Digital Asset Business FAQ's (2019-06-20)

Summary

This is a Frequently Asked Questions notice issued by the Bermuda Monetary Authority explaining how the Digital Asset Business Act 2018 licensing regime works. It is aimed at persons intending to apply for, or already holding, a Digital Asset Business (DAB) licence and summarises licence types, application process, AML/ATF and sanctions documentation expectations, and reporting officer requirements.

• Licence types: Class F is a full, non-expiring licence subject to ongoing supervisory visits; Class M is a temporary sandbox-style licence (typically six months to a year) with business restrictions such as customer numbers, transaction volume, asset types or capital amounts.
• Activities requiring a licence: Issuing, selling or redeeming digital assets; operating as a payment service provider using digital assets; operating an electronic exchange; providing custodial wallet services; or operating as a digital asset services vendor.
• Physical presence: Applicants must have a physical presence (Head Office) in Bermuda to obtain a DAB licence.
• AML/ATF and sanctions documentation: Applicants must submit AML/ATF policies and procedures, sanctions policies and procedures, a business ML/TF risk assessment, and a customer ML/TF risk assessment methodology as part of the application.
• Outsourcing disclosures: Where AML/ATF or sanctions functions are outsourced, the company must identify the outsourced provider, describe the outsourced functions, provide service level agreements, evidence of monitoring, and confirmation of the outsourced party's compliant AML/ATF systems.
• Compliance Officer and MLRO: The applicant must appoint a managerial-level Compliance Officer and a Money Laundering Reporting Officer (who may be the same person), each with authority to access records and demonstrate adequate training.
• Suspicious activity reporting: The MLRO must file Suspicious Activity Reports with the Financial Intelligence Agency electronically via the GoAML system, and both the company and MLRO must register with the FIA to do so.

The FAQ also notes a typical four-week licence processing turnaround, that a DAB licence is not required before conducting an Initial Coin Offering, and that pre-application meetings with the Authority's Fintech unit are encouraged though not mandatory.

Key obligations

• Applicants must maintain a physical presence (Head Office) in Bermuda to obtain a DAB licence
• Applicants must submit AML/ATF policies and procedures demonstrating compliance with the Proceeds of Crime (AML/ATF Financing) Regulations 2008
• Applicants must submit sanctions policies and procedures demonstrating compliance with the International Sanctions Regulations 2013
• Applicants must provide a business ML/TF risk assessment covering customer, geographic, delivery channel and product/service risk pillars
• Applicants must provide a customer ML/TF risk assessment and a written methodology for ongoing customer risk-rating monitoring
• Where AML/ATF or sanctions functions are outsourced, the company must disclose the outsourced provider's identity, the functions outsourced, service level agreements, monitoring evidence, and the outsourced party's compliance policies
• The applicant must appoint a managerial-level Compliance Officer with authority over AML/ATF policy oversight and record access
• The applicant must appoint a Money Laundering Reporting Officer registered with the Authority
• The MLRO must file Suspicious Activity Reports with the FIA electronically via the GoAML system, and the company and MLRO must register with the FIA

Applies to

Digital Asset Business (DAB) applicants and licensees, Class F licensees, Class M licensees, Regulated Financial Institutions (RFIs)

Deadlines

• four weeks: Typical turnaround time for the Authority to process a DAB licence application from submission
• six months to a year: Typical duration of a Class M (sandbox) licence before expiry or extension review