Financial Crime World

Prevention and Detection of Money Laundering and Financing of Terrorism in Bermuda

As financial institutions and other entities, it is essential to comply with anti-money laundering (AML) and anti-terrorism financing (ATF) regulations. The following guidance notes provide a framework for implementing effective systems and controls to prevent money laundering and the financing of terrorism.

Internal Controls

3.7 Issues Covered in Internal Controls

  • Discretionary Application of Regulations by Personnel: Ensure that personnel do not apply regulations at their discretion, but rather follow established procedures.
  • Customer Due Diligence (CDD) Requirements for Simplified, Standard, and Enhanced Due Diligence:
    • Simplified due diligence: required for low-risk customers
    • Standard due diligence: required for moderate-risk customers
    • Enhanced due diligence: required for high-risk customers
  • Outsourcing or Reliance on Third Parties for CDD Obligations: Ensure that third-party providers are reliable and compliant with AML/ATF regulations.
  • Restricting Work on Files without Completed CDD: Do not allow employees to work on files without completed CDD procedures.
  • Permitted Cash Payments and Acceptance of Payments from Third Parties: Establish policies for permitted cash payments and acceptance of payments from third parties.

Effectiveness of Risk Management Systems

3.8 Effectiveness of Risk Management Systems

  • Regular Information Relevant to Money Laundering and Terrorist Financing Risks: Ensure that employees have access to regular information on money laundering and terrorist financing risks.
  • Adequate Management of Money Laundering and Terrorist Financing Risks: Implement effective risk management systems to identify, assess, and mitigate risks.
  • Competence and Effectiveness of the Compliance Person (CP) and Reporting Officer: Ensure that the CP and reporting officer have the necessary skills and knowledge to perform their roles effectively.
  • Resources for Effective Compliance with AML/ATF Legislation: Provide employees with the necessary resources to comply with AML/ATF legislation.
  • Periodic Review of Policies and Procedures for Higher-Risk Clients: Regularly review policies and procedures for higher-risk clients to ensure that they are effective.
  • Consideration of Changes in Business Activities, Legislation, or Regulatory Requirements: Stay up-to-date with changes in business activities, legislation, or regulatory requirements.

Cultural Barriers

3.9 Cultural Barriers

  • Human Factors that Can Prevent Effective Control: Recognize the human factors that can prevent effective control within an organization, such as employee relationships and client interactions.
  • Intangible Nature of an Organization’s Culture: Understand that an organization’s culture is intangible and difficult to measure its impact on the firm.
  • Risk Minimization Strategies:
    • Addressing assumptions that junior employees’ concerns are of no consequence
    • Improving handling of queries raised by junior employees regarding unusual transactions
    • Avoiding pressure on employees to conduct transactions without CDD
    • Managing employee remuneration or bonus schemes that are linked to revenue-based targets