Bermuda Tightens Screws on Money Laundering and Anti-Terrorist Financing
In a move aimed at strengthening its defenses against financial crimes, the Government of Bermuda has introduced new regulations to combat money laundering and terrorist financing. The Regulations 2018, which came into effect in [Year], require Reporting Entities to establish and maintain risk-sensitive policies and procedures to prevent illicit activities.
Key Requirements
- Conduct customer due diligence
- Maintain adequate records against sanctions lists applicable to Bermuda
- Ongoing monitoring of client relationships
Enhanced customer due diligence is required for transactions involving countries subject to international sanctions. Additionally, entities are required to maintain records of potential matches to names and sanctions lists, whether true or false positives. Failure to adequately maintain these records can result in breach of the Bermuda Sanctions Regime.
US OFAC Sanctions
While the US Treasury’s Office of Foreign Assets Control (OFAC) sanctions regime is not directly applicable in Bermuda, entities should note its extraterritorial effect on transactions involving US dollars or US entities. Appropriate advice from US counsel is recommended.
Reporting Requirements
The Bermuda Sanctions Regime places a general obligation on natural and legal persons to supply the Financial Intelligence Unit (FSIU) with information that facilitates compliance with OT Orders. Reporting Entities must report suspicious activities to the FSIU, including cases of designated persons or those committing offenses under the regime.
Licensing Requirements
Licenses are required for certain activities or transactions prohibited by the Bermuda Sanctions Regime. A licence is a written authorization from the Minister, with the consent of the UK Secretary of State, permitting an otherwise prohibited action. Common grounds for obtaining a license include:
- Basic expenses
- Professional fees
- Obligations under contracts
Penalties for Non-Compliance
Non-compliance with the Bermuda Sanctions Regime can result in imprisonment up to seven years, fines, or both. Corporate and personal liability are also applicable for offenses. Failure to comply may also impact an entity’s ability to conduct business in a “prudent manner” and may result in enforcement action by the Bermuda Monetary Authority.
Brexit Impact
Following the UK’s exit from the EU, new sanctions regulations have been introduced to transpose existing EU sanctions into UK law. The Financial Services Institute of the University of Zurich (FSIU) has advised that persons should review OT Orders to ensure compliance with the updated regime.
Practical Next Steps
The changes to the Bermuda Sanctions Regime present an opportunity for entities to evaluate their current sanctions compliance arrangements. Walkers, a global Regulatory & Risk Advisory practice group, is available to provide legal advice and assistance on all aspects of international sanctions and regulatory compliance matters.