14.10 Issues and recommendations
14.10.1 Introduction
Bermuda has a strong legislative base for international
co-operation. There is, however, the 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.
Our specific recommendations for improvement are
detailed below.
14.10.2 Co-operation between regulatory authorities
14.10.2.1 Scope of existing gateways
The Guidance Notes require that the statutory gateways
should extend to client information. The gateway in the BMA Act
is deficient and, in this respect, the BMA Act does not comply
with international standards. We note, however, that it may be
possible for the BMA to pass client information through the BDCA
to a foreign banking regulator, as the BDCA does not contain the
same restriction on the disclosure of client information.
We support the proposal of the BMA to make provision
in specific regulatory statutes to enable the BMA to disclose
client information to foreign regulatory authorities through the
gateway. It is acceptable for the disclosure of client information
to be restricted in accordance with regulatory need and to be
subject to strict conditions.
As stated, the IA does not contain any gateways.
As the BMA is not the regulator under the IA, the gateway in the
BMA Act does not assist. We recommend, therefore, that gateway
provisions are inserted into the IA.
14.10.2.2 Compulsory powers
We understand that the Model Compulsory Powers Ordinance
was developed by the UK and discussed with the OTs at a number
of Attorney-Generals' conferences. It is designed to provide OT
regulators with powers to compel the production of information
from both regulated and unregulated individuals and entities in
order to satisfy a request for assistance made by a foreign regulator.
As regulatory requests are civil rather than criminal, they cannot
generally be made under legislation that enables the provision
of assistance in criminal matters.
Bermuda has not adopted this Ordinance and is of
the firm view that it has never been requested to do so and, therefore,
is taking no action towards implementing it.
As indicated, the BMA considers that it does have
some ability to assist overseas regulatory authorities by obtaining
information using its own powers. However, this does not extend
to persons who are not regulated by the BMA. In the circumstances,
we do not consider that the legislation in Bermuda provides equivalence
with the Model Ordinance.
We therefore recommend that Bermuda enact the legislation
necessary to give full equivalence with the Model Ordinance, which
we consider to represent good practice.
14.10.2.3 MOUs
The TOR require that MOUs are put in place where
necessary. As stated, Bermuda does currently have one operable
MOU, with Jersey, but finds that informal arrangements work.
There is no evidence that the lack of MOUs is preventing
or hindering the BMA from co-operating with foreign regulatory
authorities.
An MOU is required with the Cayman Islands, however,
as otherwise the BMA will not be able to undertake on-site inspections
and will not be able to exercise consolidated supervision of licensees
under the BDCA.
We recommend that the BMA continue to actively press
for an MOU with the Cayman Islands modelled on the format recommended
by IOSCO in "Principles of Memoranda of Understanding".
14.10.2.4 Confidentiality of information
received
The Guidance Notes require that regulators are able
to safeguard the confidentiality of information provided to them
by foreign regulatory or law enforcement authorities. There is
no specific statutory provision concerning this.
Confidentiality is protected in the BDCA and a general
duty of confidentiality exists under the BMA Act. We support the
BMA's view that, in order to facilitate international co-operation
and fully meet international and good practice standards, specific
provision for the confidentiality of information received from
foreign regulators and law enforcement authorities should be included
in the other relevant regulatory statutes.
14.10.3 Co-operation between law enforcement
authorities
14.10.3.1 USBTCA
As a result of the pre-existing tax convention with
the USA, Bermuda has not considered it necessary to enter into
an MLAT with the USA. However, in order to provide a consistent
approach with that taken by the Caribbean OTs, Bermuda is currently
negotiating an MLAT with the United States. No timetable is yet
in place for the completion of this process.
In the absence of an MLAT, the US law enforcement
authorities may use the same channels for seeking assistance as
the law enforcement authorities in other jurisdictions.
14.10.3.2 CJICA
We consider that the CJICA provides equivalence to
the UK Act. It also contains "ship riding" provisions.
We consider that it meets international standards.
14.10.3.3 Restrictions on the ability to
co-operate in relation to financial offences
Given that dual criminality is not required under
the CJICA, Bermuda has the ability to provide assistance on fiscal
matters.
14.10.3.4 Tracing, freezing and confiscation
of proceeds of crime
The PCA provides for the enforcement of overseas
forfeiture and confiscation orders. As indicated in the section
of this Report on money laundering, the list of designated countries
under the PCA is comprehensive.
The PCA depends upon dual criminality and therefore
does not extend to conduct which may be a financial crime in a
foreign jurisdiction but which is not an indictable offence in
Bermuda (for example, insider trading and market manipulation).
Therefore, the provisions which permit the enforcement of foreign
forfeiture orders do not apply to such conduct. This is not in
accordance with the Guidance Notes.
Compliance could be achieved by extending the range
of financial crimes in Bermuda.
The Guidance Notes also require that assets should
not be immune from seizure through asset protection trusts or
"flee" clauses. For the reasons set out in the section
of this Report on Trusts, we do not consider asset protection
trusts to be significant in Bermuda. Please see our recommendations
concerning "flee" clauses in the section on Trusts.
14.10.3.5 Co-operation between regulatory
and law enforcement authorities
Whilst the contacts between the BMA and the police
are good, in order to demonstrate compliance with good practice
guidelines there needs to be a formal communication process, whereby
the police advise the BMA of the findings or investigations relating
to fraud and money laundering.
14.10.4 Transparency in co-operation
As Bermuda prefers not to enter into formal MOUs,
we consider that, in order to fully demonstrate compliance with
IOSCO Principle 12 it should produce guidance for other regulators
on how and when it can provide assistance. The guidance should
also make clear what requirements need to be satisfied before
co-operation can be given. It would be helpful for those guidelines
to be published on the BMA website.
14.10.5 WCCIT
We consider that it would be of benefit for Bermuda
to participate in the WCCIT programme as it would both provide
additional intelligence and investigative capability.
