Government has proposed changes to legislation to improve safeguards against money laundering and terrorist financing.

The changes are in response to revised recommendations against money laundering and terrorist financing by international bodies, including the Financial Action Task Force (FATF). It also considers the preliminary findings of a Bermuda review by the International Monetary Fund that has not yet been made public.

?These amendments reflect a number of developments in anti-money laundering practices and developments internationally,? said Munro Sutherland, the Bermuda Monetary Authority?s superintendent of banking, trusts and investment.

The changes will be made to the ?guidance notes? of the Proceeds of Crime Act, which explain how regulated financial institutions such as banks and brokers can comply with the law outlined in the Act. Although the guidance notes can be changed by committee, they will likely require amendments to the more general legislation, which would require parliamentary approval. One such change is to require regulated institutions to screen new employees.

The revised FATF recommendations, which took two years to draw up and were released last June, included expanding the due diligence process for financial institutions, increasing transparency of companies and trusts so authorities can determine who is behind them, and the prohibition of shell banks - also known as ?brass plate banks? with no physical presence in a country.

FATF?s eight new recommendations intended to combat terrorist financing include criminalising the financing of terrorism, freezing and confiscating terrorist assets, and strengthening identification procedures for customers sending and receiving wire transfers.

The changes to Bermuda?s guidance notes are contained in an 80-page document sent by the National Anti-Money Laundering Committee (NAMLC) to regulated institutions earlier this month. The Ministry of Finance expects to receive feedback by mid-February.

According Mr. Sutherland, there will be a ?series of dialogues? between government, the NAMLC and industry about the proposed guidelines.

Government is still deliberating future changes, including modifying the rules about ?reliable introductions?, which currently allow financial institutions to skip regular due diligence procedures if the client is introduced by another regulated financial institution that has already done its own background check. There are also questions over whether to make the law retroactive and require companies to check on customers they took on before 1998, when the Proceeds of Crime Act took effect.

While the implications for financial institutions are significant, many were reluctant to comment on the proposed changes and said they would likely wait to express their opinions directly to the committee in February.