15.2 Factual assessment
15.2.1 Legislation
15.2.1.1 Introduction
Bermuda has two pieces of legislation that relate
to money laundering, namely:
- the Proceeds of Crime Act 1997; and
- the Criminal Justice (International Co-operation)
Act, 1994.
The PCA encompasses both drug trafficking and all
crimes money laundering.
A Bill to amend the PCA has been enacted but not
yet brought into force. We have considered the provisions of this
Bill for the purposes of our Review.
15.2.1.2 Proceeds of Crime Act 1997
15.2.1.3 Offences
The PCA was enacted to implement the drug trafficking
aspects of the Vienna Convention in Bermuda. The following money
laundering offences were created by the PCA:
- concealing or transferring the proceeds of criminal
conduct (Section 43);
- assisting another to retain the proceeds of criminal
conduct (Section 44);
- acquisition, possession or use of proceeds of
criminal conduct (Section 45); and
- tipping off (Section 47).
The PCA defines criminal conduct as drug trafficking
offences and "relevant offences". There is a Schedule
of relevant offences that includes most offences that could result
in significant pecuniary gain, including corruption, fraud, counterfeiting,
stealing and forgery. Criminal conduct is also limited to an act,
or omission that would constitute drug trafficking or a relevant
offence had it occurred in Bermuda. This concept is known as "dual
criminality".
The mens rea for the above offences is as
follows:
- the offence of concealing or transferring the
proceeds of criminal conduct: "knowing or having reasonable
grounds to suspect" that any property is or represents another's
proceeds of criminal conduct;
- the offence of assisting: "knowing or suspecting"
that the person assisted is or has been engaged in criminal conduct;
and
- the offence of acquisition, possession or use:
"knowing" that the property is the proceeds of criminal
conduct.
15.2.1.4 Other provisions of PCA
Sections 9 - 16 of the PCA enable the Court to confiscate
the proceeds of drug trafficking and relevant offences and Sections
27 - 30 give the Court the power to make restraint orders and
charging orders.
Sections 53 and 55 of the PCA establish procedures
for registering at Court and enforcing foreign confiscation orders
made by the Court of a designated country or territory. The list
of designated countries and territories is comprehensive.
The PCA also provides for production orders (sections
37 and 38) and search warrants (section 39).
Section 41 of the PCA contains a provision by which
the police can obtain a "monitoring order" under which
a bank can be directed to give the police information obtained
by the institution about transactions conducted through an account
held by a particular person with the bank. This power, which is
not contained in the UK legislation, enables the police to monitor
a specific account over a period.
Under section 42, where a production order or a monitoring
order has been made, the PCA contains provisions which make it
an offence to disclose that fact if such disclosure is likely
to prejudice the investigation into the criminal conduct or is
intended to reveal the existence of the monitoring order.
Section 50 of the PCA enables a police officer to
seize and detain cash which is being imported into or exported
from Bermuda and which the officer has reasonable grounds for
suspecting represents the proceeds of criminal conduct or is intended
for use in criminal conduct.
Sections 45 and 46 of the PCA provide for the reporting
of suspicious transactions to a police officer. The section provides
that if a person makes a disclosure to a police officer:
- that disclosure shall not amount to a breach
of any restriction on disclosure of information imposed by statute
and shall not give rise to any civil liability; and
- provided the disclosure is made in accordance
with the section, he does not commit an offence in respect of
any act done in contravention of the section.
The offences under the PCA apply to "persons".
A "person" includes an individual and a corporate body.
Therefore both may commit offences under the PCA.
Section 58 of the PCA imposes a duty of confidentiality
on a police officer in respect of any information or matter which
he has obtained in the performance of his duties or the exercise
of his functions under the PCA. No such information may be disclosed
except in the performance of his duties or the exercise of his
functions or when lawfully required to do so by any court or under
the provisions of any enactment.
Section 49(1)(c) provides for the introduction of
guidance notes for the prevention of money laundering.
15.2.1.5 The Proceeds of Crime (Amendment)
Act 1999 ("PCAA")
The PCAA has been passed but has not yet been brought
into force. If brought into force, the PCAA will amend the PCA.
This Act changes the definition of "relevant
offence" to mean all indictable offences, with the exception
of drug trafficking offences (which are already separately covered
in the PCA).
The PCAA originally contained a restriction on the
extent of the scope of the PCA as it required that the proceeds
of an offence committed abroad must be brought to Bermuda within
three years of the act being done. We have been advised that this
limitation will be removed and this amended provision has already
been introduced for enactment during the current expression of
Parliament. We support this decision.
15.2.1.6 The Criminal Justice (International
Co-operation) Act 1994
The CJICA enables Bermuda to co-operate with other
countries in criminal proceedings and investigations and, in so
doing, gives effect to the mutual legal assistance provisions
of the Vienna Convention. This is discussed further in the section
on international co-operation.
The CJICA also provides for the enforcement of overseas
forfeiture orders in drug trafficking cases.
15.2.2 Regulations
The following regulations and orders have been made
and issued under the PCA:
- the Proceeds of Crime (Money Laundering) Regulations
1998 ("PCMLR"); and
- the Proceeds of Crime (Designated Countries and
Territories) Order 1998.
15.2.2.1 PCMLR
The PCMLR apply to regulated institutions, including
voluntarily regulated institutions.
The definition of regulated institutions is relatively
wide, the notable exceptions being:
- investment businesses exempted from the Investment
Business Act 1999; and
- persons providing company formation and management
services.
Essentially, the PCMLR requires regulated institutions
to establish and maintain procedures concerning client identification,
record keeping, internal reporting and training and the appointment
of a compliance officer.
There is no requirement under the PCMLR for a regulated
entity to verify the identity of customers with whom it had a
business relationship at the time the regulations came into force.
Section 8 of the PCMLR provides that a person who
carries on business without complying with the requirements of
the regulations commits an offence. In determining whether a person
has complied with the requirements of the PCMLR, the Court can
take account of any relevant guidance issued by the National Anti-Money
Laundering Committee.
The PCMLR do not cover the recruitment of employees
or the need for an audit system to assess compliance with the
regulations.
15.2.2.2 The Proceeds of Crime (Designated
Countries and Territories ) Order 1998
This Order details those jurisdictions whose confiscation
orders Bermuda will enforce (pursuant to sections 53 and 54 of
the PCA) and in favour of which restraint and charging orders
will be issued.
15.2.3 Guidance Notes
Guidance Notes on the Prevention of Money Laundering
were issued by the National Anti-Money Laundering Committee under
section 49 of the PCA in January 1998.
The Guidance Notes apply to all regulated institutions.
They are not mandatory but they are designed to represent good
practice and draw extensively on the Guidance Notes issued in
the United Kingdom and Guernsey.
Adherence to the Guidance Notes is taken into account
in any assessment of whether a breach of the provisions of the
regulations has occurred.
The Guidance Notes cover areas such as customer verification,
recognising and reporting suspicious transactions, keeping records
and staff training.
In respect of introductions from third parties, no
verification is required if the introduction is from a regulated
person in a jurisdiction applying equivalent standards to those
of Bermuda. Whilst such introducers are required to confirm that
they have verified the identity of their client, there is an exception
for clients who were existing clients of the introducer prior
to 30 January 1998.
15.2.4 Fiscal offences
Tax crime will be a predicate offence if it falls
within the definition of "criminal tax evasion" in Section
37 of the Taxes Management Act 1976 as amended by the Taxes Management
Amendment Act 1999, which has been passed but is not yet in effect.
Criminal tax evasion is defined as any wilful act
by a person with intent to defraud where:
(a) that person knows that a substantial
amount of tax would otherwise be due; and
(b) the conduct involved constitutes a systematic
effort or pattern of activity designed to falsify material records
to the relevant authorities.
Criminal tax evasion will be the only indictable
tax offence in Bermuda and therefore the only fiscal offence where
co-operation can be provided under the PCA.
Other tax offences are not indictable and therefore
do not fall within the ambit of the PCA.
15.2.5 Anti-money laundering - framework,
system and procedures
15.2.5.1 Reporting Authority and Financial
Investigations Unit
All reports of suspicious transactions are reported
to the Financial Investigation Unit ("FIU"). The FIU
and the Fraud Investigation Unit together comprise the Commercial
Crime Department of the Bermuda police service.
The FIU was set up to administer the relevant provisions
of the PCA and the PCMLR.
The FIU staff comprises three police officers, a
Detective Inspector, a Detective Sergeant and a Detective Constable.
The FIU budget is included in the overall police budget. The FIU
is based on the UK model. A further officer has been appointed
and joined the Unit in early May 2000. However, according to the
FIU, the current volume of work may require additional resources
beyond this.
Suspicious activity reports ("SARs") are
made to the FIU on a prescribed form (in urgent cases the information
may be telephoned or faxed). The FIU then issues an acknowledgement
and, where appropriate, gives consent to continue with the transactions
until further notice.
The FIU may seek additional information but will
not approach the customer unless criminal activity has been identified.
The number of SARs for 1998 and 1999 are as follows
(no earlier figures are available as there were no legislated
reporting requirements prior to 19 January 1998).
