Bermuda

Trump to the Left Of Us, Brexit to the Right: Stuck in the Middle With You


By Alex Potts, Partner, Sedgwick Chudleigh Ltd., and Caitlin Conyers, Associate, Sedgwick Chudleigh Ltd., Bermuda (29/08/2017)

In global geo-political terms, and by comparison with recent political events in the United States and the United Kingdom, 2016 was a year which illustrated the benefits of a jurisdiction such as Bermuda, given its relatively high level of legal, political, and regulatory stability, its international business practices and standards, and its mid-Atlantic proximity (culturally and physically) to both North America and Europe.

But 2017 is likely to be a critical year for Bermuda, with a general election fast approaching, the 35th America's Cup sailing event taking place in Bermuda's Great Sound, a significant national debt, and heated political exchanges on issues ranging from same sex marriage rights to private finance initiatives. Donald Trump's election, and Britain's proposed withdrawal from the European Union, will certainly present both challenges and opportunities for Bermuda. 

As a leading international financial centre with a 400-year history, however, Bermuda should be well equipped to succeed in 2017 and beyond. International business should be reassured by the fact that the Bermuda Government has been highly responsive in 2016 to international expectations and requests with respect to enhanced regulation, heightened transparency, and rigorous prevention and detection of money laundering and terrorist financing. 

In addition, Bermuda has committed itself to various multilateral and bilateral agreements on the automatic exchange of tax information; it is one of only two non-European Union countries to achieve Solvency II equivalence; and it is in the process of modernizing its laws on fraud, bribery and corruption, including corruption of foreign officials.

Some particular developments are highlighted below.

Anti-Money Laundering and Anti-Terrorist Financing

In April 2016, the Government of Bermuda amended the Companies Act 1981 to establish a public Register of Directors in order to comply with Financial Action Task Force (FATF) rules. The new law provides that every registered company must file a list of its Directors with the Registrar of Companies and notify the Registrar of any changes within 30 days. Companies were required to file the list by 31 December 2016.

Bermuda's AML/ATF framework was updated to expand the mandate of the Financial Intelligence Agency (FIA) to include the supervision of dealers of high value goods, including, among others, jewellery dealers, car, boat and motorcycle dealers and precious metal and stone dealers. As of 2 January 2017, businesses that wish to accept cash payments above US$7,500 have to register with the FIA.

The Bermuda Monetary Authority and the Bermuda Government hope to have these developments recognised internationally when the CFATF undertakes its review of Bermuda's compliance with the FATF recommendations in early 2018, further to the IMF's report in 2008 and the CFATF's review in 2012.

Enforcement Powers of the Bermuda Monetary Authority

In his Introduction to the Bermuda Monetary Authority's (BMA) 2016 Business Plan, the CEO of the BMA, Jeremy Cox, indicated that from 2016, the BMA will publish details of any use of its enforcement powers including details of the nature of the enforcement action, the size of any penalty, the identity of the entity or person involved and the circumstances of the breach. Mr Cox stated that the purpose of such an approach was to hold Bermuda-based entities to account for the conduct of their business and compliance gaps.

 The BMA's new approach was demonstrated in August 2016, when the BMA published a press release stating that it had imposed a US$50,000 fine on a named financial services provider, in addition to a restriction on its licence.

Modernisation of Legislation on Fraud and Bribery

Alongside developments in its AML/ATF framework and the increasing use of enforcement powers by the BMA, the Government of Bermuda has made clear its intentions to modernize Bermuda's legislation against bribery, corruption and fraud. The Bribery Bill 2016, based on the UK's Bribery Act 2010, will create four offences, including offences for giving or accepting a bribe, bribing a foreign public official and a new offence for failure by a commercial organisation to prevent bribery. A commercial organisation will not be held liable, however, where it can prove that it had "adequate procedures" in place to prevent persons associated with it from committing acts of bribery.

The new Bribery Act will apply extra-territorially and therefore will enable Bermudians, ordinary residents and Bermuda-registered corporate bodies to be prosecuted in Bermuda even where the act of bribery is committed wholly or partly abroad. In addition, the Bribery Bill 2016, as tabled, goes beyond the UK's Act by imposing duties on public officials to report corruption and establishing an offence for failure to report.

Based on a Ministerial Statement in the House of Assembly in May 2016, it is expected that, in 2017, the Government will table a Bill, based on the UK's Fraud Act 2006, to replace the antiquated offence of fraud as contained in the Criminal Code 1907 (as amended in 2005).

Limited Liability Company Act 2016

Although many people doing business in Bermuda will already be familiar with foreign Limited Liability Companies (LLCs), the Limited Liability Company Act 2016 has introduced this form of corporate structure into domestic Bermuda law for the first time. Where previously Bermuda entities operating as a limited liability structure had to be registered as either a limited liability partnership or a limited company, LLCs offer an alternative corporate governance structure and should be of particular interest to operators of private equity funds and asset holding structures.

Expansion of the Functions of the Regulatory Authority of Bermuda

The Regulatory Authority of Bermuda (RAB), in addition to supervising the Bermuda telecommunications industry, has had its regulatory mandate extended by the Electricity Act 2016 to take over independent supervision of the power industry. The Act is designed to promote competition, cleaner energy sources and technologies, non-discriminatory inter-connection to transmission and distribution systems, and the promotion of economic efficiency and sustainability.

In the telecoms context, the RAB has also recently overseen a 4G Spectrum award process, which is designed to facilitate the introduction of 4G mobile network services to Bermuda in 2017, and to promote enhanced competition in the marketplace.

Implementation of the Casino Gaming Act

Two years after the Casino Gaming Act was enacted, the government of Bermuda has begun the process of introducing integrated resort casinos in Bermuda. The Casino Gaming Amendment Act 2016 provides that applicants for the three casino licenses that will be available will first have to apply for designation of their site, then present a proposal of viability to the Commission through an RFP process and finally have the suitability of the operator established for approval of the licence. The application process for designated sites opened in March 2016 and has resulted in two properties, the Hamilton Princess and the St George's hotel project, being deemed designated sites.

In line with the government's focus on eliminating bribery and corruption, the Amendment Act provides that certain relevant officials, including commissioners, commission staff and some government employees and officials working in the area of gaming, will be subject to restrictions such as holding an interest in a casino or providing goods and services to a casino, while they hold office.

Conclusion

The year 2017 promises to be an exciting and pivotal year for Bermuda, as the island prepares for the 35th America's Cup sailing event, as well as a general election. The future holds its challenges, of course, for Bermuda just as much as any other jurisdiction. Increasing levels of regulation and competition have also forced many Bermuda-based companies to reconsider their organizational requirements in terms of capital, liquidity, and human resources.

Fortunately, Bermuda's foundations are strong; capital investment continues to flow both in and out of the jurisdiction; and global opportunities continue to exist for Bermuda, its people, and its businesses (many of whom punch above their weight, in global terms).