• legislative amendment to allow the introduction of on-site inspection for standard and institutional schemes;

• the inclusion of limited partnerships acting as a collective investment scheme within the regulatory scope;

• the introduction of further regulation for standard schemes; and

• further enforcement powers for the BMA.

We are aware that the BMA is looking to address a number of these weaknesses and we welcome this.

1.4.7  Stock Exchange

The BSX is operating broadly in line with international standards. There is however a need to introduce on-site inspection visits.

1.4.8  Companies

The Bermuda system of notification and vetting of proposed beneficial ownership puts it at a high level of compliance with good practice in this area, as it substantially exceeds the minimum requirement that the beneficial owner of a company can be identified.

Furthermore, in a wide range of other areas relating to companies, Bermuda meets the requirements of good practice. Nevertheless, as is the case in any system, some enhancements are still necessary, and our principal recommendations in this area are:

• the introduction of a capability to disqualify a person from acting as director of a Bermudian company;

• that the details of directors are submitted to the BMA and are subject to the same vetting process as beneficial owners; and

• that the names of directors should form part of the publicly available information held at the companies registry.

1.4.9  Company service providers

Bermuda operates a very conservative policy in respect of company formation. This is evidenced both by the requirement to notify the BMA of the proposed beneficial owners of companies and by the restriction on those who can prepare memoranda of association for remuneration to lawyers and accountants.

In general we consider Bermuda's approach to this area to represent good practice, ahead of many onshore and offshore centres.

Nevertheless, we consider that there are certain minor weaknesses in the Bermuda model which need to be addressed in order for the system to be fully robust against abuse. In particular, if Bermuda chooses not to introduce legislation covering those who are engaged in company service provision, the professionals who are permitted to undertake this activity must be subject to an enforceable code of practice. They should also be subject to the anti-money laundering regulations in respect of this activity.

1.4.10  Partnerships

We are of the view that, with some minor exceptions, the legislation and systems in place in Bermuda concerning limited partnerships meet good practice.

Our principal recommendations to overcome these weaknesses are:

• that where the accounting records of a limited partnership are not kept at its registered office, the registered office should maintain a written record of where they are kept; and

• that the Registrar of Companies (who is also responsible for the registration of limited partnerships) should have enforcement powers to:

(1)  apply to the courts for the dissolution of a partnership on public interest grounds or on grounds of fraud or insolvency; and


(2)  apply to the courts for the appointment of an inspector to investigate the activities of a limited partnership.

1.4.11  Trusts

Trust legislation in Bermuda is similar to the trust legislation in a number of other jurisdictions. In general, we do not consider that there are any features of the Trustee Act that are likely to lead to trust structures in Bermuda being considered particularly attractive to those wishing to engage in criminal conduct.

As a general point, rather than one specific to Bermuda, we recommend that legislation is amended to prevent the use of so-called "flee" clauses in trust documents to frustrate legitimate creditors or to prevent regulatory or criminal investigation.

1.4.12  Trust service providers

Whilst the existence of legislation relating to trust service provision is a further positive feature of Bermuda's regulatory regime and addresses many areas of good practice, we agree with the BMA that the current legislation regarding trust service providers is in need of enhancement and welcome the fact that it is working on proposals for new legislation which will fully comply with standards of good practice.

As part of this legislative update there is a need to address the joint responsibility for licensing and regulation which currently exists. Furthermore, attention needs to be paid to the establishment of a more robust application procedure.

Whilst trust service providers are required to comply with rules for "know your client" as set down in the anti-money laundering guidance notes, there is a need to adopt a more general code about practices to be adopted together with the capability to enforce such a code and the ability of the BMA to access client files where appropriate.

1.4.13  International co-operation

Bermuda has a strong legislative base for international co-operation. There is, however, a need for a number of specific improvements. The most important of these is an increase in regulatory ability to assist foreign regulators in investigations of Bermuda persons or entities.

1.4.14  Anti-money laundering

Bermuda has a significant level of anti-money laundering provisions in place. The legislation, regulation and the Guidance Notes taken together are comprehensive and contain most of the material and cover most of the issues that we would expect to find in a jurisdiction that is fully compliant with international standards. We consider that this is positive evidence of Bermuda's commitment to the prevention of money laundering.

There are a few other areas where we consider that enhancements are required if Bermuda is to fully comply with international standards. The principal enhancements required are:

• the scope of those covered by the anti-money laundering regulations needs to be extended; and

• the legislation needs to be slightly amended to ensure full international co-operation with other law enforcement bodies can be provided.