Bermuda Corporate Insurance Brief: market insights

Date published

08/29/2018

Services

Sectors

Locations

Register of company bye-laws

In line with the Financial Action Task Force’s (FATF) 2012 Recommendations (Revised Standards), in particular Recommendation 24, a draft consultation paper was published by the Registrar of Companies seeking feedback on legislative changes proposed by the Premier and Minister of Finance, according to which the bye-laws of all companies registered in Bermuda are to be filed electronically with the Registrar of Companies.

The consultation period expired on 23 February 2018. Changes were implemented by the Companies Amendment Act 2018 and came into force on 21 March 2018. As a result of the changes, every company limited by shares or having a share capital hasd until 21 September 2018 to file with the Registrar of Companies details of the provisions in its bye-laws providing for: the transfer of shares and the registration of estate representatives of deceased shareholders; the duties of the secretary to the company; and the number of members required to constitute a quorum at any general meeting of the members of the company. The information will be held by the Registrar but will not be publicly available.

The International Sanctions (Policing and Crime Act) Amendment Regulations 2017 and other sanctions-related developments

The International Sanctions (Policing and Crime Act) Amendment Regulations 2017 came onto force on 4 December 2017. They amend the International Sanctions Regulations 2013 by providing for automatic implementation in Bermuda of Orders of the UK Privy Council, when scheduled to the Regulations, whether or not the Order specifically states that it is extended to Bermuda.

The Regulations bring into force in Bermuda the UK Policing and Crime Act (Financial Sanctions) (Overseas Territories) Order 2017. Under the UK Policing and Crime Act 2017, HM Treasury has the power to create a temporary financial sanctions regime to implement a regime imposed by a new UN Security Council Resolution. Such regulations cease to have effect when the EU implements the UN Security Council Resolution or after the end of a default period. The International Sanctions (Policing and Crime Act) Amendment Regulations 2017 provide for such temporary regimes to be extended to Bermuda.

On a related note, the Proceeds of Crime (Miscellaneous) Act 2018 has clarified the jurisdiction of the BMA to monitor regulated financial institutions and take effective measures to secure their compliance with international sanctions obligations.

Roll-out of the anti-money laundering/anti-terrorist financing supervisory regime to persons carrying on financial guarantee business – insurers excluded

Earlier this year, the BMA consulted on proposed legislative amendments that would add entities who carry on “financial guarantee” business to the AML/ATF supervisory jurisdiction of the BMA.

Trade finance, including lending, factoring, financial guarantee and related business activities, have been identified by the FATF as prone to abuse in facilitating money laundering.

Entities carrying on these activities in Bermuda have hitherto not been required to comply with the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 (the 2008 Regulations), unless they were a “regulated financial institution” (RFI) by virtue of being licensed under the Banks and Deposit Companies Act 1999 or by virtue of being insurers or brokers of direct life insurance business or insurance managers licensed under the Insurance Act 1978. Insurers carrying on solely general (P&C) business, for example, are not subject to the 2008 Regulations. That would have changed had an unqualified reference to financial guarantee business been added to the relevant definition of a RFI.

As was announced at the end of May 2018, the BMA has concluded that financial guarantee business carried on by P&C insurers is sufficiently low-risk not to warrant the addition of such insurers to the BMA’s AML/ATF supervision just on the basis that they carry on financial guarantee business. Thus, while the Proceeds of Crime (Miscellaneous) (No. 2) Act 2018, which was passed by the House of Assembly and Senate in July 2018, includes “financial guarantee” business on the list of activities that render a person who carries them on a RFI under the Proceeds of Crime Act 1997 (and thus a person subject to the 2008 Regulations), it excludes such business when carried on by a person registered as an insurer under the Insurance Act 1978.

This will no doubt come as a relief to P&C insurers. However, such insurers should continue to monitor the position carefully, pending the outcome of Bermuda’s FATF review this year.

The Proceeds of Crime (Miscellaneous) (No. 2) Act 2018 will come into operation when gazetted.

It should be noted that that act adds other insurance-related activities, including the “underwriting and placement of life insurance and other investment related Insurance”, to the list of financial activities that render a person carrying them on an RFI. Whether that will be calibrated in due course, to exclude, for example, life reinsurance business activities, remains to be seen.

Update – revised Statement of Principles and Guidance on the BMA’s exercise of ATF/AML-related enforcement powers

The BMA has published an “Enforcement Guide” encompassing a “Statement of Principles and Guidance on the Exercise of Enforcement Powers” under the Proceeds of Crime (Anti-Money Laundering & Anti-Terrorist Financing Supervision and Enforcement) Act 2008 (SEA), following the addition to that act of a wide range of new disciplinary and enforcement powers in August 2018.

The Guide constitutes a single, unified Statement of Principles on the BMA’s exercise of its enforcement powers. It replaces the following documents, which no longer have effect:

  • The 2010 ‘Statement of Principles on the Use of Enforcement Powers – Proceeds of Crime (Anti-Money Laundering & Anti-Terrorist Financing Supervision and Enforcement) Act 2008’, and
  • The 2012 Statement of Principles on the Use of Enforcement Powers.

Among other things, the amendments to the SEA passed in August increased the maximum civil penalty that can be imposed by the BMA for AML/ATF-related breaches from BD$500,000 to BD$10 million and added powers to restrict or revoke licences (something that could, in practical terms, previously be done only if the AML/ATF-related breach represented non-compliance with minimum requirements under the Insurance Act 1978) and added powers to publicly censure RFIs.

On the exercise of powers to publish decisions to sanction an RFI, the Guide states that the BMA will consider whether it is in the public interest not to publish its decision and that the BMA will consider its regulatory objectives and the application of enforcement principles and the facts matters and circumstances that led to the enforcement action. The BMA will consider the circumstances of each case, but it will usually publish all enforcement actions, including the name of the entity involved.

This appears to be a slight retreat from an announcement that had been made in an annual report in 2016 that indicated that, as a matter of general policy, all decisions would be published.

The Guide should be compulsory reading for all Insurance Act RFIs.

Read other items in the Corporate Insurance Brief - October 2018