BERMUDA Law and Practice Contributed by: Bourn Collier and Sharon A. Beesley, BeesMont Law Limited
LC), which co-ordinates national AML/ATF policy, oversees the National Risk Assessment, and repre- sents Bermuda in dealings with the Financial Action Task Force (FATF) and the Caribbean Financial Action Task Force (CFATF). The Financial Intelligence Agency (FIA) is Bermuda’s financial intelligence unit, through which it exchanges suspicious activity information with overseas counter- parts. The BMA, as supervisor of the financial sector, works alongside NAMLC and the FIA on cross-border AML/ATF matters affecting regulated entities. Ber- muda is currently a Compliant or Largely Compliant jurisdiction across the FATF 40 Recommendations fol- lowing its most recent CFATF mutual evaluation. The Office of the Privacy Commissioner for Bermuda is an independent supervisory authority responsible for overseeing implementation of the Personal Infor- mation Protection Act 2016 (Privacy Commissioner). 2.2 Crypto-Asset Regulatory Frameworks See 1.1.3 Regulation of Blockchain Technology . Ongoing regulatory obligations (in addition to those discussed) for DABA licensees include the following. • Client Disclosure Rules – these specify disclosures to be made prior to entering into transactions and/ or a client agreement, including in relation to mate- rial risks, licensing status, fees, applicable insur- ance, finality and voting rights. • Prudential (Annual Return) Rules, Business Accounts Rules and Audit requirement – these specify the form of annual return and statutory financial statements DABA licensees should com- plete and submit. Every DABA licensee is required to appoint an approved auditor each year o audit its financial statements. • Cyber Risk Rules and Cyber Code – require a cyber risk return be filed annually for Class F DABA licensees and for Class M and T DABA Licensees at a time determined by the BMA, whilst the Cyber Code sets the framework for identification and management of risks as well as controls to be adopted by the DABA licensee.
• Head Office Requirements – specify the fac- tors determining compliance with the head office requirements under DABA (detailed below). • Product Due Diligence (Material Change Notifica- tion) – specifies best practice for complying with the Code of Practice in respect of introducing a new product or service (being a material change to business). Regarding customer types, DABA does not draw a sharp retail-versus-professional line at the activ- ity level – the same licensable activities require the same licence regardless of client type – but the BMA accommodates retail-facing business models through licence conditions, operating thresholds, conduct expectations and disclosure requirements calibrated at the licensing stage, and several large retail digital asset businesses are licensed and supervised in Ber- muda. 2.3 Regulated Firms and Legal Wrappers Overlap Between Digital Asset Business, Investment Business and Investment Fund Activities Involving Digital Assets Given there is some overlap between digital asset business and investment business there have been some examples of Bermuda-based investment busi- ness licensees carrying on some activity which also falls within DABA (such as holding investments in tokenised assets and in one example issuing RWA- backed tokens) and vice versa (particularly with DABA licensees beginning to hold investment fund instru- ments to back stablecoins, such as shares in funds holding US Treasuries). To cover the overlap there are statutory carve outs and guidance which permit a certain amount of “ancillary business” by a DABA licensee to carry out investment business – where carried out in an ancillary manner – including up to certain limits as a proportion of total gross revenue (ancillary business generated should not exceed 25% of total gross revenue, with a buffer zone between 25–35% requiring the DABA licensee to notify the BMA and agree a remediation plan or roadmap to reduce the revenue towards compliance with the 25% threshold).
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