Financial Crime World

Bermuda’s AML/ATF Framework Under International Scrutiny

Pressure to Ensure Effective Anti-Money Laundering (AML) and Anti-Terrorism Financing (ATF) Procedures

The island nation of Bermuda is facing pressure to ensure its anti-money laundering (AML) and anti-terrorism financing (ATF) procedures are effective in preventing financial crimes. The Financial Action Task Force (FATF), an international organization, has issued guidelines to combat money laundering and terrorist financing.

International Efforts to Combat Financial Crimes

  • The FATF has issued Forty Recommendations on Money Laundering and Nine Special Recommendations on Terrorist Financing.
  • The Basel Committee, International Association of Insurance Supervisors (IAIS), and the International Organization of Securities Commissions (IOSCO) have encouraged national supervisors to require financial institutions to follow specific due diligence procedures in relation to customers.
  • The United Nations has sanctioned individuals and organizations involved in money laundering and terrorist financing, denying them access to the financial services sector.

Bermuda’s AML/ATF Framework

Bermuda’s legal and regulatory framework for AML/ATF includes several pieces of legislation:

  • Proceeds of Crime Act 1997
  • Anti-Terrorism (Financial and Other Measures) Act 2004

The Bermuda Monetary Authority (BMA) is responsible for regulating and providing guidance to financial institutions.

The Risk-Based Approach

The risk-based approach, which assesses the risks of money laundering and terrorist financing, is crucial in preventing financial crimes. This approach requires financial institutions to:

  • Identify and mitigate the risks associated with their customers and transactions
  • Select mitigation procedures in a considered way
  • Properly record all relevant decisions
  • Follow established procedures

“The risk-based approach requires financial institutions to identify and mitigate the risks associated with their customers and transactions,” said a BMA spokesperson. “If an institution’s assessment of the risks and selection of mitigation procedures are approached in a considered way, all relevant decisions should be properly recorded, and the institution’s procedures followed, the risk of censure should be very small.”

Consequences for Inadequate AML/ATF Procedures

Institutions may face severe consequences if they fail to implement effective measures. The private sector Wolfsberg Group of banks has also published guidance on private banking, correspondent banking, and the suppression of terrorist financing.

“Bermuda’s financial institutions must ensure they are following these guidelines to maintain a high level of compliance,” said another industry expert.

BMA Objectives

The BMA’s objectives in combating money laundering and terrorist financing include:

  • Monitoring AML/ATF regulated financial institutions
  • Assisting with the detection and prevention of financial crime
  • Detering and disrupting criminal and terrorist activity

“In light of international pressure, it is essential that Bermuda’s financial institutions adopt a risk-based approach to AML/ATF,” said the BMA spokesperson. “This will ensure the island nation remains compliant with international standards and maintains its reputation as a reliable and secure financial hub.”