Insufficient emphasis by regulators has been placed on the investigation of "suspicious activities" by licensed companies, managers and executives under Bermuda law.

That is the view of Michael Hardy, an FCA and who has been an auditor, accountant and manager of a number of insurance and reinsurance companies on the Island for 25 years, who raised his concerns on the UK Parliament website over a "long-standing weakness in the enforcement of criminal law as it applies to financial crime, particularly with regard to entities regulated by the Bermuda Monetary Authority (BMA)".

Mr. Hardy, who was also a director of the Bermuda International Business Association, president of the Bermuda Insurance Managers Association and member of the Insurance Advisory Committee to the Bermuda Government, claimed that, as far as he could gather, the BMA had not made any significant "official" criminal complaint to the Police Fraud Unit during that period according to police officials.

But the BMA has hit back at those claims, saying that contrary to the suggestions made, it has close ongoing dialogue with the Bermuda Police Service and works actively with them to combat financial crime, and has submitted suspicious activity reports.

Mr. Hardy went on to say that while Bermuda companies and executives have been investigated overseas for fraudulent activities in cross-border transactions, there have been no such transparent investigations and indictments in the country itself.

"Bermuda entities having been involved in transactions with foreign companies accused of nefarious activities, have not been reported as investigated for such activities in Bermuda," his submission to the UK Parliament read.

He lists a number of re/insurance companies and financial institutions, which he alleges have been involved in a range of fraudulent activities from siphoning off insurance premiums from other companies to the use of an accounting "cookie jar" to help smooth out earnings in bad years.

"Please note that I do recognise that Bermuda is no different to any other major business centre in that it will and has attracted some unsavoury characters," Mr. Hardy continued.

"Also, the goal posts have been moved regarding what transactions are acceptable and those that are not.

"Many were originally agreed to by external consultants, lawyers and auditors. Their roles being found to have an ominous lack of independence or professional judgment and more of a view of commercial expediency."

He said that, to an outside observer, it appears that the BMA, while dealing with "unsavoury situations" by co-operating with overseas regulators and providing them with the help they require to put criminals in jail in foreign jurisdictions, does not "proactively investigate suspicious circumstances themselves", passing evidence of criminal wrongdoing to the police.

"I therefore urge you to look into this perceived lack of enforcement of Bermuda laws by the BMA and commitment towards helping the police identify criminals operating under the guise of Bermuda regulated companies, by placing sufficient emphasis on investigation, sanctions and, ultimately, official criminal complaints to the appropriate police unit," he added.

He concluded by saying that the BMA should be proactively investigating "suspicious activities", there should be a separate investigative branch of the BMA to work closely with police on these matters, business plans for insurance companies should include a letter from a tax consultant in the owners' home country to ensure there is no tax evasion or illegal avoidance of tax involved in the proposed transactions to be undertaken by the new Bermuda company and the public should be informed of any such penalties resulting from this and the like meted out to Bermuda entities and their officers.

The BMA's director of Legal Services and Enforcement, William Kattan, said it was the case in recent years that the international community has been placing much greater emphasis on dealing with the investigation and punishment of corporate wrong-doing and fraud — a trend that is also being seen in Bermuda with the enactment of new laws such as those criminalising insider dealing and market manipulation and amendments to the criminal code act updating provisions on fraud.

"The Authority has, as the submission makes clear, an important part to play in bringing to the attention of the Bermuda Police Service its suspicion in relation to any criminal activity by a regulated institution that may have come to its notice in the course of its regulatory duties," he said.

"Further, the Authority will fully cooperate with the police in prosecuting those concerned. But it is right to say that the function of investigating and obtaining evidence for a criminal prosecution is primarily a matter for the police and not the Authority albeit that it is done with the cooperation of the Authority.

"Therefore, contrary to the suggestions that have been made, the Authority has close ongoing dialogue with the Bermuda Police Service and collaborates actively with them in combating financial crime, and has from time to time submitted suspicious activity reports as provided for in the proceeds of crime legislation.

"The Authority is unable however, to discuss specific cases because of the strict confidentiality requirements imposed on it by statute. Nor can the Authority make mention of any cases in which it has collaborated with the police or where it has filed suspicious activity reports as all these matters are confidential."