A new financial intelligence agency to assist in rooting out money laundering or terrorism financing in Bermuda will soon be up and running.

As the Island works to strengthen its reputation as a responsible offshore financial jurisdiction it will create a new agency that will have summary powers to put a temporary freeze on bank accounts and order documentation checks if it receives a report of suspicion regarding money laundering or terrorism financing within the financial sector.

The independent quango, which will report directly to the Minister of Justice, will act as a “buffer” between financial institutions and the Police service’s Financial Investigations Unit.

Details of how the Financial Intelligence Agency (FIA) will work and what powers it will possess were outlined by Bermuda Monetary Authority’s director of legal and enforcement services William Kattan at the Society of Trust and Estate Practitioners conference held in the Fairmont Hamilton Princess Hotel on Friday.

Mr. Kattan said it was hoped the new agency would come into being this year.

“As Bermuda becomes more successful as an offshore financial centre more is expected of it by the international community and the companies doing business in Bermuda.

“The days of the light-touch regulation are long gone. Bermuda is no longer a small player in the global financial services industry.”

When the International Monetary Fund (IMF) visited Bermuda in 2003 it identified deficiencies in the area of identifying the proceeds of crime and the financing of terrorism. That report was published in 2005.

The IMF is due to return to the Island this May to carry out another inspection. One of the new things it will find is the FIA - or at least its imminent formation, Mr. Kattan told the conference.

The independent FIA will have a board of directors appointed by the Minister of Justice.

Mr. Kattan said the FIA should not be confused with the Financial Investigations Unit (FIU).

Whereas the FIU can investigate, collect evidence and prosecute, the new intelligence agency is an organisation that will receive confidential reports from financial institutions and look into them to see if there is something that requires the FIU to become involved and investigate.

The intelligence agency will only concern itself with alleged money laundering or terrorism financing, and its remit is limited to banks and deposit companies.

“The FIA would operate as a buffer between the commercial sector and the law enforcement authority in charge of crime investigations and prosecutions,” said Mr. Kattan.

“The rationale is financial institutions facing problematic transactions or relationship but without hard evidence of the fact that such a transaction involved criminal activity might therefore be reluctant to disclose that information directly to a law enforcement agency out of concern that their suspicions may become an accusation that could be based on the wrong interpretation of facts.

“The FIA will then substantiate the suspicion and pass on to the FIU. It is also thought the financial institutions would be more confident about disclosing information if they know that dissemination would be limited to cases of money laundering and financing of terrorism.”

To enable the FIA to perform its functions it will be given limited summary powers to freeze accounts and obtain information without having to apply to a court for a warrant.

Mr. Kattan said: “A notice served on bank will require the bank not to make any funds available to a particular person for a period not exceeding 72 hours, this is a necessary stop-gap that would give the FIA sufficient time to conduct its inquiries to enable it to make a determination.”

And he added: “Critical to the success of the FIA is the statutory obligation of confidentiality. So any information to the FIA must not be disclosed without the consent of the person who provided the information or the person to whom the information is received.”

However, there will be limited disclosure where necessary to investigating authorities such as the FIU in Bermuda or similar organisations overseas, and to the Bermuda Monetary Authority and Finance Ministry.

The STEP conference also featured sessions on proposed legislative changes affecting trustees in Bermuda, the future of the trust industry on the Island and benchmarking.

Amongst the speakers at the event, which had GAM as its main sponsor, was Kelvin Hastings-Smith of Appleby Hunter Bailhache, Alec Anderson of Conyers Dill & Pearman and Barbara Houser, a family office advisor from New York.