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AML controls tighten as money-laundering threat rated higher

The Bermuda Monetary Authority will host an outreach session later this year to discuss the guidance notes and address the findings of the government report: Bermuda – Report on 2020 Money Laundering and Terrorist Financing Risk Assessment

Bermuda’s national money laundering threat rating has been raised to high in the latest report by the National Anti-Money Laundering Committee.

Bermuda – Report on 2020 Money Laundering and Terrorist Financing Risk Assessment said the rating move to high from the 2017 rating of medium-high reflected a progressively better understanding of ML threats to Bermuda and deeper analysis of more comprehensive data and information, rather than any major changes in the threat profile per se.

The government report also reflected the greater expertise and experience Bermuda had gained for such assessments.

Meanwhile, the terrorist financing risk to Bermuda was again assessed to be low.

The report said there was no domestic or foreign-sourced intelligence to suggest that terrorist financing had occurred in Bermuda in any sector.

Crimes perpetrated overseas such as fraud, corruption and bribery, market manipulation/insider trading and international tax crimes were found to present the highest ML threat to Bermuda.

The island’s financial institutions and the large volume of international services they provide to clients could be impacted by potential money laundering derived from these foreign offences.

Domestically, the report said, the threat of potential money laundering was still driven by local drug trafficking and emerging threats from activity such as cyber-based extortion targeting Bermuda residents from overseas, were evident.

However, the scale of ML threats to Bermuda from foreign predicate offences remains significantly higher.

In the sectoral threats and inherent vulnerabilities assessments, only the trust sector was rated as high for inherent ML risk, up from medium-high in 2017.

This higher rating reflects deeper analysis showing potential threats and inherent vulnerabilities around misuse of private trust companies for ML purposes, the report said.

The deposit-taking sector (banks & credit union), corporate service providers, securities, long-term (life) insurance and legal sectors were rated as medium-high.

The real estate, betting, money service business and dealers in precious metals and stones sectors were rated as medium.

The lending, general business/reinsurance and high value goods sectors, along with the Bermuda Stock Exchange, were assessed as medium-low risk.

The lending sector was included in the national risk assessment for the first time because it was brought into the scope of the AML/ATF regime in 2018.

This sector conducts primarily domestic business, is proportionately small compared with other financial services sectors and the rating of medium-low risk was consistent with this, the report said.

The accounting sector was rated as low risk.

The casino sector was also rated as medium-low risk at this time, reflecting the fact that there are as yet no casino operators in Bermuda; but this preliminary assessment of the sector is beneficial and will inform the supervisory approach once a casino licence is issued, the report said.

The nature of the ML threats Bermuda faces is high, particularly given the impact potential money laundering could have on the financial services sector.

In common with all financial jurisdictions, the report said, Bermuda must be responsive to such threats, but it also understood the current and future benefits of continuing to enhance its already strong AML controls.

The terrorist financing threat was rated as low across the relevant sectors, other than the banking, MSB and NPO sectors, which were rated medium-low.

The report said there was no evidence indicating Bermuda had significant inherent threat as a site for domestic or foreign terrorist activity, or was a transit point to move funds from one country to another.

Nevertheless, it added, Bermuda’s ATF regime remained robust, and the Bermuda authorities were vigilant, recognising that no jurisdiction was completely immune to TF threats and terrorist activities.

The report said work to enhance relevant AML/ATF controls across the financial sectors as necessary was ongoing, as part of the national strategy and evolving action plan established formally in 2016 for that purpose.

Legislative, institutional and operational changes have already taken place based on previous assessments. The findings from the 2020 NRAs will help inform the next round of updates to the action plan.

With Cabinet’s approval, the report said, all competent authorities responsible for executing the various items incorporated into the action plan were required to align their agency action plans accordingly, and to include them in their accountability reports going forward.

Overall, both government institutions and the private sector could use the results of this risk assessment to ensure they modified their respective risk-based approaches to AML/ATF activities, the report said.

For intelligence and law enforcement, this means focusing on financial crimes generated via the financial services sector, and for supervisors maintaining their robust monitoring of sectors and entities, particularly those presenting the highest inherent vulnerabilities.

For the private sector, the report said, the 2020 NRA findings could inform their own ML/TF risk assessments and identify areas for enhanced focus and attention within their institutions.

In this way, and with a collective commitment to compliance with international standards, vigilance and continued hard work, it said Bermuda would stay at the forefront of combating money laundering and terrorist financing.

The assessment period covered by both the ML and TF national risk assessments was from January 1, 2017 until December 31, 2019.

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Published May 30, 2023 at 7:48 am (Updated May 30, 2023 at 7:48 am)

AML controls tighten as money-laundering threat rated higher

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