Amendments to the British Virgin Islands FSMA

The Financing and Money Services Act, 2009 (FSMA) provides a framework for the licensing, registration and supervision of persons carrying on financing and money services businesses in or from within the BVI. It is targeted at regulating and licensing companies (other than banks and post offices) that provide financing to residents in the BVI.

With effect from 1 March 2019, the following two changes were made to FSMA: (I) the definition of “financing business” was amended to include a new licensing regime applicable to the peer to peer FinTech market, peer to business and business to business markets and the scope of “money services business” has been expanded with the aim of growing FinTech in the BVI, and (II) new classes of licences have been developed.

1. Amendments to the scope of financing business:

Following the changes made to FSMA, the definition of “financing business” has been amended to include the business of conducting international financing and lending in the peer to peer FinTech market, peer to business and business to business and is supplemented by expanding the licence regime to include a Class F licence for such FinTech related business (as described further below).

2. Amendments to the scope of money services business:

The definition of “money services business” now includes new business activities such as:

dispensing money;

facilitating deposits;

payments;

transferring money;

reporting account information via ATMs; and

transmitting money in any form such as electronic money, mobile money or payments of money.

New Classes of Licenses – Financing and Lending in the FinTech Market:

Prior to the changes to FSMA, a person could only have held a financing business licence or money services business licence depending on the nature of their business. Under the current regime with effect from 1 March 2019, FSMA has been expanded to include the following six new categories of licences:

Class A: allowing a licensee to carry on business of transmitting money in any form such as electronic and mobile money payments;

Class B: allowing a licensee to carry on the business of issuing, selling or redeeming money orders or travellers cheques, cheque cashing and currency exchange;

Class C: allowing a licensee to engage in financing business;

Class D: allowing a licensee to carry on the business of financing lease;

Class E: allowing a licensee to carry on the business of operating an ATM;

Class F: allowing a licensee to carry on the business of international financing and lending in the peer to peer FinTech market and peer to business and business to business markets; and

Class G: allowing a licensee to carry on the business of such other service as may be specified in the regulations.

The Class F licence is relevant to BVI business companies and qualifying foreign companies licensed under the FMSA operating in the following markets:

peer to peer FinTech: digital / online lending of money to individuals or businesses matching lenders with borrowers;

peer to business: an alternative to a bank loan whereby a pool of private investors lend to businesses – can be a great asset to small businesses or start-ups looking for funding to expand or to cover expenses; and

business to business: electronic exchange of capital between businesses.

In relation to the FinTech market, virtual and crypto currencies are still excluded from the definition of “money” and “money services business” so do not currently require a licence under FSMA. Having said this, the BVI Financial Services Commission (FSC) have indicated that guidance and further regulations are being considered.

Banking Solution for Bermuda Digital Business

The availability of traditional banking services for entities incorporated in offshore jurisdictions has generally been a concern for Asian businesses. There has been a recent development announced by the Government of Bermuda relating specifically to the digital asset business sector.

Signature Bank, a full-service commercial bank headquartered in New York, has expressed its willingness to consider applications for banking services from digital asset businesses that are licensed pursuant to Bermuda’s digital asset legislative and regulatory framework such as the Initial Coin Offering legislation and the Digital Asset Business Act 2018. Applicants would need to satisfy the bank’s own internal criteria and standards.

This new banking solution enables Bermuda to continue to promote growth and expansion of the digital asset sector and to help attract digital businesses to be licensed in Bermuda.

Global Innovation Financial Network

On 31 January 2019, the Global Financial Innovation Network (GFIN) was officially launched by an international group of regulators and related organisations. By way of summary, GFIN is a group of 29 international regulators and organisations (including Hong Kong Monetary Authority, Monetary Authority of Singapore, Australian Securities & Investments Commission, the UK Financial Conduct Authority and Bermuda Monetary Authority to name a few).

The three principles of the GFIN are as follows:

1. act as a network of regulators to collaborate and share experience of innovation, such as emerging technologies and business models and to provide accessible regulatory contact information for firms;

2. provide a forum for joint RegTech work and collaborative knowledge sharing/lessons learned; and

3. provide firms with an environment in which to trial cross-border solutions.

While terminology differs across jurisdictions, sandboxes are essentially formal regulatory programs which allow market participants to test new financial services or business models with live customers (subject to certain safeguards and/or regulatory oversight). GFIN is conducting a six month long pilot phase of cross-border testing for firms wishing to test innovative products, services or business models across more than one jurisdiction, the applications for which ended on 28 February 2019. The GFIN testing scheme will allow firms to trial and scale new technologies in multiple jurisdictions simultaneously.

As GFIN cannot override national legislation, the firms’ must meet regulators’ application requirements in all the jurisdictions in which they wish to test. The Bermuda Monetary Authority (BMA) was one of the 18 regulators that participated in the initial trial in order to leverage the BMA’s current initiatives such as the Innovation Hub and the regulatory sandbox but also to share and cooperate on digital transformation of financial services.

Cayman Islands Data Protection Law 2017

The Cayman Islands Data Protection Law, 2017 (“DPL”), will now come into force on 30 September 2019 and will regulate the future processing of all personal data in the Cayman Islands. Drafted around a set of internationally recognised privacy principles, the new law provides a framework of rights and duties designed to give individuals greater control over their personal data, and will stand as the most comprehensive data protection law in the region.

With the implementation date now set, Cayman entities should take steps now to ensure they understand their obligations under the new law, have in place policies and procedures to ensure the proper protection of all personal data under their control and create an effective governance regime for approving, overseeing, implementing and reviewing those policies. Organisations need to get it right – reputations and criminal liability will soon be at stake.

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