Letter to Stakeholders - Response to Consultation Paper - Scope of AML/ATF Activities (2018-05-23)

Summary

This is a letter from the Bermuda Monetary Authority summarising industry feedback on its February 2018 Consultation Paper on the Scope of AML/ATF Activities, and setting out the Authority's responses and resulting proposals. It does not itself enact legislation but describes how the BMA intends to proceed with amendments to widen the AML/ATF regulated financial institution definition and to the Insurance Act 1978.

• Money lending brought into scope: The Authority confirms it will widen the definition of AML/ATF regulated financial institutions to include entities carrying on money lending, financial leasing and financial guarantee activities.
• Exemption making power: An exemption power will be proposed to allow the Minister responsible for Bermuda's AML/ATF regime to grant exemptions, addressing industry concerns about vague activity descriptions.
• Financial guarantees: A blanket exemption for financial guarantees was rejected, but the Authority will recommend a specific exemption criterion for financial guarantees that constitute reinsurance.
• Retroactive application and transition: The amending law will apply retroactively to money lending activities already being carried on, subject to a grandfathering period of three months to notify the Authority and register under the Proceeds of Crime Act, plus a further six months to implement AML/ATF systems and procedures.
• Insurance Act section 19 amendment: The Authority will propose extending section 19 of the Insurance Act 1978 to restrict licensed insurers from carrying on any activity other than insurance business, except ancillary business as defined under that Act.
• Ancillary activities exemption: An exemption from AML/ATF oversight will be proposed for activities ancillary to insurance business under section 19, but only where loans or guarantees are part of an insurance agreement whose primary purpose is risk transfer for premium.

Overall, the letter signals forthcoming legislative changes rather than immediate binding rules, but flags specific transition timelines that affected entities will need to observe once the amendments take effect.

Key obligations

• Entities carrying on money lending business (once the amended AML/ATF definition takes effect) must notify the BMA and register under the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing Supervision and Enforcement) Act 2008 within a three month grandfathering period.
• Such entities must put in place AML/ATF systems and procedures within a further six months after the grandfathering period.
• Licensed insurers will be restricted under the proposed Insurance Act 1978 section 19 amendment from carrying on any activity other than insurance business, except ancillary business as defined under that Act.

Applies to

money lending institutions, insurers, licensed insurance entities, AML/ATF regulated financial institutions

Deadlines

• three months (grandfathering period): Period for entities carrying on money lending business to notify the Authority and register under the Proceeds of Crime Act once the amended AML/ATF definition applies retroactively.
• a further six months: Additional period after the grandfathering period for entities to put in place necessary AML/ATF systems and procedures to comply with the legislation.