Product Due Diligence Guidance Note (DABA 2018) - March 2021

Summary

This guidance note from the BMA's FinTech Department explains how digital asset businesses (DABs) licensed under the Digital Asset Business Act 2018 (DABA) should conduct product due diligence (PDD) when introducing new products or services, or making material changes to existing ones. It should be read alongside Section X (Product Due Diligence) of the DAB Code of Practice and clarifies the Authority's expectations rather than creating new legal requirements.

• Notification trigger: Section 22 of DABA requires notification to the Authority of any material change to the business, which includes changes susceptible to significantly impacting a reasonable customer, particularly to a product's inner functionalities or features.
• Filing process: The DAB must send the completed Material Change Notification Form and relevant documentation to its lead supervisor, copying FinTech@bma.bm; early discussion with the Authority before formal submission is encouraged.
• Authority review timeline: The Authority will review a duly completed Material Change Notification Form within 30 days of submission.
• Governance sign-off: Before submitting the notification form, the DAB's board or relevant internal committees should have reviewed and signed off on the intended new product or material modification.
• PDD evaluation areas: Per Section IX of the DAB Code, PDD should assess product details, intended usage, risk profile, targeted customers, risks to the DAB, risks to customers, AML/ATF considerations, marketing strategy, fee model, internal and customer training, conflicts of interest, systems requirements, staffing impact, and legal implications.
• Ongoing monitoring: After launching or changing a product, the DAB should monitor customer complaints, periodically reassess training needs, monitor compliance with sale restrictions, and periodically reassess the product's risk profile and controls.

The note is explicitly non-exhaustive; the Authority may request additional information at its discretion, and any departures from the guidance should be documented with supporting rationale. Ultimate responsibility for compliance with DABA and related codes rests with the DAB.

Key obligations

• DABs must notify the Authority of any material change to the business under Section 22 of DABA before implementing it.
• DABs must submit a completed Material Change Notification Form and supporting documentation to their lead supervisor, copying FinTech@bma.bm.
• DABs must ensure their board or relevant internal committees review and sign off on a new product or material modification before submitting the notification form.
• DABs must conduct and document a product due diligence analysis covering the fifteen specified areas (product details, risk profile, AML/ATF, fee model, training, conflicts of interest, systems, staffing, legal implications, etc.) before introducing or materially changing a product or service.
• DABs must document the rationale for any departure from this guidance.
• DABs must implement post-launch processes to monitor customer complaints, reassess training needs, monitor compliance with sale restrictions, and periodically reassess product risk profiles and controls.

Applies to

digital asset businesses (DABs) licensed under the Digital Asset Business Act 2018

Deadlines

• within 30 days of submission: The Authority's stated timeframe for reviewing a duly completed Material Change Notification Form.