Fraud

Regulatory provisions and authorities

1. What are the main regulatory provisions and legislation relevant to corporate fraud?

The main corporate and business fraud offences and regulatory provisions are found in the:

  • Criminal Code Act 1907 (Criminal Code).
  • Proceeds of Crime Act 1997 (Proceeds of Crime Act).

There are further offences that can apply to legal entities under the following acts, among others:

  • Banks and Deposit Companies Act 1999.
  • Bribery Act 2016.
  • Companies Act 1981 (Companies Act).
  • Investment Business Act 2003.
  • Investment Funds Act 2006.
  • Tax Management Act 1976.

Offences

2. What are the specific offences relevant to corporate fraud?

The main fraud offences are contained in Part XXI of the Criminal Code. The Code sets out general offences of fraud by corporate bodies, such as:

  • Accounting fraud.
  • Fraud and misrepresentation in connection with sales of securities.
  • Conspiring to defraud.
  • Embezzlement.

Depending on the offence, a legal entity can be liable for the conduct of its officers, directors or members acting within their actual or apparent authority or scope of employment, where the conduct was authorised or permitted (including as a result of corporate culture) by the corporate body.

There are additional offences relating to fraud and associated offences under further specific acts and regulations. These can extend to employees or agents of the legal entity. For example, under the Companies Act, if any person wilfully and knowingly makes a statement that is false in any material particular in any required return, report, certificate, book or paper or other document, they are guilty of an offence and are liable on conviction to imprisonment for a term of up to two years, a fine of two thousand dollars or both.

Fraudulent activity can also fall under offences such as money laundering under the Proceeds of Crime Act.

Enforcement

3. Which authorities have the powers of prosecution, investigation and enforcement in cases of corporate or business fraud? What are these powers and what are the consequences of non-compliance? Please identify any differences between criminal and regulatory investigations.

Authorities

The Department of Public Prosecutions (DPP) is the sole prosecutorial agency for business crimes and is responsible for public prosecutions, confiscation and conviction-based forfeiture of assets. The DPP prosecutes criminal offences and advises other governmental agencies.

The Bermuda Police Service is responsible for investigating crimes generally, while the Organised and Economic Crime team deals with the specific offences of money laundering or terrorist financing and any associated offences, including fraud.

The Bermuda Monetary Authority (BMA) supervises, regulates and inspects any financial institution within its remit (registered or licensed) that operates in or from Bermuda to ensure that all licensees operate in a sound and prudent manner in compliance with the regulatory laws, regulations, criteria and standards. Regulated institutions must have adequate policies and procedures in place to prevent them from being used to further financial crime, including fraud.

The Financial Intelligence Agency (FIA) provides intelligence to various agencies, including:

  • Law enforcement and regulatory authorities.
  • Relevant government ministries.
  • Certain international counterparties as a member of the international Egmont Group for the secure exchange of expertise and financial intelligence to combat money laundering and terrorist financing.

The Compliance Measures Act 2017 also confers powers on the Registrar of Companies to require inspection of and compliance by legal entities that are registered in Bermuda, such as companies, partnerships and limited liability companies (LLCs).

Prosecution powers

Criminal matters are referred to the DPP.

The BMA has a broad range of civil enforcement options including but not limited to:

  • Civil penalties.
  • Limitation or revocation of a licence.
  • Public censure.
  • Winding up.

Powers of interview

The BMA and police can conduct interviews. The Police and Criminal Evidence Act 2006 (Police and Criminal Evidence Act) in conjunction with Ministerial issued codes of practice and the Police (Conduct) Order 2016 set out the general police powers of interview and limitations on those powers.

Powers of search/to compel disclosure

Police powers are governed by the Police and Criminal Evidence Act and include powers of arrest, detention, search and seizure, and surveillance. In addition to police powers, the regulators and agencies such as the FIA and the BMA have powers of investigation and to require disclosure, subject to limitations relating to legal professional privilege over documents and information.

The BMA has a broad range of information-gathering powers under various statutory provisions. These include powers to:

  • Obtain information and reports.
  • Require the production of documents.
  • Enter premises to obtain information and documents.

Failure to comply and co-operate with a regulator or agency that is exercising its power is a contravention of the law.

Powers to obtain evidence

In addition to police powers such as document production orders issued by the Supreme Court, the BMA has a broad range of investigative powers under various statutory provisions. See above, Powers of search/to compel disclosure.

Power of arrest

The Bermuda Police Service exercises the power of arrest.

Court orders or injunctions

Enforcement proceedings may include injunctions or interim orders over assets. These matters are usually at the discretion of the court, and injunctive relief can be applied for and obtained within a relatively brief period of time. For example, if a matter is pursued through the civil/administrative route, the BMA can apply to the Supreme Court for injunctive relief. Injunctions can then be sought on an urgent and ex parte basis. The Court can make orders to:

  • Restrain conduct or action.
  • Compel conduct or action.
  • Secure assets and evidence.

4. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?

Various statutory acts and regulations contain individual provisions for civil or criminal sanctions. However, prosecution is the responsibility of the Department of Public Prosecutions (DPP).

The procedure for the initiation of criminal cases is set out in Part XXIV of the Criminal Code. In practice, this is generally by charging the defendant at a police station or alternatively, a warrant can be issued for the arrest.

If civil action is being undertaken, the Bermuda Monetary Authority (BMA) retains independent authority to enforce against a regulated institution. The Statement of Principles on the Use of Enforcement Powers sets out the approach used by the BMA.

5. What are the sanctions for participating in corporate fraud?

Civil/administrative proceedings or sanctions

Depending on the nature of the conduct, the Bermuda Monetary Authority (BMA) as the supervisor and regulator of financial institutions has a broad range of civil/administrative enforcement remedies available to it, including:

  • Imposition of directions.
  • Restrictions and conditions on a licence.
  • Imposition of a civil penalty.
  • Injunctions.
  • Public censure.
  • Objection of controllers.
  • Prohibition orders against individual directors and officers.
  • Revocation of licence.
  • Winding up.
  • Referral to the police.

Supervisory departments of the BMA can impose remedial actions without referral to enforcement, including:

  • Imposing directions and restrictions on a licence (in addition to the power to impose conditions on a licence).
  • Imposing penalties for late lodgement.
  • Registering an objection to a controller.

Criminal sanctions do not preclude civil penalties. If the criminal process does not result in a conviction, the BMA can publicly censure the defendant and/or make a prohibition order.

Criminal proceedings

Right to bail. Provisions for the right to bail are set out in the Bail Act 2005 in conjunction with the Police and Criminal Evidence Act. The right to bail is determined by the courts based on factors including:

  • Previous criminal history.
  • The strength of the prosecution case.
  • The circumstances of the accused.

Penalties. Penalties vary depending on the nature of the fraud, but a person can be liable on conviction by a court of summary jurisdiction to imprisonment for 12 months and on conviction on indictment to imprisonment for two years.

Civil suits

Victims of financial crime can seek redress through the civil courts. Currently, there is no Bermuda law equivalent of a US class action. However, the Bermuda courts have capacity to deal with multi-party claims.

Safeguards

6. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?

Procedural safeguards are provided for in the Police and Criminal Evidence Act. The Police and Criminal Evidence Act, the Police (Conduct) Order 2016 and its related five codes of practice govern the rights of arrested and detained persons, such as the right to have an attorney present during questioning. Administrative decisions, including those taken by courts and prosecutors, can be subject to challenge by judicial review.

The right to claim legal professional privilege is generally preserved in regulatory investigations. However, the regulators and agencies can compel the production of documents or information. Regulatory decisions are generally reviewable. The following enforcement actions taken by the Bermuda Monetary Authority carry a right to appeal to a tribunal under the relevant sector-specific tribunal regulations:

  • Revocation of a licence/cancelling of a licence registration.
  • Action against controllers and directors.
  • Prohibition orders against individual directors and officers.
  • Imposition of a civil penalty.
  • Imposition of conditions, limitations or restrictions on licence.
  • Public censure.

Any appeal must be conducted in the manner set out in the relevant sector-specific tribunal regulations.

Bribery and corruption

Regulatory provisions and authorities

7. What are the main regulatory provisions and legislation relevant to bribery and corruption?

The Bribery Act 2016 (Bribery Act) is the primary piece of bribery and corruption legislation. It received the Assent of the Governor on 6 December 2016 and came into effect on 1 September 2017. The Bribery Act applies to all Bermudians, Bermuda residents and entities incorporated or registered in Bermuda.

The Bribery Act is largely based on the UK’s Bribery Act 2010, and consolidates various existing anti-corruption laws into one clear international standard for combating bribery.

The Act defines bribery as “intending to influence the actions of a person by way of a bribe”.

The main offences under the Act are:

  • Offering, promising or giving of a financial or other advantage to another person (active bribery) (section 3).
  • Requesting, agreeing to receive or accepting of a financial or other advantage (passive bribery) (section 4).
  • Bribing a foreign public official (section 8).
  • Failure by a commercial organisation to prevent bribery (whether the offence takes place in Bermuda or elsewhere). This is subject a defence of having “adequate procedures” (section 9).
  • Failure by public officials to report bribery and corruption (section 13).
  • Interfering with the duty of public officials to report bribery and corruption (section 14).

The Attorney General and Minister of Legal Affairs have also issued guidance concerning the procedures that relevant commercial organisations should implement to prevent bribery and corruption.

8. What international anti-corruption conventions apply in your jurisdiction?

The Bribery Act is a major legislative initiative toward implementing requirements into domestic law equivalent to those of the:

  • OECD’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-Bribery Convention).
  • United Nations Convention against Corruption (UNCAC).

The UK has so far not extended these conventions to Bermuda.

Offences

9. What are the specific bribery and corruption offences in your jurisdiction?

Foreign public officials

Section 8 of the Bribery Act sets out a stand-alone offence of bribery of a foreign public official. The offence is committed where a person offers, promises or gives a financial or other advantage to a foreign public official with the intention of influencing the official in the performance of their official functions. The person offering, promising or giving the advantage must also intend to obtain or retain a business advantage by doing so. However, the offence is not committed where the official is permitted or required to be influenced by the advantage under the applicable foreign law.

A “foreign public official” includes officials, whether elected or appointed, who hold a legislative, administrative or judicial position of any kind outside Bermuda. It also includes any person who performs public functions in any branch of a foreign national, local or municipal government or who exercises a public function for any foreign public agency or public enterprise. This includes:

  • Professionals working for public health agencies.
  • Officers exercising public functions in state-owned enterprises.
  • Officials or agents of public international organisations, such as the UN, CARICOM, the EU or the World Bank.

Facilitation payments are not permitted and can trigger either the section 8 offence or, where there is an intention to induce improper conduct, including where the acceptance of such payments is itself improper, the section 3 offence of active bribery, and therefore potential liability under section 9 (see below, Private commercial bribery).

Domestic public officials

Failure by a public official to report as soon as reasonably practicable an act that could constitute an offence of bribery is an offence under section 13 of the Bribery Act.

Private commercial bribery

Under section 9 of the Bribery Act, a relevant commercial organisation is liable to prosecution if a person associated with it bribes another person with the intention to obtain or retain a business advantage for that organisation. For these purposes, a “relevant commercial organisation” is:

  • A body corporate or partnership incorporated or formed under the laws of Bermuda that carries on business in Bermuda or elsewhere.
  • Any other body corporate or partnership wherever incorporated or formed that carries on a business or part of a business in Bermuda.

The commercial organisation would have a full defence if it can show that despite a particular case of bribery it had adequate procedures in place to prevent persons associated with it from bribing. Under established case law, the standard of proof that the commercial organisation must meet to prove the defence is the balance of probabilities.

Defences

10. What defences, safe harbours or exemptions are available and who can qualify?

Relevant commercial organisations have a defence to the offence of bribery under section 9 of the Bribery Act (see Question 9), if they can show that they have put in place adequate procedures to prevent associated persons from engaging in bribery.

Section 11(3) of the Bribery Act states that in determining whether a relevant commercial organisation has committed an offence under section 9, the court will consider whether the organisation followed the guidance issued by the Attorney General and Minister of Legal Affairs and the application of its six principles:

  • Proportionality.
  • Top-level commitment.
  • Risk-assessment.
  • Due diligence.
  • Communication (including training).
  • Monitoring and review.

Additional defences are set out under section 19 of the Bribery Act, which provides statutory defences for actions taken that are necessary for the proper exercise of any function relating to the defence or security of Bermuda, or to the armed forces (Royal Bermuda Regiment or UK armed forces) when engaged on active service.

It is also recognised that there are circumstances in which individuals are left with no alternative but to make payments to protect against loss of life, limb or liberty. The common law defence of duress is very likely to be available in such circumstances.

11. Can associated persons (such as spouses) and agents be liable for these offences and in what circumstances?

A commercial organisation is liable under section 9 of the Bribery Act if a person associated with it bribes another person intending to obtain or retain business or a business advantage for the organisation. Persons are associated with a commercial organisation if they perform services for or on behalf of the organisation (section 10, Bribery Act). An associated person may be an individual or an incorporated or unincorporated body.

Section 10 provides that the capacity in which a person performs services for or on behalf of the organisation does not matter, and employees (who are presumed to be performing services for their employer), agents and subsidiaries are therefore included. However, section 10(4) of the Bribery Act makes it clear that the question as to whether a person is performing services for an organisation is to be determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between that person and the organisation.

The concept of a person who performs services for or on behalf of the organisation is intended to give section 9 broad scope so as to embrace the whole range of persons connected to an organisation who might be capable of committing bribery on the organisation’s behalf.

Enforcement

12. Which authorities have the powers of prosecution, investigation and enforcement in cases of bribery and corruption? What are these powers and what are the consequences of non-compliance? Please identify any differences between criminal and regulatory investigations.

The Bermuda Police Service (BPS) has primary law enforcement responsibility for investigating allegations involving bribery and corruption. Where regulators such as the Bermuda Monetary Authority make findings that a person has engaged in corrupt conduct, in addition to referral to the BPS, civil/administrative action may be taken against the legal entity in as far as the matter concerns the entity’s ability to carry its business in prudent manner (see Question 14). The discretion to prosecute bribery and corruption lies with the Department of Public Prosecutions.

The BPS’s powers in relation to investigation, prosecution and enforcement are the same as for general corporate and business fraud, see Question 3.

13. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?

The basis for court orders or injunctions are the same as for general corporate and business fraud (see Question 4).

Convictions and sanctions

14. What are the sanctions for participating in bribery and corruption?

Civil/administrative proceedings or penalties

Although bribery/corruption is a criminal offence, civil/administrative proceedings or penalties can apply if the Bermuda Monetary Authority (BMA) finds that a person has engaged in corrupt conduct where they are required to guard against bribery and corruption, or in relation to the Minimum Licensing Criteria that apply to most legal entities registered or licensed in Bermuda.

Criminal proceedings or penalties

Right to bail. The right to bail is the same as for general corporate and business fraud (see Question 5).

Penalties. There are significant criminal penalties for bribery offences under the Bribery Act. The failure of a commercial organisation to prevent bribery is a strict lability offence and can result in an unlimited fine. Depending on the nature of the offence, an individual is liable on summary conviction to a fine of up to BMD500,000, or to imprisonment for a term of ten years, or to both. On conviction on indictment, an individual is liable to an unlimited fine or to imprisonment for a term of 15 years, or both.

Safeguards

15. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?

The safeguards are the same as for general corporate and business fraud (see Question 6).

Tax treatment

16. Are there any circumstances under which payments such as bribes, ransoms or other payments arising from blackmail or extortion are tax-deductible as a business expense?

There are no circumstances under which payments such as bribes, ransoms or other payments arising from blackmail or extortion are tax-deductible.

Insider dealing and market abuse

Regulatory provisions and authorities

17. What are the main regulatory provisions and legislation relevant to insider dealing and market abuse?

The main insider dealing and market abuse offences and regulatory provisions are found in Part XXI of the Criminal Code. Additional offences that can apply to legal entities in these circumstances are included in further statutes, including but not limited to the:

  • Companies Act.
  • Investment Funds Act 2006.
  • Investment Business Act 2003.
  • Limited Liabilities Companies Act 2016.

Offences

18. What are the specific offences that can be used to prosecute insider dealing and market abuse?

The offence of insider dealing is set out in section 405B of the Criminal Code. A person is guilty of the offence if they have information as an insider and either:

  • Acquire or dispose of investments on a recognised investment exchange that are price-affected in relation to the information.
  • Encourage another person to deal in investments that are price-affected in relation to the information, while knowing or having reasonable cause to believe that the dealing would take place.
  • Disclose the information to another person, other than in the proper performance of the functions of their employment, office or profession.

A person has information as an insider if they know that it is inside information, and have it, and know that they have it, from an inside source. Having an inside source is defined as either:

  • Being a director, employee or shareholder of an issuer of investments.
  • Having access to the information by virtue of employment, office or profession.
  • Receiving the information directly or indirectly from a person with an inside source as above.

The offence of market manipulation is set out in section 405A of the Criminal Code. Any person who performs any act or course of conduct that creates a false or misleading impression as to the market in or the price or value of any relevant investments is guilty of an offence if they do so for the purpose of creating that impression and of thereby inducing another person to either:

  • Acquire, dispose of, subscribe for or underwrite those investments or to refrain from doing so.
  • Exercise, or refrain from exercising, any rights conferred by those investments.

The following conditions must be met:

  • The act must done, or course of conduct engaged in, in Bermuda.
  • The false or misleading impression must be created in Bermuda.

“Relevant investment” means an investment within the meaning of section 3(1)(a) of the Investment Business Act 2003 that is listed on the Bermuda Stock Exchange, or any other exchange in Bermuda in relation to which a recognition order is in force under the Investment Business Act 2003.

Section 405 of the Criminal Code sets out the offence of misleading statements and practice. It is an offence for a person to:

  • Make a statement, promise or forecast that they know to be misleading, false or deceptive in a material particular.
  • Dishonestly conceal any material facts.
  • Recklessly make (dishonestly or otherwise) a statement, promise or forecast that is misleading, false or deceptive in a material particular.

The following conditions must be met:

  • The statement must be made for the purpose of inducing, or be reckless as to whether it may induce, another person (whether or not they are the person to whom the statement is made) to:
    • enter or offer to enter into, or to refrain from entering or offering to enter into, a relevant agreement; or
    • exercise, or refrain from exercising, any rights conferred by a relevant investment.
  • And either:
    • the statement, promise or forecast (or arrangements to make the statement, promise or forecast) are in or from Bermuda;
    • the facts concealed are in Bermuda;
    • the person on whom the inducement is intended to or may have effect is in Bermuda; or
    • the agreement is or would be entered into in Bermuda, or the rights are or would be exercised in Bermuda.

Additional offences exist in the Criminal Code and elsewhere, such as the offences of:

  • Fraudulent inducement to invest or deposit (section 404, Criminal Code).
  • False or misleading statements in company documents or information (section 72, Investment Funds Act 2006).

Defences

19. What defences, safe harbours or exemptions are available and who can qualify?

Section 405C of the Criminal Code sets out three general defences to insider dealing:

  • If the insider dealing is by virtue of dealing in investments, it is a defence to show that the defendant either:
    • did not at the time expect the dealing to result in a profit attributable to the fact that the information in question was price-sensitive information;
    • at the time believed on reasonable grounds that the information had been disclosed widely enough to ensure that none of those taking part in the dealing would be prejudiced by not having the information; or
    • would have done what they did even if they had not had the information.
  • If the insider dealing is by virtue of encouraging another person to deal in investments it is a defence to show that the defendant either:
    • did not at the time expect the dealing to result in a profit attributable to the fact that the information in question was price-sensitive information in relation to the investments;
    • believed on reasonable grounds that the information had been or would be disclosed widely enough to ensure that none of those taking part in the dealing would be prejudiced by not having the information; or
    • would have done what they did even if they had not had the information.
  • If the insider dealing is by virtue of a disclosure of information it is a defence to show that the defendant either:
    • did not at the time expect any person, because of the disclosure, to deal in investments in the circumstances; or
    • although having such an expectation at the time, did not expect the dealing to result in a profit attributable to the fact that the information was price-sensitive information in relation to the investments.

Additional special defences (section 405D, Criminal Code) to insider dealing apply in limited instances, such as:

  • Engaging in market making business.
  • That it was reasonable for the person to have acted as they did despite having that information as an insider.

(Sections 405E and 405F, Criminal Code.)

It is a defence for market manipulation to show that the defendant reasonably believed that their act or conduct would not create an impression that was false or misleading as to the material matters.

Enforcement

20. Which authorities have the powers of prosecution, investigation and enforcement in cases of insider dealing and market abuse? What are these powers and what are the consequences of non-compliance? Please identify any differences between criminal and regulatory investigations.

The authorities and their powers of the prosecution, investigation and enforcement in cases of insider dealing and market abuse are the same as for general corporate and business fraud (see Question 3).

21. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?

The basis for court orders or injunctions are the same as for general corporate and business fraud (see Question 4).

Convictions and sanctions

22. What are the sanctions for participating in insider trading and market abuse?

Civil/administrative proceedings or penalties

Civil/administrative proceedings or penalties are the same as for general corporate and business fraud (see Question 5).

Criminal proceedings

Right to bail. The right to bail is the same as for general corporate and business fraud (see Question 5).

Penalties. An individual guilty of insider dealing is liable on conviction of a fine of up to BMD175,000 or to imprisonment for up to seven years, or both.

An individual guilty of market manipulation or of misleading statements and practice is liable on conviction of a fine of up to BMD100,000 or to imprisonment up to five years, or both.

Civil suits

Victims of financial crime can seek redress through the civil courts. Currently there is no Bermuda law equivalent of a US class action. However, the Bermuda courts do have capacity to deal with multi-party claims.

Safeguards

23. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?

The safeguards in place are the same as for general corporate and business fraud (see Question 6).

Money laundering, terrorist financing and financial/trade sanctions

Regulatory provisions and authorities

24. What is the main legislation and regulatory provisions relevant to money laundering, terrorist financing and/or breach of financial/trade sanctions?

Bermuda has long-standing obligations for regulated financial institutions (RFIs) to maintain effective procedures to prevent and detect money laundering and terrorism financing. The obligations for RFI compliance are set out in the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008. The Financial Intelligence Agency Act 2007 created the Financial Intelligence Agency to receive and analyse suspicious activity reports.

Key elements of the anti-money laundering and anti-terrorist funding (AML/ATF) framework in Bermuda include the:

  • Anti-Terrorism (Financial and Other Measures) Act 2004 (Anti-Terrorism Finance Act).
  • Financial Intelligence Agency Act 2007 (FIA Act).
  • Guidance Notes for AML/ATF Regulated Financial Institutions on Anti-Money Laundering & Anti-Terrorist Financing (General Guidance Notes).
  • Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing Supervision and Enforcement) Act 2008 (Supervision and Enforcement Act).
  • Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 (AML/ATF Regulations).
  • Proceeds of Crime Act.
  • The Extradition (Overseas Territories) Order 2002.
  • The Terrorist Asset-Freezing etc. Act 2010 (Overseas Territories) Order 2017.
  • International Sanctions Act 2003 and International Sanctions Regulations 2013.

Additional regulatory acts and regulations that achieve some of Bermuda’s AML/ATF objectives include the:

  • Exchange Control Regulations 1973.
  • Limited Partnership Act 1883.
  • Exempted Partnerships Act 1992.
  • Overseas Partnerships Act 1995.
  • Corporate Service Provider Business Act 2012.
  • Companies Act.
  • Limited Liability Company Act 2016.

Adherence to the requirements of the AML/ATF and international sanctions regime is referenced in various regulatory acts and regulations as part of the criteria reviewed when assessing whether the entity is conducting its business in a prudent manner as a part of the minimum criteria for licensing.

Money laundering

The primary money laundering legislation is the Proceeds of Crime Act.

Terrorist financing

The primary terrorist financing legislation is the Anti-Terrorism Finance Act.

Financial/trade sanctions

The sanctions regime is set out by the International Sanctions Act 2003 and the International Sanctions Regulations 2013, and consists of UN, EU and UK sanctions measures.

The sanctions in force in Bermuda are essentially the same as those in effect in the UK, and apply to all natural and legal persons located in Bermuda, operating in or from Bermuda or formed under Bermuda law.

Offences

25. What are the specific offences that can be used to prosecute money laundering, terrorist financing and breach of financial/trade sanctions?

Money laundering

Money laundering is defined under sections 43-45 of the Proceeds of Crime Act as the offence of knowingly concealing, or assisting the acquisition of criminal property. Criminal property is defined as property that is or represents a benefit from criminal conduct (in whole or part and whether directly or indirectly) or any property used in the financing of terrorist activity.

Under section 45(b) of the Proceeds of Crime Act, the offence of money laundering and the duty to report apply in relation to the proceeds of any criminal conduct, wherever carried out, that would constitute an offence if it took place in Bermuda. This broad scope excludes only those offences that the institution, employee or reporting officer knows or believes to have been committed in a country or territory other than Bermuda and to be lawful in the country or territory concerned.

If the offence is shown to have been committed with the consent or the connivance of an officer of a corporate body, or to be attributable to any neglect on their part, then the officer as well as the corporate body is guilty of an offence and is liable to be punished accordingly.

Terrorist financing

The terrorist financing offences under sections 5-8 of the Anti-Terrorism Finance Act include:

  • Raising of funds for the financing of terrorist activity.
  • Use and possession of any property used in the financing of terrorist activity.
  • Funding arrangements in relation to any property used in the financing of terrorist activity.
  • Money laundering in relation to any property used in the financing of terrorist activity.

Financial/trade sanctions

The Bermuda sanctions regime requires absolute compliance, and any person in breach of an obligation under a relevant sanctions measure is guilty of an offence and liable to a maximum of seven years imprisonment, a fine or both. Any failure by an entity or person to comply with the requirements of the Bermuda sanctions regime leads to criminal and/or civil liability.

Defences

26. What defences, safe harbours or exemptions are available and who can qualify?

Money laundering

The AML/ATF General and Sector Specific Guidance Notes are used by the courts and Bermuda Monetary Authority (BMA) in determining whether an institution is in breach. Under the guidance, it is possible to establish a defence of having established and maintained compliant policies and procedures for preventing the misuse of the institution as a vehicle for money laundering.

There is an additional defence if the institution knows or believes on reasonable grounds that the relevant criminal conduct to which the proceeds of crime were connected was not unlawful in the jurisdiction in which it occurred.

Terrorist financing

See above, Money laundering.

Financial/trade sanctions

The Governor of Bermuda can grant a permit authorising an activity that would otherwise contravene the sanction laws.

The offence provisions do not apply if a corporate body proves that it took reasonable precautions and exercised due diligence to avoid contravening the sanction laws. Sanction-specific guidance is provided by the BMA, Sanctions Guidance Notes of June 2016.

Enforcement

27. Which authorities have the powers of prosecution, investigation and enforcement in cases of money laundering? What are these powers and what are the consequences of non-compliance? Please identify any differences between criminal and regulatory investigations.

Law enforcement agencies such as the Bermuda Police Service (BPS) and prosecutorial agencies such as the Department of Public Prosecutions (DPP), investigate and prosecute AML/ATF offences.

The Bermuda Monetary Authority is designated by the Supervision and Enforcement Act as the supervisory body empowered to secure institutions’ compliance. It publishes AML/ATF Guidance Notes that are relied on by corporate bodies in instating appropriate compliant policies and procedures.

Certain additional authorities designated by the Supervision and Enforcement Act also have AML/ATF responsibilities, such as the AML/ATF Barristers and Accountants Board for law firms and professional accounting firms. In addition, the oversight of AML/ATF activities is co-ordinated by the National Anti-Money Laundering Committee (NAMLC). NAMLC is the body responsible for advising the relevant Minister on the:

  • Detection and prevention of AML/ATF and proliferation financing in Bermuda.
  • Development of a national plan for those purposes.
  • Development of policies to combat AML/ATF and proliferation financing.
  • Bermuda’s participation in the global AML/ATF effort.

The authorities’ powers of prosecution, investigation and enforcement are the same as for general corporate and business fraud (see Question 3).

Depending on the nature of the crime, the protections available are similar to those for general criminal misconduct (see Question 6). However, if the offence is a serious arrestable offence, which includes acts of terrorism and certain money laundering offences, limitations on rights may be applied as detailed in the Police and Criminal Evidence Act and its related codes of practice.

28. Which authority makes the decision to charge and on what basis is that decision made? Are there any alternative methods of disposal and what are the conditions of such disposal?

The basis for court orders or injunctions is the same as for general corporate and business fraud (see Question 4).

Convictions and sanctions

29. What are the sanctions for participating in money laundering, terrorist financing offences and/or for breaches of financial/trade sanctions?

Money laundering

Right to bail. The right to bail is the same as for general corporate and business fraud (see Question 5).

Penalties. A person found guilty of a money laundering offence under sections 43 to 45 of the Proceeds of Crime Act (concealing, assisting or acquisition) can be liable on conviction of the more serious offences to imprisonment up to 20 years or an unlimited fine, or both. The sanctions for failing to comply with section 46 or 47 of the Proceeds of Crime Act (failure to disclose knowledge or suspicion,or tipping off) are imprisonment for ten years or an unlimited fine, or both.

Terrorist financing

Right to bail. The right to bail is the same as for general corporate and business fraud (see Question 5).

Penalties. A person found guilty of a terrorist financing offence under sections 5 to 8 of the Anti-Terrorism Finance Act (fundraising, use and possession, funding arrangements or money laundering) is liable on conviction a fine of up to BMD200,000 or to imprisonment for 14 years, or both. The sanction for failing to comply with sections 9 or 10A of the Anti-Terrorism Finance Act (the offence of failing to disclose information) is an unlimited fine or imprisonment for ten years, or both.

Under section 17 of the Anti-Terrorism Finance Act, the duty to report applies in relation to any terrorist financing offence under sections 5 through 8 of the Act that would have been an offence had it occurred in Bermuda.

Financial/trade sanctions

Right to bail. The right to bail is the same as for general corporate and business fraud (see Question 5).

Penalties. The Bermuda sanctions regime requires absolute compliance, and any person in breach of an obligation under a relevant sanctions order can be liable to imprisonment of up to seven years or a fine, or both. Under the sanction measures, it is an offence to:

  • Breach any of the financial and/or trade prohibitions.
  • Attempt to circumvent any of the prohibitions.
  • Fail to disclose relevant information to the Governor of Bermuda.
  • Fail to comply with information requests from the Governor of Bermuda.

Regulatory action by the Bermuda Monetary Authority can result in the cancellation of registration of a licensed entity, public censure and a civil fine of up to BMD500,000.

Safeguards

30. Are there any measures in place to safeguard the conduct of investigations? Is there a process of appeal? Is there a process of judicial review?

The safeguards in place are the same as for general corporate and business fraud (see Question 6).

Financial record keeping

31. What are the general requirements for financial record keeping and disclosure?

Regulation 15 of the AML/ATF Regulations prescribes that records must be kept for a period of five years beginning on the date on which a business relationship ends. If the entity is subject to an investigation, records must be kept pending the outcome of the investigation. Records for the purposes of the AML/ATF legal framework include:

  • A copy of, or references to, evidence of the customer’s identity obtained through customer due diligence measures, together with account files, business correspondence and the results of any analysis undertaken in relation to that customer.
  • The supporting evidence and records of transactions (consisting of the original documents or copies admissible in court proceedings) sufficient to permit the reconstruction of individual transactions.

This includes all documents and findings related to the investigations of complex transactions, unusually large transactions or unusual patterns of transactions.

There are general obligations on legal entities to keep and retain adequate accounting records for a period of five years under section 83 of the Companies Act.

The authorities have broad powers to request disclosure of documents by companies and individuals falling within their jurisdiction. For example, the Financial Intelligence Agency and the Bermuda Monetary Authority can examine relevant institutions’ books, accounts and transactions (see Question 3).

32. What are the penalties for failure to keep or disclose accurate financial records?

The maximum penalties vary depending on the offence. A person, including a Regulated Financial Institution, that fails to comply with record keeping requirements, is liable to a fine of up to BMD750,000 or to imprisonment for a term of two years, or both.

The penalties for failure to keep or disclose accurate financial records under the Companies Act are a fine of BMD2,000 or imprisonment for a term of two years, or both.

33. Are the financial record keeping rules used to prosecute white-collar crimes?

Financial record keeping rules are used to prosecute white-collar crimes.

Due diligence

34. What are the general due diligence requirements and procedures in relation to corruption, fraud or money laundering when contracting with external parties?

General due diligence requirements and procedures when contracting with external parties in relation to corruption, fraud or money laundering are set out in the:

  • AML/ATF Regulations and the corresponding General Guidance Notes and Sector Specific AML/ATF Guidance Notes issued by the BMA.
  • Bribery Act and its corresponding Guidance Notes for the Bribery Act 2016.

The level of due diligence required depends on a number of factors, including the:

  • Jurisdiction(s) in which the external party operates or carries out business in.
  • Industry sector.
  • Relevant third parties (subcontractors/customers/clients).
  • Procurement controls.

It is necessary to monitor and review any activities outsourced to or relied on from a third party.

Corporate liability

35. Under what circumstances can a corporate body itself be subject to criminal liability?

If a corporate, partnership or unincorporated association is guilty of an offence under the Proceeds of Crime Act and/or Anti-Terrorism Finance Act, and that offence is proved to have been committed with the consent or connivance of, or due to negligence by, any director, manager, secretary or similar officer of the entity or any person purporting to act in any such capacity, that person and the legal entity are both guilty of the offence.

Each of the relevant statutes governing the various structures for legal entities also provide for corporate criminal liability. For example, under section 83 of the Investment Business Act 2003, if an offence is proved to have been committed with the consent, connivance, or due to negligence by, any officer of the company, or any person purporting to act in any such capacity, that person and the company are both guilty of the offence, unless they can show that they took all reasonable steps to avoid the commission of an offence. This liability can extend to members of the company if the company affairs are managed by its members.

Cartels

36. Are cartels prohibited in your jurisdiction? How are cartel offences defined? Under what circumstances can a corporate body be subject to criminal liability for cartel offences?

There are no express provisions prohibiting cartels in Bermuda.

Immunity and leniency

37. In what circumstances it possible to obtain immunity/leniency for co-operation with the authorities?

Leniency and immunity is determined by the authorities on a case-by-case basis. Self-reporting and co-operation with investigations is influential in obtaining leniency, particularly in relation to a corporate entity.

Cross-border co-operation

38. What international agreements and legal instruments are available for local authorities?

Obtaining evidence

The formal mechanisms for co-operating with foreign prosecuting authorities in criminal matters include the Criminal Justice (International Co-operation) Act 1994 and the specific mutual legal assistance agreements entered into by Bermuda. These include:

  • A mutual legal assistance treaty with the US.
  • A number of bilateral tax information exchange agreements (TIEAs).
  • Memorandums of understandings (MOUS) with a number of other jurisdictions/organisations including, but not limited to, the US, Channel Islands, EU and Switzerland.

The competent authority in Bermuda responsible for addressing all mutual legal assistance requests is the Attorney General’s Chambers, which is the Central Authority for Bermuda.

Where appropriate and in line with the international agreement under which evidence is requested, the means for obtaining evidence is the same as for general corporate and business fraud (see Question 3).

Seizing assets

The steps for seizing assets depend on the nature of the related offence and the international agreement under which assets are to be seized.

Sharing information

Bermuda can both provide and request information to assist or gain assistance from overseas authorities in investigations and the prosecution of relevant crimes through the Mutual Legal Assistance Treaty (MLAT) process and the various tax treaties and agreements to which Bermuda is a signatory.

Bermuda is also a participant in the automatic exchange of the OECD Common Reporting Standard (CRS) information. It was also among the countries that signed the multilateral competent authority agreement (MCAA) for CRS in Berlin in October 2014 and subsequently exchanged 2016-year CRS information. As noted in the Bermuda National Risk Assessment, there is a high level of international co-operation. For example, the Financial Intelligence Agency (FIA) is actively involved in exchanging financial intelligence through the extensive network of financial intelligence units (FIUs) that are part of the Egmont Group. In addition, the FIA is able to have and utilise information-sharing agreements with non-Egmont FIUs through relationships within the Caribbean Action Task Force (CFATF) and other such bodies. The Bermuda Police Service also interacts on a regular basis with foreign agencies, including the UK’s National Crime Agency, the FBI and other such bodies.

39. In what circumstances will domestic criminal courts assert extra-territorial jurisdiction?

Law enforcement authorities co-operate to support the analysis of intelligence and the investigation of financial crime case offences to ensure they are properly investigated and prosecuted, including those associated with foreign crimes.

It is unlikely that the Bermuda courts would assert their jurisdiction to prosecute crimes committed outside of Bermuda. However, such crimes may have a Bermuda AML/ATF element, which may fall within the Bermuda courts’ jurisdiction.

40. Does your jurisdiction have any statutes aimed at blocking the assertion of foreign jurisdictions within your territory? Are there statutes aimed at blocking the assertion of foreign jurisdictions within their territory?

Depending on the request from overseas authorities for assistance, the request must be submitted under the appropriate agreement/MOU and corresponding circumstances as prescribed for within that agreement/MOU. Authorisation can be denied in a range of circumstances under the agreement/MOU or by ministerial decision.

Whistleblowing

41. Are whistleblowers given statutory protection?

Section 29A of the Employment Act 2000 provides statutory protection for whistleblowers if a disclosure is made in good faith to a listed person as set out by the Act.

Reform, trends and developments

42. Are there any impending developments or proposals for reform?

Bermuda is continually and proactively taking steps to assess and enhance the legal framework and to play a leading role in the global fight against financial crime.

The following are examples of developments and reform:

  • Amendments to the AML/ATF legal framework to address any gaps with the Financial Action Task Force Recommendations and Methodology.
  • Bermuda joined the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
  • Implementation of the OECD Country-by-Country (CBC) automatic exchange of information.
  • Execution of a bilateral CBC automatic exchange of information competent authority agreement with the UK and US.

Market practice

43. What are the main steps foreign and local companies are taking to manage their exposure to corruption/corporate crime?

The main steps foreign and local companies are taking to manage their exposure to corruption/corporate crime are:

  • The implementation of adequate systems, procedures and controls based on business risk assessments that identify the vulnerabilities and threats of corporate crime and corruption to the entity.
  • Training and awareness of their employees.
  • Co-operation and dialogue with the regulators and authorities on recommendations, outreaches and typologies.
    Corey Cross, Compliance Manager helped in the preparation of this article.
Type

Legal Guide

Locations

Bermuda

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