerbusinesses.

Pursuant to the Supervision Act, the BMA has a duty to monitor the relevant persons for whom it is  the supervisory authority andtake necessary measures to ensure compliance with the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 (‘Regulations’).  The BMA must also make a report on its activities under the Supervision Act every year to the Minister responsible for justice andmaintain and publish a register of all AML/ATF regulated financial institutions (both licensed and non-licensed entities)and all insurers.

The BMA is also responsible for issuing guidance notes as to compliance with the Regulations, Part V of the Proceeds of Crime Act 1997 and paragraph 1 of Schedule 1 to the Anti-Terrorism (Financial and Other Measures) Act 2004.

 


ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?

Yes, lawyers are generally and specifically covered by the AML/ATF legislation.

The AML/ATF Board issued Guidance Notes on the Prevention and Detection of Money Laundering and Financing of Terrorism for the Legal Sector in 2012 which provide law firms for whom the AML/ATF Board has supervisory authority with guidance as to how they should carry out their obligations as required under Bermuda’s legislative framework for the prevention and detection of money laundering and terrorist financing.

The AML/ATF offences under the POCA and the Anti-Terrorism (Financial and Other Measures) Act 2004 (ATF Act) apply to all persons in Bermuda, regardless of their profession.

The Regulations set out customer due diligence and AML/ATF internal control requirements, which currently extend to lawyers.

In accordance with the regulations, lawyers may be considered independent professionals when participating in financial or real property transactions concerning (i) buying and selling real property; (ii) managing of client monies, securities and other assets; (iii) management of bank, savings or securities accounts; (iv) organisation of contributions for the creation, operation or management of companies; and (v) creation, operation or management of legal persons or arrangements, and buying and selling business entities. 

 


LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.

 


ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

Yes, the laws are applicable to the same extent as lawyers resident in the country.


LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.

In addition to the Guidance Notes on the Prevention and Detection of Money Laundering and Financing of Terrorism for the Legal Sector mentioned above the BMA has also issued a Statement of Principles on Proceeds of Crime (AML-ATF Supervision and Enforcement) Act 2008, Guidance Notes for AML-ATF Regulated Financial Institutions on AML-ATF and Guidance Notes for AML-ATF Regulated Financial Institutions - Part 4 Wire Transfers. 

 


IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

The supervisory authority for lawyers, the AML/ATF Board, was established jointly by theInstitute of Chartered Accountantsof Bermuda and the Bermuda Bar Association. 

 


DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.

Pursuant to Part 2 of the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations of 2008, customer due diligence consists of (i) identifying the customer and verifying their identity; (ii) identifying the beneficial owners of the customer and assessing on a risk-sensitive basis whether or not to verify those beneficial owners; and (iii) obtaining information on the purpose and intended nature of the business relationship.

Customer due diligence (CDD) measures must be applied when establishing a business relationship, when carrying out an occasional transaction,when there is suspicion of money laundering or terrorist financing, or when there is doubt regarding the veracity or adequacy of document, data or information previously obtained for the purpose of identification or verification.  CCD measures must also be applied at appropriate times to existing customers on a risk-sensitive basis.

Enhanced Due Diligence procedures must be applied to higher risk client relationships and simplified CDD procedures can be applied to low risk client relationships.

If customer due diligence cannot be applied then the institution must not establish a business relationship or carry out an occasional transaction with the customer or must terminate any existing business relationship with the customer. Pursuant to regulation 9(2), the requirement to cease transactions does not apply where a lawyer is in the course of ascertaining the legal position for his client or performing his task of defending or representing that client in or concerning legal proceedings including advice on instituting or avoiding proceedings. 

 


DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

Lawyers are required to put in place systems and controls which reflect the degree of risk associated with their practice. The lawyer’s policies and procedures shouldset out criteria and situations which by their nature can present a higher risk of money laundering or terrorist financing.

Such situations may include where the client has not been physically present for identification purposes; correspondent banking relationships; and business relationships or occasional transactions involving high risk countries, high risk industries or politically exposed persons.

The risk-based approach consists of:

  • Identifying the money laundering and terrorist financing risks that are relevant to the lawyer;
  • Assessing the risks presented by the lawyer’s particular clients, products and transactions;
  • Designing and implementing controls to manage and mitigate these assessed risks;
  • Monitoring and improving the effective operation of these controls; and
  • Recording what has been done, and why in order to demonstrate to its supervisory authority that its client due diligence is appropriate in relation to the circumstances. 

 


ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

A lawyer is required to apply enhanced due diligence measures on a risk-sensitive basis pursuant to regulation 11 in any situation which by its nature can present a higher risk of money laundering or terrorist financing.

Situations where enhanced due diligence will be required include where a client has not been physically present for identification purposes; in respect of correspondent banking relationships; and in respect of business relationships or occasional transactions involving high risk countries, high risk industries or politically exposed persons.

An example of enhanced due diligence is, in the case where a client has not been physically present for identification purposes, to ensure that the customer’s identity is established by additional documents, data or information as set out in the guidance notes and applying supplementary measures to verify or certify the documents supplied.

A politically exposed person is defined in regulations 11(5) and (6) as an individual who is or has, in a country or territory outside Bermuda, at any time in the preceding year, been entrusted with prominent public functions such as Heads of State, senior political figure, senior government, judicial or military officials, senior executives and their immediate family, their close associates and any corporate entity, partnership or trust arrangement that has been established by them or for their benefit. Politically exposed persons can pose higher money laundering risks too, as their position may make them vulnerable to corruption. This risk also extends to members of their immediate families and to known associates.

Relevant measures needed to be undertaken when dealing with politically exposed persons include obtaining prior approval from senior management, establishing source of wealth and funds involved and conducting enhanced ongoing monitoring. 

  


ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

Lawyers are exempted from the customerdue diligence obligations when they have reasonable grounds for believing the client or transaction is:

  • An AML/ATF regulated financial institution;
  • A financial institution (or equivalent) which is situated in a country other than Bermuda which has AML/ATF requirements equivalent to the Regulations and is supervised for compliance with those requirements;
  • A company listed on an appointed stock exchange;
  • An independent professional where the product is an account into which monies are pooled and information on the identity of the person on whose behalf the monies are held is available on request to the institution acting as custodian for the account; or
  • A public authority in Bermuda.

Simplified due diligence is not permitted where there is a suspicion that a proposed business relationship or occasional transaction may involve money laundering or terrorist financing or the lawyer doubts the veracity or adequacy of documents, data or information already obtained for client identification and verification.

The lawyer must stillconduct ongoing monitoring of the business relationship or to report suspicious activities. 

 


ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE. 

Regulation 14 enables lawyers to rely on certain third parties to apply any or their entire customer due diligence measures, provided however that consent to being relied on has been given by the third party.

The third parties being relied upon must fall within one of the following categories:

  • AML/ATF regulated financial institutions or their foreign equivalent; or
  • Independent professionals who are supervised for the purpose of the Regulations of the Bermuda Bar Association or the Chartered Professional Accountants of Bermuda, or their respective foreign equivalents.

With respect to foreign third parties, the entities must be subject to requirements equivalent to those laid down in the Regulations and must be supervised for compliance in an equivalent manner. Foreign independent professionals also must be subject to mandatory professional registration recognised by law.

As a clarification, reliance on third parties for customer due diligence differs from the outsourcing of customer due diligence. In the case of the former, the lawyer would be relying on the due diligence conducted by the third party with respect to the third party’s customer (who would be a common customer) for the third party’s own purposes. In the case of the latter, the third party acts as agent to the lawyer and carries out due diligence with respect to the clients of and for the purposes of the lawyer.

In either case, however, the lawyer retains responsibility for any failure to comply with the requirement of the Regulations, as this responsibility cannot be delegated. 

 


WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

Although the offence of failing to disclose knowledge or suspicion of money laundering which came to a person’s attention in the course of his trade, profession, business or employment apply to all persons generally, an exception has been made for lawyers who do not have an obligation to disclose such information or suspicion where it comes to them in privileged circumstances.

If information or other matter which was communicated or given with a view to furthering criminal purpose the above exception does not apply and the lawyer is required to report the suspicious transaction to the FIA. (See section 46 of the POCA and section 9 of the ATF Act.).


DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

The existing exception to failing to report an offence is for a professional legal adviser who does not disclose information which has come to him in privileged circumstances, provided however the information is not communicated with a view to furthering any criminal purpose.  

 


DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

Any disclosures made in good faith to the FIA pursuant to the POCA or ATF Act are protected and would not breach any duty of confidentiality the lawyer may otherwise have. 

 


ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

Once a suspicious transaction report has been made to the FIA, the lawyer should not proceed with the transaction without first obtaining the consent of the FIA.

Sections 44(3)(b)(i) & 45(5)(b)(i) of the POCA provide that it is a defence to certain proceeds of crime offences if the person acts with the consent of the FIA. A similar provision is found in section 12 of the ATF Act. 

 


IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

Section 47 of the POCA makesit an offence to disclose where the person knows or suspects a report has been made to the relevant authorities.

An exception to this offence is for a professional legal adviser who discloses information in the context of providing legal advice, provided however such advice is not given with a view to furthering any criminal purpose (see section 47(3) of the POCA).

Section 10A of the ATF Act makes it an offence to where the person knows or suspects a report has been made to the relevant authorities and there is or may be an investigation being conducted into terrorist financing.

An exception to this offence is for a professional legal adviser who discloses information in the context of providing legal advice, provided however such advice is not given with a view to furthering any criminal purpose (see section 10A(3) of the AFT Act). 

 


DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.

The International Sanctions Regulations 2013 prohibit undertaking work for or on behalf of some persons listed in the United Kingdom’s HM Treasury Consolidated Sanctions List.

In addition, the acceptance of a new client will depend on the outcome of the lawyer’s client due diligence. 

 


ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.

Yes, lawyers are required to conduct ongoing monitoring of their business relationships pursuant to regulation 7. Ongoing monitoring shall consist of scrutiny of transactions undertaken throughout the course of the business relationship to ensure that the transactions are consistent with the lawyer’s knowledge of the client, his business and risk profileand an investigation into the background and purpose of all complex, unusually large transactions, or unusual patterns of transactions which have no apparent economic or lawful purpose and record the findings in writing.

Ongoing monitoring also requires keeping, so far as practicable, the documents, data or information obtained for the purpose of applying customer due diligence measures up to date. Again, certain events may trigger the requirement for further client due diligence measures. 

 


DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION. 

Lawyers are required to establish policies and procedures in order to prevent money laundering or terrorist financing.

Such policies and procedures must cover, among other things: compliance management; risk assessment and management; customer due diligence requirements; external and internal reporting procedures; vetting of own staff, ongoing monitoring; training; and record keeping.

Failure to comply with the provisions of Bermuda’s AML/ATF legislation may lead to civil and criminal penalties including fines and/or imprisonment against the lawyer and its employees.  

 


HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

No.

 


HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

Bermuda is not a member of the FATF, but is a member of the CFATF, an associate member of the FATF.

The CFAFT Plenary in May 2014 recognised that Bermuda had made significant progress in addressing the deficiencies identified in their  Assessment Report on Anti-Money Laundering and Combatting the Financing of Terrorism (2007 Mutual Evaluation Report) and therefore could be removed from the regular follow-up process.  The Fifth Follow-Up Report to the 2007 Mutual Evaluation Report was released on 12 May 2014.

Bermuda will be evaluated as part of the CFATF’s 4th Round of Mutual Evaluations in 2016. The 4th Round will be based on the 2012 revised FATF Recommendations which now consist of 40 Recommendations and relevant Interpretative Notes (“Revised Recommendations”).  This will include a detailed assessment of whether the requirements of the Revised  Recommendations have  been  incorporated into Bermuda’s AML/ATF legal framework.

 



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