Businesses seeking regulatory approval for directors, owners and senior personnel now need to account for an additional documentary requirement.

After a change introduced on October 1, the Bermuda Monetary Authority requires police clearance certificates when vetting key persons at anti-money laundering and anti-terrorist financing regulated financial institutions.

The change adds a prescribed source of criminal-record evidence to the BMA’s existing assessment of whether individuals are considered fit and proper.

For affected businesses, it also introduces a practical consideration into licensing, recruitment, succession planning and ownership changes by the requirement to obtain records from countries in which the individual has lived.

The BMA’s notice, issued on August 13, requires the certificate to accompany the individual’s personal declaration form. It applies to relevant applications and notifications of changes to key persons submitted on or after the October 1 commencement date. Applications received in full before that date are excluded.

Understanding the scope of this change requires two questions to be answered: whether the institution falls within the relevant AML/ATF definition, and whether the individual is being vetted as a key person.

Section 42A (1) of the Proceeds of Crime Act 1997 defines an AML/ATF regulated financial institution by reference to specified activities and businesses. The definition includes banking, investment business, fund administration and other financial services. BMA regulation alone does not establish that an institution falls within this particular policy.

The distinction is especially relevant to the re/insurance industry. The statutory definition includes insurers carrying on specified long-term business (such as direct life insurers) and expressly excludes reinsurers from that category. As a result, reinsurers are not required to comply with the new requirement.

The statutory definition also includes insurance managers, while insurance brokers and insurance marketplace providers are covered in connection with specified long-term business other than reinsurance. The position with respect to the new requirement therefore depends on the business being conducted, rather than a general description of an entity as part of the insurance industry.

For individuals, the notice links “key person” to the fit-and-proper assessments required by the minimum licensing or registration criteria in the relevant regulatory legislation. Its reach can consequently extend beyond senior employees to directors, shareholder controllers and beneficial owners. The applicable statutory role and assessment provide the starting point.

The documentary requirements are specific. A certificate must be no more than 12 months old when submitted. Certificates must be obtained from each country in which the applicant was ordinarily resident for more than six months at any time during the preceding three years.

That 12-month limit concerns the age of the document at submission. The notice does not establish a general annual renewal obligation for certificates held by existing personnel.

There is also an express provision for circumstances in which a certificate cannot be obtained from a relevant jurisdiction. The BMA may consider appropriate substitute documentation on a case-by-case basis. This provides flexibility, although applicants cannot assume that their preferred alternative will be accepted.

The policy’s purpose is to strengthen the BMA’s ability to assess criminal-record information and protect the integrity of Bermuda’s financial system. It sits within an international framework that expects regulators to prevent criminals and their associates from owning, controlling or managing financial institutions.

Criterion 26.3 of the Financial Action Task Force’s assessment methodology expresses that objective. However, the FATF - which leads global action to tackle money laundering and terrorist financing - does not prescribe police clearance certificates, a 12-month document limit or the particular residence periods adopted by the BMA. Those details represent Bermuda’s supervisory approach to obtaining evidence in support of the international standard.

Bermuda already has an established vetting framework. The Caribbean FATF’s mutual evaluation report published in 2020 described our market-entry controls as generally strong and effective and recognised routine criminal-background checks.

Its overall assessment of Recommendation 26 was “largely compliant”. The new policy therefore supplements existing controls; that historical assessment does not preclude further improvements.

For businesses, the practical effect will depend partly on an individual’s residence history and the procedures of the authorities issuing the records in those jurisdictions.

A person who has lived in several countries may face a more involved process. Certificate collection should therefore be considered early enough to avoid disrupting an otherwise complete application.

The broader regulatory judgment remains essential. A certificate contributes evidence about criminal history, but cannot by itself establish competence, integrity or the absence of criminal associations.

Successful implementation of the policy will depend on how that evidence improves the assessment, alongside clear expectations about acceptable documents and workable alternatives where records are unavailable.

Those features will help Bermuda maintain rigorous scrutiny while giving businesses a predictable route through the approval process.

• Jarion Richardson is the regulatory, governance and compliance advisory lead in Appleby’s Bermuda office, and Cathryn Minors is a partner in the firm’s Corporate practice on the island. A copy of this column can be obtained on the Appleby website at www.applebyglobal.com. This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.