Independent Review Finds Gaps in Bermuda RFI’s Due Diligence Procedures

A recent review by an independent reviewer has uncovered shortcomings in the due diligence procedures employed by the Bermuda Regulatory Financial Institution (RFI).

Shortcomings in Due Diligence Procedures

The report highlights several areas of concern, including:

• Inconsistent and non-transparent procedures for identifying and classifying reportable persons
• Issues with determining whether a pre-existing entity account holder is a reportable person
• Failure to maintain accurate records of account holder identification
• Lack of robustness in obtaining self-certifications from controlling persons of passive non-financial entities (NFEs)

Sample Size Concerns

The review also found that the RFI’s sample size of accounts reviewed was too small to be statistically significant, making it difficult to draw conclusions about the overall effectiveness of its due diligence procedures.

Recommendations for Improvement

To address the identified gaps and shortcomings, the reviewer has recommended that the RFI:

• Develop a more comprehensive and transparent process for identifying and classifying reportable persons
• Improve its reliance on publicly available information and maintain accurate records of account holder identification
• Strengthen its procedures for obtaining self-certifications from controlling persons of passive NFEs
• Increase the sample size of accounts reviewed to ensure statistical significance

Conclusion

The independent review highlights the importance of robust due diligence procedures in ensuring compliance with international standards. The RFI has been advised to address these issues and improve its processes to ensure that it is adequately identifying and classifying reportable persons.

Takeaways

• Financial institutions must maintain high standards of due diligence and transparency
• Continuous monitoring and improvement of procedures are crucial for staying compliant with changing regulations