Annex I - Sector-Specific Guidance Notes for Trust Business (2022 Guidance Notes for AML/ATF Regulated Financial Institutions)

Summary

This is Annex I of the BMA's 2022 AML/ATF Guidance Notes, providing sector-specific guidance for persons carrying on trust business in Bermuda. It supplements (but does not replace) the general AML/ATF Guidance Notes, applying their requirements to the particular structures, risks and terminology of trust business, including customer due diligence, beneficial ownership identification, and monitoring of trusts and similar legal arrangements (e.g. foundations, stiftungs, fideicomisos).

• Who it covers: AML/ATF Regulated Financial Institutions (RFIs) conducting trust business under Section 9(3) of the Trusts (Regulation of Trust Business) Act 2001, including licensed trust companies and certain exempted private trust companies, unless those private trust companies use a licensed Corporate Service Provider or licensed trust business in their structure.
• Governance and controls: Senior management must ensure compliance with the acts and regulations, approve AML/ATF policies and procedures, identify and mitigate ML/TF risks, appoint a compliance officer and a reporting officer, screen staff, resource the compliance function, ensure training, and arrange independent testing/audit.
• Customer due diligence: Guidance addresses identifying customers and beneficial owners in a trust context (including settlors, trustees, protectors, beneficiaries and classes of beneficiaries), establishing source of wealth/funds, timing of CDD, simplified and enhanced due diligence, and reliance on third parties.
• Ongoing obligations: Covers ongoing monitoring of trust relationships, suspicious activity reporting to the Financial Intelligence Agency, record-keeping, and sector-specific ML/TF risk factors (e.g. cash transactions, third-party intermediaries, unusual distributions to PEPs or unsupervised charities).
• Legal effect: The Supreme Court or BMA must consider whether an RFI followed this guidance when assessing breaches of the underlying acts/regulations; 'must' denotes a direct legal requirement while 'should' denotes BMA's expectation, departures from which must be documented and justifiable.

The annex does not itself introduce new dated deadlines but reiterates continuing statutory and regulatory obligations (e.g. under POCA, POCR, ATFA and the POCA SEA) that apply on an ongoing basis to trust business RFIs.

Key obligations

• Senior management of trust business RFIs must appoint a qualified, managerial-level compliance officer to oversee AML/ATF policies, procedures and controls.
• Senior management must appoint a qualified reporting officer to receive internal disclosures and make external suspicious activity reports to the FIA.
• RFIs must establish and maintain documented AML/ATF policies, procedures and controls adequate to prevent ML/TF, and keep risk assessments current.
• RFIs must screen owners, directors, managers and employees against high standards under POCR Regulation 18(1)(c).
• Where an RFI has overseas branches, subsidiaries or group members, it must communicate its AML/ATF policies to them and ensure they apply measures at least equivalent to Bermuda's.
• RFIs must conduct customer due diligence and identify and verify beneficial owners of trusts and similar legal arrangements, including obtaining source of wealth and source of funds information.
• RFIs must conduct ongoing monitoring of trust business relationships and transactions for ML/TF risk indicators.
• RFIs must report suspicious activity to the Financial Intelligence Agency where knowledge, suspicion or reasonable grounds for suspicion of ML/TF arises.
• RFIs must maintain records in accordance with the general Guidance Notes and applicable regulations.
• RFIs must provide appropriate AML/ATF training to relevant employees.
• RFIs applying to become licensed trust businesses should include AML/ATF policies and procedures, plus a business risk assessment and client risk assessment, with their licence application.
• Departures from the guidance must be documented with a rationale that the RFI can justify to the BMA.

Applies to

Trust business RFIs (licensed trustees under the Trusts (Regulation of Trust Business) Act 2001), Exempted private trust companies (unless using a licensed Corporate Service Provider or licensed trust business), Senior management, compliance officers and reporting officers of trust business RFIs