• the OECD Principles are designed primarily for publicly traded corporations and are not appropriate to limited partnerships; and

• the G22 Report on Transparency and Accountability is not applicable to limited partnerships.

Due to the limited liability given to limited partners, limited partnerships are attractive offshore vehicles and, in common with all offshore vehicles, are subject to potential abuse by money launderers and other criminals. We therefore consider that good practice requires that, in the event that a limited partnership is suspected of being involved in criminal activity, the law enforcement authorities should be able to access information concerning both the limited and general partners. This approach was envisaged by the Guidance Notes.

We also consider that the business of:

• forming limited partnerships;

• providing a registered office for limited partnerships; and

• acting as a registered agent or registered representative (where applicable)

should be regarded as financial services. As such, it is important that high standards are maintained for the protection of clients. Subject to special circumstances, we consider that good practice standards require that these activities should be regulated.

• Overseas partnerships:  28

No statistics were provided on the type of business carried on by partnerships in Bermuda.

• the Limited Partnership Act 1883;

• the Exempted Partnerships Act 1992; and

• the Overseas Partnerships Act 1995.

11.3.1.1  The Partnership Act

For the reasons set out in the Introduction, we have not considered the Partnership Act in this review.

11.3.1.2  The Limited Partnership Act ("LPA")

The LPA permits the formation of limited partnerships and their registration by the Registrar of Companies ("the Registrar"). Limited partnerships consist of one or more general partners and one or more limited partners. The general partners carry on the business of the partnership and have the same liabilities and responsibilities as partners in an ordinary partnership. Limited partners contribute or undertake to contribute capital to the partnership and their liability is limited to the capital that they have contributed or undertaken to contribute. A limited partner is not permitted to take part in the management of a limited partnership. To the extent that he does, he is liable as a general partner.

A limited partnership must have a registered office and a resident representative in Bermuda.

11.3.1.3  The Exempted Partnerships Act ("EPA")

Where one or more partners in a partnership, whether ordinary or limited, is not a Bermudian or a Bermuda company, the partnership may be registered by the Registrar as an exempted partnership. We note that:

• there is no requirement for an exempted partnership to have any Bermudian partners; and a partnership with one or more non-Bermudian partners is not required to be registered as an exempted partnership.

An exempted partnership may be an ordinary or a limited partnership.

An exempted partnership:

• must have a registered office and a resident representative in Bermuda; and

• may not generally hold land in Bermuda or, subject to certain exceptions, carry on any business in Bermuda.

11.3.1.4  The Overseas Partnerships Act ("OPA")

A partnership formed under a law other than the law of Bermuda is an overseas partnership and must not carry on any trade or business in Bermuda unless registered by the Registrar under the OPA.

An overseas partnership may consist of Bermudian and/or non-Bermudian partners and may be an ordinary partnership or a limited partnership. Except as provided by the OPA, an overseas partnership is governed by the law of the jurisdiction under whose law it was formed.

An overseas partnership must have a registered office and a resident representative in Bermuda.

We have been advised by the Bermuda Government that overseas partnerships are required to give reasons for wishing to apply to be registered in Bermuda and that these reasons are carefully considered before permission is granted.

11.3.2  Regulations, rules and guidance notes

There are no rules, regulations or guidance notes concerning partnerships apart from one issued by the BMA detailing the procedure for forming a partnership and outlining the relevant Bermuda legislation.

11.3.3  The formation and registration of limited, exempted and overseas partnerships

Persons who carry on the business of forming limited, exempted or overseas partnerships, providing the registered office for and acting as the resident representative of such partnerships are not, in that capacity, regulated or subject to the Proceeds of Crime (Money Laundering) Regulations 1998. They are not, therefore, subject to the requirements contained in those regulations concerning know your customer or record keeping procedures.

However, we have been advised by the Bermuda Government that the registered offices of most limited, exempted and overseas partnerships are provided by lawyers or regulated institutions, such as banks.

The registration process for limited, exempted and overseas partnerships is broadly similar and can be summarised as follows:

• intention to form the partnership must first be advertised;

• details of all partners must be provided to the BMA which vets the general partners;

• the consent of the Minister of Finance to form the partnership must be obtained;

• if the Minister gives his consent, the partnership is registered by the Registrar; and

• Limited partnerships must have a capital of at least B$12,000.

11.3.4  Supervision - systems and procedures

11.3.4.1  Regulatory structure

Details of the structure and resources of the Registrar and Companies Registry are provided in the section of this Report on Companies.

11.3.4.2  On-going supervision

In common with other jurisdictions, there is no on-going supervision of limited, exempted and overseas partnerships.

11.3.5  Enforcement — systems and procedures

The following enforcement procedures are available in respect of limited, exempted and overseas partnerships:

• where the consent of the Minister to certain changes in particulars is not obtained, he may apply to the Court for the dissolution of the partnership;

• the Minister may appoint an inspector in respect of an exempted or an overseas partnership, but not a limited partnership; and

• certain breaches of the Acts constitute offences and are punishable by a fine.

11.3.6  Publicly available information

11.3.6.1  Information held by the Registrar

The information contained in the registers of limited, exempted and overseas partnerships maintained by the Registrar covers the following:

• in the case of a limited partnership, the names and places of residence of the general partners;

• in the case of an ordinary partnership (exempted or overseas), the names of the partners and, in the case of an overseas partnership, the addresses of the partners;

• in the case of an exempted or overseas partnership, the name of the resident representative and his address if different to that of the registered office;

• the general nature of the partnership business;

• the address, in Bermuda, of the registered office of the limited partnership;

• the date when the limited partnership is to commence and the term, if any;

• the date and amount of each capital contribution made or undertaken to be made by a limited partner; and

• in the case of an overseas partnership, the law governing the partnership and the address, outside Bermuda, of the principal place of business of the partnership.

Limited partnerships, exempted partnerships and overseas partnerships are required:

• to advertise and obtain the consent of the Minister to any change in (i) the name of the partnership; (ii) the general partners; (iii) the general nature of the partnership business; and (iv) the resident representative, in the case of an exempted or overseas partnership;

• to notify the Registrar of any change in registered particulars; and

• to send to the Registrar an annual declaration stating the general nature of the partnership business.

The registers are all available to the general public.

11.3.6.2  Information held at the registered office

The general partners of a limited partnership are required to keep a register of limited partners at the registered office which must contain the following:

• the name and address of each limited partner;

• the date upon which a person becomes or ceases to be a limited partner; and

• the amount of cash contributed or undertaken to be contributed by each limited partner as capital, together with the value of any non-cash contribution.

The register of limited partners required to be kept by the general partners of a limited partnership is open to public inspection.

11.3.7  Non-public information

An exempted partnership and an overseas partnership, whether limited or ordinary, must keep at its registered office, as a minimum, sufficient records of account to enable the financial position of the partnership at the end of each three month period to be ascertained.

• the identity of general and limited partners of limited partnerships in Bermuda has been ascertained through the usual "know your customer" procedures; and

• adequate procedures are in place to protect the interests of partnerships utilising professional service providers in Bermuda.

For the reasons set out in the following paragraphs we are of the view that, with some minor exceptions, the legislation and systems in place in Bermuda concerning limited partnerships exceed good practice standards.

We do consider that some further enforcements may be desirable and these are set out below.

11.4.1.1  Availability of information to law enforcement agencies

As set out above, a significant amount of information is required to be filed with the Registrar. This information is available to the public and therefore readily accessible to the law enforcement authorities in Bermuda.

Furthermore, a limited partnership is required to keep at its registered office in Bermuda such records of account as would enable the financial position of the partnership at the end of each three month period to be ascertained. Although these records are not available to the public, subject to Court Order, they could be accessed by the law enforcement agencies if required.

We are of the opinion that the legislative requirements prescribing the information and records to be kept in Bermuda are comprehensive and exceed good practice standards. Of course the quality of the information will be dependent upon:

• the due diligence checks undertaken with regard to partners; and

• the degree of compliance with regard to the other record keeping requirements.

These matters are addressed in the following paragraphs.

11.4.1.2  Application of know your customer and record keeping requirements

The BMA carries out the same due diligence checks on general partners as it carries out on the shareholders of companies. We have commented on enhancements that could be made to the vetting procedure in the Companies section of this report. We consider, however, that the carrying out of such checks exceeds good practice standards.

We do not, however, consider that the vetting checks undertaken by the BMA should be considered as a substitute for the due diligence checks that FATF and CFATF Recommendations require to be undertaken by professional service providers.

Persons who form limited partnerships or provide registered office or resident representative services for limited partnerships are not currently subject to any "know your customer" or record keeping requirements. We consider that in order to comply with FATF and CFATF Recommendations they should be. In the circumstances, we recommend that all persons who, for profit, form limited partnerships or provide registered office or resident representative services for limited partnerships should be subject to the Proceeds of Crime (Money Laundering) Regulations 1998 in respect of that activity.

11.4.1.3  Regulation of professional service providers

We have indicated that those who form limited partnerships and those who provide registered office and resident representative services for limited partnerships should be considered as financial service providers. We consider that, generally such service providers should be regulated. The objectives of regulation are as follows:

• the maintenance of standards generally that will protect partnerships using the service providers; and

• the maintenance of high record keeping standards so that records required to be kept at the registered office are maintained in good form so that they are of value to the law enforcement agencies, if required.

We consider that the due diligence undertaken by the BMA on general partners and the fact that the majority of service providers are either lawyers or other regulated institutions may achieve the results sought by regulation and that to require regulation of the service providers by the BMA may not add any value, despite the additional regulatory overheads.

We consider, however, that to avoid the necessity for the introduction of a scheme for the regulation of partnership service providers:

• Bermuda must ensure that all partnership service providers are subject to the Proceeds of Crime (Money Laundering) Regulations 1998 as recommended above;

• that only lawyers or other regulated entities should be permitted to provide partnership services; and

• that all limited partnerships should be required to utilise a lawyer or other regulated entity to provide its registered office and its resident representative.

11.4.1.4  Exempted and overseas partnerships

All exempted and overseas partnerships (even where they are ordinary partnerships) are subject to similar registration and other procedures as limited partnerships. We consider that this accords with good practice as these partnerships have an offshore connection. Our recommendations concerning limited partnerships also apply to exempted and overseas partnerships that are ordinary partnerships.

11.4.1.5  Other areas for improvement

There is no provision for the appointment of an inspector of a limited partnership. We consider that it should, in suitable circumstances (for example on the public interest ground), be possible for the Court to appoint an Inspector of a limited partnership and for the Inspector to have powers of dissolution.

As indicated earlier, partnerships having non-Bermudian partners may register but are not required to register as exempted partnerships. As a result, there is no vetting by the BMA of the partners of such partnerships unless they are limited partnerships. The Ministry of Finance considers that a non-Bermudian cannot be a partner in an ordinary partnership without becoming subject to the Immigration Act and that control is therefore retained. However, it must be accepted that in such cases non-Bermudian partners will still fall outside the BMA vetting procedures. We consider that it would be better for all non-Bermudian partners to be vetted by the BMA.