Kathleen Moniz (pictured) and Elliot Hubbard of law firm Conyers Dill & Pearman explain the implications for fund management and administration businesses of the new anti-money laundering rules introduced in Bermuda at the beginning of this year.
Two new pieces of legislation have been introduced in Bermuda, effective January 1, 2009. The Proceeds of Crime Regulations (Supervision and Enforcement) Act 2008 and the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 require all anti-money laundering and counter financing of terrorism-regulated financial institutions to comply with various obligations under the recently updated and enhanced AML/CFT legislative framework.
In March, the Bermuda Monetary Authority announced that it had published anti-money laundering guidance notes and a statement of principles as part of Bermuda's enhanced AML/CFT framework.
The updated legislation defines financial institutions as persons who, among other things, carry on the business of a fund administrator within the meaning of the Investment Funds Act 2006 or are 'operators' of investment funds within the meaning of the act.
The guidance is of direct relevance to the senior management of financial institutions and to their respective reporting officers. The BMA expects financial institutions, under its supervision, to address their management of the relevant risks in a thoughtful and considered way, and to establish and maintain systems and procedures appropriate and proportionate to the risks identified.
The core obligations of financial institutions are to establish and maintain adequate and appropriate policies and procedures to forestall and prevent operations relating to money laundering and terrorist financing. These controls should take account of the risks faced by the relevant business of each financial institution.
The AML/CFT systems and controls should enable financial institutions to identify, assess, monitor and manage money laundering and terrorist financing risk and should be comprehensive and proportionate to the nature, scale and complexity of their activities.
Investment fund operators and fund administrators are required to appoint a money laundering reporting officer to whom reports should be made and who shall have responsibility to make reports when suspicious circumstances require.
In addition, the BMA will establish, maintain and publish a register of AML/CFT regulated financial institutions comprising 'licensed persons' and 'non-licensed persons'. A number of such financial institutions are currently non-licensed persons, in particular, investment businesses and operators of investment funds that are exempted or excluded from the licensing requirement under the Investment Business Act 2003 or the authorisation requirement under the IFA. These institutions are required by the Supervision Act to be registered with the BMA.
It is a requirement for non-licensed persons to register with the BMA by June 30, 2009 using the BMA's prescribed form and paying the relevant fee. Failure to comply will result in their inability to carry on business activities. Licensed persons will be deemed to be registered on January 1, 2009 and therefore will not be required to complete the registration process.