Annex VII - Sector-Specific Guidance Notes for Money Service Business (2022 GN, 14 February 2023)

Summary

This is Annex VII of the BMA's 2022 AML/ATF Guidance Notes, providing sector-specific guidance for Money Service Business (MSB). It supplements (but does not replace) the general Guidance Notes and explains how AML/ATF obligations under Bermuda's proceeds of crime, anti-terrorism and MSB legislation apply specifically to persons carrying on money service business.

MSB is defined to include money transmission services, cheque cashing and guaranteeing, issuing or redeeming drafts/money orders/traveller's cheques for cash, payment service business, and bureau de change activities. Persons conducting these activities to the general public are designated AML/ATF Regulated Financial Institutions (RFIs) and are generally required to be licensed by the BMA under the MSB Act, or otherwise registered as an RFI if not licensed elsewhere.

• Licensing and registration: Persons carrying on MSB must obtain a licence from the BMA under Section 8 of the MSB Act, or, if not licensed by another competent authority, must register with the BMA as an RFI under Section 9 of POCA SEA.
• Application requirements: Licence applications must include AML/ATF policies and procedures, and should also include a business risk assessment, client risk assessment and business plan.
• Senior management duties: Senior management must ensure compliance with the acts and regulations, approve AML/ATF policies and controls, identify and mitigate ML/TF risks, appoint a compliance officer and a reporting officer, screen employees, ensure adequate resources and training, and arrange independent audit/testing of AML/ATF controls.
• Ownership and employee screening: RFIs conducting MSB must screen owners, directors, managers and employees against high standards under POCR Regulation 18(1)(c), including where screening is performed by a third party.
• Group and cross-border controls: Where an MSB RFI has agents, branches, subsidiaries or group entities outside Bermuda, it must communicate its AML/ATF policies to them and ensure they apply measures at least equivalent to Bermuda's requirements.
• Customer due diligence and monitoring: RFIs must apply customer due diligence (including enhanced due diligence and cash/bearer instrument controls), conduct ongoing monitoring, and consider MSB-specific risk factors relating to customers, transactions, delivery channels, agents and third parties.
• Suspicious activity reporting and record-keeping: RFIs must comply with suspicious activity reporting obligations (with offences for failure to report and tipping-off) and maintain records in line with the general Guidance Notes.
• Penalties for non-compliance: Failure to comply with specified POCR/POCA SEA regulations is a criminal offence, with fines up to $50,000 on summary conviction or up to $750,000 and/or two years' imprisonment on indictment, and the BMA may impose civil penalties of up to $10 million.

The annex also sets out MSB-specific guidance on customer identification, agent networks, money transmission and wire transfers, and lists sector-specific ML/TF risk indicators to inform each RFI's risk-based approach. It is guidance rather than standalone law, but courts and the BMA must consider adherence to it when assessing compliance with the underlying acts and regulations.

Key obligations

• Persons carrying on money service business must obtain a licence from the BMA under Section 8 of the MSB Act, unless exempt.
• Non-licensed RFIs conducting MSB that are not licensed or registered with another competent authority must register with the BMA as an RFI under Section 9 of POCA SEA.
• MSB licence applications must include the applicant's AML/ATF policies and procedures as required by Section 10(2)(c) of the MSB Act.
• Senior management of MSB RFIs must appoint a compliance officer and a reporting officer, approve AML/ATF policies and controls, and ensure risk assessments are documented, current and appropriate.
• RFIs conducting MSB must screen owners, directors, managers and employees against high standards under POCR Regulation 18(1)(c).
• RFIs with agents, branches, subsidiaries or group members outside Bermuda must communicate their AML/ATF policies to those entities and ensure equivalent AML/ATF measures are applied.
• RFIs must establish and maintain detailed AML/ATF policies, procedures and controls adequate to prevent ML/TF.
• RFIs must apply customer due diligence, including enhanced due diligence where warranted, and conduct ongoing monitoring of business relationships and transactions.
• RFIs must comply with suspicious activity reporting requirements and avoid tipping-off, and must maintain required records.

Applies to

Money service businesses (MSB), AML/ATF Regulated Financial Institutions (RFIs) conducting MSB, MSB licensees and applicants, Agents, branches, subsidiaries and third-party service providers of MSB RFIs