Bermuda's anti-money laundering efforts may have been hampered by a lack of staff and budgetary constraints in the Bermuda Police Service and in the Department of Public Prosecutions, according to the International Monetary Fund (IMF) report on Bermuda.

And the Island's authorities "have been slow in implementing a number of key recommendations from the last IMF assessment" in 2003, the report added.

Those were two of the more notable conclusions listed in the long-awaited IMF report, which was released by the Caribbean Financial Action Task Force (CFATF) yesterday.

Representatives visited the Island twice last May to assess Bermuda's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime and the report found that "there has not been much change" in relevant laws since 1998.

But the report added that legislation that was enacted shortly after the IMF visits would address a number of weaknesses identified by the IMF team. These changes included amendments to the Proceeds of Crime Act (POCA), the Financial Intelligence Agency Act and the Criminal Justice International Cooperation Act.

The report also highlighted the fact that local drug traffickers had been found to launder their ill-gotten gains by investing in local property, frequently through the use of nominees, as well as investing in further drug shipments and cars.

The Financial Investigations Unit (FIU), which is part of the Police Service "should be more adequately funded, staffed and provided with additional technical resources, including, for instance, expertise in forensic accounting".

The IMF stated that "the current volume of work impacts the effectiveness of the FIU in undertaking timely analysis and investigation. The number of staff positions allocated to the FIU is insufficient and assigning non-ML/FT duties to its Police officers places further strain on available resources".

"The legal framework for investigation and prosecution of ML is well developed and law enforcement and prosecutorial staff are highly motivated and professional," the report stated.

"However the staffing and budgetary (e.g. for training) constraints in the office of the DPP and the FIU may have contributed to a lower number of ML (money laundering) investigations, limiting their ability to carry out their AML/CFT tasks effectively.

"There have been no ML prosecutions in the last three years despite the relatively large number of SARs (suspicious activity reports). In practice, only a small number of SARs are fully investigated.

"The number of vacancies in the DPP's office should be filled, and efforts made to retain professional staff. The recruitment policy should therefore be revisited to ensure the adequacy and continuity of staff responsible for AML/CFT issues. Investigating and prosecuting AML/CFT cases should be made a priority by the law enforcement authorities, including the provision of adequate funding and staffing.

"Laws against money laundering and financing terrorism were "generally comprehensive" said the IMF, adding: "However, it is difficult to assess effectiveness of the legal framework, given that there has only been one prosecution for ML in the last five years, as well as limited ML investigations. With respect to FT, there have been no prosecutions, investigations, or SARs filed.

"The attractiveness of buying Bermuda real estate as a means of money laundering was limited for overseas drug traffickers because of tight restrictions on the local property market, the IMF found. However, the report added: "Local drug traffickers utilise the proceeds of drug trafficking to facilitate further drug shipments, as well as to acquire assets.

"Investigations related to possible confiscation orders frequently find that drug traffickers have used their proceeds to invest in local property, generally at the lower to middle end of the market and frequently through the use of nominees. Car purchases are also a common use of the proceeds of drug trafficking.

"The IMF praised financial regulator the Bermuda Monetary Authority (BMA) saying that "the integrated nature of financial sector supervision by the BMA and professionalism of its staff" was a key strength of Bermuda's supervisory regime.

The BMA's strict licensing regime had contributed to the stability of Bermuda's financial sector, "nonetheless AML/CFT supervision is still developing, particularly with regard to on-site inspections".

"The BMA also faces practical constraints in its ability to effectively conduct ongoing consolidated AML/CFT supervision, especially in the insurance sector and on a cross-border basis," the IMF added. "This will require careful resource management and increased collaboration with other key players such as external auditors and overseas regulators.

"The IMF mission added that the BMA had a broad range of sanctioning powers, but it had never used them against a financial institution for breaches of AML/CFT requirements. "The practice has been for the BMA to apply moral suasion and less formal approaches to enforcement of compliance...," the report added.

The IMF will be available on the Bermuda Goverment website, www.gov.bm, tomorrow.

The CFAFT is an organisation of 30 Caribbean region countries, which have agreed to implement common counter-measures to address the problem of criminal money laundering.Read more from the IMF report in The Royal Gazette tomorrow.