Bermuda companies could soon be faced with tighter laws bearing on the business management services they provide.

But similar laws could also open up opportunities for a cross-section of companies to provide basic financial services.

Proposals for more stringent regulation of both corporate and money service providers have been set out in two consultative papers released by the Finance Ministry last week.

The consultation papers, which are available to the public, follow recommendations in a 2000 KPMG report to strengthen the Island's anti-money laundering parameters.

But new laws could also pave the way for businesses that do not hold a bank or deposit company licence to seek a separate licence to provide certain financial services whether it be cheque cashing, currency exchange or administering payment over the Internet.

The Ministry said it was working with the Island's financial services regulator, the Bermuda Monetary Authority, to ensure that any changes to the law would serve to keep the Island's clean reputation as an above-board business jurisdiction: "It is important that Bermuda is able to continue to demonstrate the effectiveness of its anti-money laundering controls in this area, given international efforts to ensure that such services do not represent a weak link in the defences in place under the Proceeds of Crime Regulations 1998."

Corporate service providers, often law firms, provide management functions for scores of Bermuda companies that have a minimal presence on the Island.

These services include the actual formation of the company on behalf of its owners, the provision of a registered office for the company, nominee shareholders, director services and the preparation and filing of statutory forms for each company.

Money service providers offer non-bank financial services.

Currently, CSPs and money service providers are not subject to any licensing requirement but that could all change if new laws are put on the books which could include possible amendments to Bermuda's Proceeds of Crimes Act 1998 and the Companies Act 1981.

Although recently introduced controls do require money service providers to seek the permission of the Finance Minister, there remain questions as to whether or not additional regulation should be put in place to further protect against money laundering activity.

Similar questions have been raised on the corporate services front with the Ministry's paper finding that the Island already has a strong vetting process to ensure that businesses incorporated here are legitimate but that further checks and balances may be called for: "It seems clear that our present approach to CSPs is no longer adequate.

"The effectiveness of the present arrangements comes through the indirect application of standards because of the fact that the authorities are able to assess' firms approach to Know Your Customer through reviewing each incorporation...However, this applies only to the original taking on of clients, and their ongoing reporting obligations.

"It does not provide direct reassurance in relation to other ongoing elements of CSPs business such as providing directors."