Code of Practice - Money Service Business Act 2016

Summary

This is the Bermuda Monetary Authority's Code of Practice issued under section 7 of the Money Service Business Act 2016. It sets out the standards, duties and sound principles expected of licensed money service businesses, and is to be read alongside the Authority's Statement of Principles. Failure to comply is not itself an offence, but the Authority takes compliance into account when assessing whether a business is conducted prudently, and persistent non-compliance can trigger formal action.

The Code applies to all holders of a money service business licence under section 11 of the Act, covering activities such as money transmission, cheque cashing, issuing or redeeming drafts/money orders/traveller's cheques, payment service business, and bureau de change operations. The Authority applies a proportionality principle, calibrating expectations to each licensee's nature, scale and complexity.

• Client due diligence: Licensees must have procedures for due diligence before taking on new clients and must be able to comply with Bermuda's AML/ATF legislation, including verification, suspicious transaction reporting, KYC record keeping and staff training.
• Integrity and confidentiality: Licensees must act with integrity, deal fairly with clients, and observe confidentiality obligations regarding client information, reminding staff periodically of confidentiality duties.
• Segregation of client monies: Client monies and assets must be kept segregated from the business's own assets, held in separately labelled bank accounts where transactions are not completed immediately.
• Governance and internal controls: Licensees need competent management, clear delegation arrangements, adequate trained personnel, adequate systems and controls, and a documented business interruption recovery plan.
• Record keeping: Appropriate records, including identity of shareholders, directors, officers or partners and account records, must be kept and preserved in Bermuda.
• Fees, terms and client agreements: Fees and commissions must be transparently displayed and changes promptly communicated; written terms of business, including required disclosures, must be discussed and recorded for payment service business clients.
• Complaints handling: Client complaints must be handled promptly, with written records of the complaint, response and action taken.
• Risk management: Licensees must implement a risk management framework appropriate to their scale and risk profile.
• Disclosure of licensed status: Licensees should disclose their licensed status in all advertisements and correspondence, using suggested wording referencing the Authority.
• Cooperation with regulators: Licensees must deal openly with the Authority and other regulators, alerting the Authority to proposed material business extensions and significant developments in staffing, systems or controls.

The Code is guidance rather than statute and does not override company or common law obligations, but the Authority may revise it after publishing and consulting on proposed material changes.

Key obligations

• Licensed money service businesses must have procedures to conduct proper client due diligence before acting for any new client and comply with applicable AML/ATF legislation.
• Licensees must verify and determine the true identity of customers and retain copies of photo identification in compliance with relevant proceeds of crime legislation.
• Licensees must conduct business with integrity, deal fairly with clients, and avoid misleading clients about services provided.
• Licensees must observe confidentiality obligations over client information and remind staff in writing of confidentiality duties upon engagement and periodically thereafter.
• Licensees must keep client monies and assets segregated from business assets, using separately labelled client bank accounts where transactions are delayed.
• Licensees must maintain competent management, appropriate delegation arrangements, adequate trained personnel, and adequate systems, controls and a documented business interruption recovery plan.
• Licensees must keep and preserve appropriate records in Bermuda, including identity of shareholders, directors, officers or partners, and maintain accounting records as required by applicable law.
• Licensees must prominently display fees and commissions and promptly notify customers of any changes to charges.
• Licensees must discuss and keep a written record of terms of business with each client for payment service business, including fees, action request procedures, termination provisions, and licensing status.
• Licensees must properly handle client complaints on a timely basis and keep a written record of complaints, responses and actions taken.
• Licensees must implement a risk management framework commensurate with the scale and risk profile of the business.
• Licensees should disclose their licensed status in all advertisements and correspondence.
• Licensees should alert the Authority to any proposal to extend their business materially and to significant developments relevant to staffing or systems and controls.

Applies to

money service businesses, holders of money service business licences