The dynamic nature of the global sanctions landscape is vividly illustrated when one considers Brexit, where the United Kingdom may be required to introduce an entirely new and independent sanctions regime once it has exited the European Union; or the United States, where there is increasing focus on secondary sanctions.

Financial sanctions are imposed to combat money laundering, terrorist financing and the development of weapons of mass destruction. Sanctions are primarily imposed by the United Nations, EU, US and UK. Such measures range from comprehensive economic and trade sanctions to more targeted measures such as arms embargoes, travel bans, financial or diplomatic restrictions.

As each country’s sanctions tend to be applicable to citizens of that country, and bodies formed or incorporated under the laws of that country, it is important to understand any obligations that follow from having links to another country.

Bermuda enforces the same financial sanctions imposed in the UK. Sanctions are generally brought into force under the International Sanctions Act 2003. The International Sanctions Regulations 2013 set out all the regime-related sanctions orders in force in Bermuda and are referred to as the Bermuda International Sanctions Regime. All individuals and legal entities who are within or undertake activities within Bermuda must comply.

It can be challenging to comply with multi-jurisdictional restrictions due to the frequency with which they change. It is therefore critical that businesses understand which regimes their entity must observe in addition to the sanctions imposed under Bermuda law. Merely dealing in a jurisdiction’s currency can bring a business within the scope of that jurisdiction’s regime.

Companies must review and test their sanctions screening system to ensure effectiveness, efficiency and responsiveness to the ever-changing sanctions regimes. It is a criminal offence to breach the obligations under the respective sanctions. Penalties for failure to comply vary but, upon conviction, they can include imprisonment and/or a fine. In addition to criminal penalties, non- compliance by an entity licensed by the Bermuda Monetary Authority can lead to regulatory action including cancellation of registration, public censure and a civil fine of up to $10 million.

Consequently, companies must identify and assess the relevant sanctions risks it may be exposed to, whether in respect of certain regimes or entities, and implement a sanctions screening programme proportionate with the company’s nature, size and complexity.

To be effective, consideration should be given to matters such as the company’s location and its proximity to sanctioned companies; the location of its customers; the volume of transactions and distribution channels; and whether the types of products and services offered represent a heightened sanctions risk, for example, foreign correspondent accounts, cross-border transactions, or trade-related products.

Two screening measures are commonly implemented, customer screening and transaction screening. Customer screening is intended to identify sanctioned individuals or entities during the on-boarding process and the lifespan of the customer relationship, while transaction screening is used to identify transactions involving sanctioned individuals or entities.

Together, customer and transaction screening that account for the relevant business specific matters previously mentioned can create a powerful system of controls that will identify targets of sanctions.

Notwithstanding this, screening alone is not sufficient to ensure complete compliance with obligations imposed under financial sanctions. Screening must be implemented alongside other financial crime risk prevention processes and as part of a wider compliance programme.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.

Type

Insight

Locations

Bermuda

Share
Twitter LinkedIn Email Save as PDF
More Publications
8 Aug 2019 |

Summary of Economic Substance Requirements in Bermuda, the British Virgin Islands and the Cayman Islands

Economic Substance Requirements in Bermuda, the British Virgin Islands and the Cayman Islands

Contributors: Shana Simmonds
5 Aug 2019 |

Probationary Periods – Importance of Dates when Considering Extensions

New employment is not always a smooth process. The employer and employee both need to adjust to new ...

24 Jul 2019 |

Legal Frontiers in Bermuda

The Asia-Pacific region has seen a surge of fintech start-ups, service providers, suppliers, investo...

Contributors: Fiona Chan
18 Jul 2019 |

Bermuda ILS overhaul welcomed but will new vehicles take off?

The ILS market has broadly welcomed moves by the Bermuda Monetary Authority (BMA) to create a new co...

8 Jul 2019 |

Bermuda to introduce new classes of insurers

Bermuda’s commitment to providing innovative solutions in the ever-evolving insurance marketplace ...

3 Jul 2019 |

Directors Unexpected Payroll Tax Liability

Payroll tax is levied against every employer, employee, self-employed person and deemed employee. Wh...

1 Jul 2019 |

Latest Developments in Bermuda’s Economic Substance Regime

The Economic Substance Amendment Act 2019 (Amendment Act) became operative on 28 June 2019. Bermuda ...

Contributors: Sally Penrose
26 Jun 2019 |

Regulatory Headwinds

Faced with increased scrutiny from regulators on both global and jurisdictional levels, businesses m...

Contributors: David Dorgan
24 Jun 2019 |

Appleby’s Adderley: Bermuda Eases Path to Collateralised ReInsurance

Partner Brad Adderley speaks to A.M. Best at the recent Bermuda Captive Conference. Brad says “Ber...

20 Jun 2019 |

Bermuda ILS Executive Roundtable 2019

Welcome to Artemis’ fourth ILS executive roundtable in Bermuda, in which our participants discusse...