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Banks should not be pilloried for exercising due diligence

Derrick Burgess

Dear Sir,

As a financial professional who has worked in Bermuda, the Cayman Islands and the British Virgin Islands, inter alia, since the increased anti-money laundering and antiterrorism financing laws scaled up — ie, in the past ten to 15 years — I can only wonder why Derrick Burgess has essentially told Bermuda that four people he knows, including two Progressive Labour Party premiers, are noncompliant with these laws. That is effectively what he has said, unintentionally, when trying to attack Butterfield Bank for closing their accounts.

Mr Burgess is correct in that this move is political, but only in the sense that all of us in the financial services businesses — those of us actively licensed, whether working or not as a lawyer, accountant and employees of all companies in regulated institutions — must undertake EDD when dealing with anyone that qualifies as a PEP.

If you don’t understand the above, that should mean you do not work in any industry that is subject to our AML/ATF requirements. A PEP is defined as a politically exposed person, and this extends to the immediate family members of PEPs.

In Bermuda, anyone serving as a Justice of the Peace or on a government board or parish council also qualifies as a PEP under the legislation. Therefore, it’s a no-brainer that past and present government (and opposition) ministers, especially premiers, are deemed PEPs.

A bank (inter alia) has no option but to require EDD on such individuals and the extent of the EDD will be determined by the legislation as interpreted by in-house compliance specialists (often needing sign-off by companies’ chief legal counsels) and/or outside compliance specialists. EDD stands for enhanced due diligence, and all of us are subject to regular DD (for example: I provided additional documents to my bank to keep my information up-to-date a month ago and, had I failed to do so, I would have been sent a similar letter notifying me my account would be closed, but only after my bank had tried unsuccessfully several times to obtain the missing or expired information). It’s not personal; it’s the law.

What this means is Butterfield has repeatedly requested information from four account holders that they are required to by law and these four people have refused to provide sufficient, if any, responses to legitimate inquiries. The only question remaining is, “Why?”

I will not venture into detail owing to client confidentiality — and the laws on reporting AML/ATF red flags — but I have spent more time onboarding some clients than the time it took to actually perform the work! This often results in a loss on a fixed-fee engagement, but the downside of not adhering to these rules is much costlier than making a loss on an engagement [including losing clients that expose us to risks of noncompliance with our laws and regulations.]

I have filed a Suspicious Activity Report in several jurisdictions. I am also aware that Bermuda’s financial institutions have all fallen foul of the EDD/DD or AML/ATF requirements at some point since 2010. Infractions led to hefty fines and/or requirements to beef up their compliance departments to ensure Bermuda remains a reputable jurisdiction for the business we compete for with on and offshore financial centres.

Bermuda is no worse than Cayman or BVI, but we need to be careful claiming we are “cleaner” than Cayman. That is not accurate, and I’ll leave it there. (BVI has a totally different business model and does not compete with us in the international business re/insurance, captive sector at all.)

What I will state outright is that Mr Burgess has told the world that we elect people who are breaking Bermuda’s laws. Bank accounts and client relationships are ended by those receiving the benefit of the relationship — ie, the bank, auditor, the accountant, the captive or fund manager, etc — when said client refuses to provide the legally mandated EDD/DD documentation or when the client refuses to explain certain financial relationships, and the origin and reason (supporting documents) for deposits and transfers of monies and other assets. Butterfield has obeyed these laws and advised these parliamentarians of their decisions because they have not properly explained transactions coming into or going out of their accounts, or failed to provide some other equally pertinent information.

Thank you for the information, Mr Burgess, although it’s a black eye for the island and an even bigger wound for the PLP.

#Candidatequality is a big problem in the GOP in the United States; it has become just as worrisome here.



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Published February 21, 2023 at 7:59 am (Updated February 20, 2023 at 7:50 pm)

Banks should not be pilloried for exercising due diligence

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