Domestic drug-trafficking is one of the main sources of money laundering in Bermuda according to both public and private sectors.

That is the view of the International Monetary Fund (IMF), which published its report entitled Anti-Money Laundering and Combating the Financing of Terrorism on Tuesday, giving an overview of the current situation in Bermuda.

The findings of the study revealed that the Island is also exposed to "money laundering and financing of terrorism risks connected with activities in its large international offshore sectors, including banking, trust, investment/mutual fund services and life and investment components of the insurance sector".

The IMF report found that the view of drug-trafficking as a major contributor to money laundering may be influenced by the fact that a large proportion of suspicious activity reports (SARs) filed to date relate to suspected drug-trafficking.

But, it added, by international comparison, the incidence of drug trafficking in Bermuda is small, given the size of the population and domestic economy, and the fact that it is not known to be a significant drug producing, consuming or transit country.

The study showed that the authorities acknowledge that the international business sector is more vulnerable to money laundering, but there is no knowledge or expressed view in terms of vulnerabilities in the system to the financing of terrorism.

Relating to this, the research revealed that there also appears to be some money laundering risk in the Bermuda property market, with law enforcement investigators frequently finding local drug traffickers have invested their criminal proceeds in the market, particularly in lower cost property.

However, it also found that the buying or sale of property by non-Bermudians is tightly controlled and highly taxed via exchange control permission by the Minister of Finance and the Bermuda Monetary Authority, greatly diminishing the liquidity of the property for non-residents and appearing to limit its attractiveness to international money launderers harbouring the proceeds of overseas crime.

"The segmented market has created very sharp differentials in the value of the property reserved for domestic residents, creating strong economic incentives for ineligible parties to attempt to buy property that is restricted to residents," it concluded.

In terms of statistics, the report recorded approximately 56 agents and 204 salespersons working in the predominantly local real estate market.

Meanwhile, the figures bore out the fact that Bermuda is also home to a burgeoning international insurance industry consisting of 1,433 companies in the Class 1-4 categories, with the majority of 566 based in the Class 3 category.

Total gross premiums exceeded $105 billion, of which more than 20 percent is made up of pure long term (life) insurance and about 30 percent including life and composite insurance.

The number of captives listed for the year ended December 31, 2005, was 57, with $918 million in gross premiums and $1.9 billion in total assets, while professional re/insurers constitute 85, with $27.8 billion tied up in gross premiums and $109 billion in total assets.

The Island's four licensed banks and one deposit-taking company comprised total assets equivalent to approximately $23 billion as of June 2006, with 2005 data indicating the total off-balance sheet assets under administration to be about $51.3 billion.

Elsewhere, as of September 30, 2006, there were about 1,267 registered mutual (investment) funds in Bermuda consisting of some 2,161 investment portfolios with net asset values totalling in excess of $210 billion.

The report also found that the Bermuda Stock Exchange currently lists securities for about 72 companies and 346 investment funds, mostly offshore insurers, with a market capitalisation of around $350 billion, $2.6 billion of which comprises domestic market firms.