Bermuda regulatory update Q3 2024

Financial sanctions updates

Financial sanctions have been published by the BMA for: Belarus: the Shadow Fleet (Russian ships engaged in illegal operations for the purposes of circumventing sanctions, evading compliance with safety or environmental regulations, avoiding insurance costs, or engaging in other illegal activities); ISIL (Da’esh) and Al-Qaida; Iran; the Russian regime, including named ships; OFSI advisory on North Korean IT workers; and the Democratic People’s Republic of Korea.

Investment business legislation

Amendments to the Investment Business Legislation:

Investment Business (Recognised Bodies Recognition Requirements) Regulations 2024 require that:

• The BMA must be satisfied that every applicant meets the recognition requirements set out in paragraph (2) before designating the investment exchange or clearing house as a recognised body, pursuant to section 67(1) of the Investment Business Act 2003.
• These requirements include:
  1. Appropriate corporate governance arrangements
  2. Adequate internal systems and controls
  3. An appropriate risk management framework
  4. Adequate rules and procedures
  5. Adequate capital and liquidity
  6. Evidence of adequate insurance to cover the risks inherent in its operations, commensurate with the nature and scale of the recognised body’s activities
  7. Adequate record-keeping arrangements, including but not limited to transaction recording
  8. Where arrangements are outsourced, an appropriate framework to manage and monitor such arrangements

The Investment Business (Prudential Standards) (Recognised Bodies) Rules 2024 require the following:

• Minimum capital requirement
• Capital must take a specified form
• Liquid asset requirement
• Notification to the Authority in cases where an entity has breached, or has reason to believe it will breach, any applicable capital or liquidity requirement
• Half-yearly return: under section 73(9) of the Act, a recognised body must file half-yearly returns electronically, including the information specified in subparagraph (3) of this document, as well as details outlined in the Schedule to these Rules, which is published separately on the Authority’s website

Digital Asset Business (“DAB”) update

The following content has been added to the BMA’s website for DAB:

Thematic review:

• The purpose of thematic reviews is to systematically gather comprehensive, market-wide data on key operational and regulatory aspects within a defined sector.
• The data collected may aid in the development of best practices that promote compliance with the DAB regulatory framework across all market participants. As a result, all DABs are required to complete the thematic review.

Consultation paper - Bermuda Monetary Authority Act 1969: General powers and fee-related changes

Stakeholders were invited to submit their feedback on the proposals outlined in the consultation paper by August 16, 2024.

The proposals include:

• The introduction of a fee for applications seeking a recognition certificate
• An increase in application and annual fees for investment providers licensed to offer Over-the-Counter (“OTC”) leveraged products to retail clients
• A processing fee for notifications of changes for registered Professional Class B funds
• A requirement for registered Professional Class B funds to obtain prior approval for changes to directors or service providers
• Revised AML/ ATF registration fees for non-licensed persons

Advisories, updates, and notices

AML-ATF Ministerial Advisory 2/2024 (dated July 8, 2024)

• Requirement to apply Enhanced Due Diligence (“EDD”) for higher-risk jurisdictions, based on updated Financial Action Task Force (“FATF”) statements regarding jurisdictions with strategic deficiencies in their AML/CFT regimes, published on June 28, 2024 (see: High-Risk Jurisdictions subject to a Call for Action - June 2024 and Jurisdictions under Increased Monitoring - June 2024).

Regulatory Update – April to June 2024 (published on July 31, 2024). See Regulatory updates on the BMA website.

Notice: Richmond Corporate Services Ltd’s licence has been revoked, and the company is no longer permitted to carry on corporate service provider business in or from Bermuda. See Notices on the BMA website.

FATF updates

Update on jurisdictions’ compliance with FATF’s Recommendation 15 (see Virtual Assets: Targeted Update on Implementation of the FATF Standards on VAs and VASPs:)

• On July 9, 2024, the Financial Action Task Force (“FATF”) published its fifth update on jurisdictions’ compliance with Recommendation 15, which applies anti-money laundering (“AML”) and counter-terrorist financing (“CFT”) measures to new technologies, including virtual assets (“Vas”) and virtual asset service providers (“VASPs”).
• This latest update outlines the requirement for countries to conduct a national risk assessment (“NRA”) to identify, understand, and assess the risks associated with VAs and VASPs. It also mandates that VA activities and VASPs be subject to adequate regulation and supervision, including appropriate, risk-based supervisory inspections of the VASP sector.

Deadlines for Q4 2024

• BMA: December 31, 2024 – Statement of Compliance for funds (for entities with a June year-end)
• Registrar of Companies (“RoC”): December 31, 2024 – Economic Substance Declarations (for in-scope entities with a June year-end)

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