Bermuda's long-standing obligation to prevent money laundering and terrorist financing has been given a fresh look this year with the passing of two pieces of legislation by the House of Assembly.

Following the International Monetary Fund review in mid-2007, Bermuda's Legislature finalised and passed The Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 (the "Regulations"), which came into effect on January 1. Also passed was The Proceeds of Crime Regulations (Supervision and Enforcement) Act 2008 (the "Act"), which established a new regulatory regime, designating the Bermuda Monetary Authority (BMA) as the supervisory body.

Institutions subject to the Regulations are now termed AML/ATF Regulated Financial Institutions and the BMA is required to monitor them for compliance with the Regulations.

The BMA is also required to establish, maintain and publish a register of AML/ATF Regulated Financial Institutions comprising "licensed persons" and "non-licensed persons".

A "licensed person" means a person who is for the time being licensed under a relevant "Regulatory Act" that includes, amongst others, those AML/ATF Regulated Financial Institutions that:

? carry on investment business within the meaning of section 3 of the Investment Business Act 2003 (the "IBA");

? carry on the business of a fund administrator within the meaning of section 2(2) of the Investment Funds Act 2006 (the "IFA");

? are the operator of an investment fund within the meaning of section 2 of the IFA.

Both the IFA and IBA are deemed by the BMA to be Regulatory Acts.

Non-licensed persons are any AML/ATF Regulated Financial Institutions that are not licensed under any of the Regulatory Acts, and include, for example, companies that may be exempted or excluded from registering under the IBA or the IFA.

AML/ATF Regulated Financial Institutions falling within the scope of the Act that are not licensed, registered or authorised under any of the Regulatory Acts are required to be registered.

The BMA is treating the term "authorised" under the IFA as being synonymous with "licensed" (as a defined term under the Regulations), and extends the authorisation granted to an investment fund to include its operator.

The IFA defines "operators" in relation to a unit trust to mean the trustee; a mutual fund company to mean the company; and a partnership fund to mean the general partner.

Consequently, Bermuda investment funds — and by extension their operators, who are either exempted under, or excluded from, the IFA — are deemed to be "non-licensed persons".

This includes, for example, the operators of an investment fund that is exempt from authorisation under section 7 of the IFA, or operators of private or excluded funds under section 6.

A financial institution that carries on investment business within the meaning of section 3 of the IBA but is exempt from licensing pursuant to the operation of the Investment Business (Exemptions) Order 2004 is similarly obliged to be registered.

Pursuant to the Regulations, AML/ATF Regulated Financial Institutions are required to appoint a reporting officer who is responsible for receiving disclosures from others within the institution that have a knowledge or suspicion that a person is engaged in money laundering, and submitting, where appropriate, a suspicious activity report to the Financial Intelligence Agency.

They must also appoint a compliance officer who is responsible for monitoring the institution's compliance with Bermuda's anti-money laundering and anti-terrorist financing legislation, related regulations and guidance notes.

While it is possible to delegate these responsibilities to another entity, delegating institutions cannot contract out of their legal responsibilities to have systems and controls in relation to the delegated activities.

In all instances, it is the delegating institution that bears the ultimate responsibility for the duties undertaken in its name.

This includes ensuring that the provider of the outsourced services has in place satisfactory AML/ATF systems, controls and procedures, and that those policies and procedures are kept up-to-date to reflect changes in Bermuda requirements.

In March 2009, pursuant to the Act (as well as the Proceeds of Crime Act 1997 and the Anti-Terrorism (Financial and Other Measures) Act 2004), the BMA produced and issued "Guidance Notes for AML/ATF Regulated Financial Institutions on Anti-Money Laundering & Anti-Terrorist Financing (AML/ATF)" (the "Guidance Notes").

The Guidance Notes set out what is expected of AML/ATF Regulated Financial Institutions and their staff in relation to the prevention of money laundering and terrorist financing.

The Guidance Notes provide a sound basis for institutions to follow in meeting their legislative and regulatory obligations by tailoring the information to meet their particular business risk profile.

The Courts of Bermuda, or the BMA, in determining whether a person is in breach of a relevant provision of any of the aforementioned Acts or Regulations relating to AML/ATF activities, is required to consider whether a person has followed any relevant guidance issued by the BMA and approved by the Minister of Justice, which includes the Guidance Notes.

Departures from the Guidance Notes, and the rationale for so doing should be documented, and institutions should be prepared to justify any departures, for example to the BMA.

The Regulations require all "non-licensed persons" to register with the BMA if they wish to carry on business activities in Bermuda.

The deadline for registration is 30 June 2009, after which it is an offence for an AML/ATF Regulated Financial Institution to continue to carry on business if it is not appropriately registered.

Any applicable companies formed after 1 January 2009 must include this application for registration as part of their standard incorporation and registration process.

Attorney George N. H. Jones is a member of the Funds and Investment Services Team within the Corporate & Commercial Practice Group at Appleby. Copies of his column are available on the firm's web site at www.applebyglobal.com.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.