Parliament passed legislation yesterday which clarified The Bermuda Monetary Authority's (BMA) role in fighting financial crimes and enhanced the regulator's independence.

But the Opposition United Bermuda Party (UBP) criticised the bill's wording saying it was too broad, could impact negatively on legitimate privacy and confidentiality needs, and could send the wrong message to international business.

After some discussion Finance Minister Eugene Cox committed Government to making further changes, if necessary, after the UBP questioned whether there had been any consultation with industry.

As a result of the bill's passage, the Authority now has as one of its principal objects “to assist with the detection and prevention of financial crime”.

And its independence from Government is further strengthened by another measure which allows it to collect fees directly from financial services providers. The legislature retains final approval over what fees are charged, however.

Such fees are currently paid into Government's consolidated fund.

The bill also allows the Finance Minister to delegate powers to the Authority by writing a letter. Minister Cox explained that clause was necessary to effectively implement United Nations anti-terrorism measures.

Mr. Cox described the bill as a “housekeeping” measure and stressed that existing legislation already implies that, in carrying out its roles as regulator and supervisor, the Authority is involved in the prevention and detection of financial crimes.

“For this reason it is important to recognise that the Authority has, as one of its functions, to assist in the detection and prevention of financial crime,” Mr. Cox emphasised.

He acknowledged that there was no “clear definition” of financial crime, but “for the purposes of this Bill financial crime deals with financial abuses which includes money laundering, manipulation of the markets and financial fraud” all of which the Authority may be alerted to in the carrying out of its regulatory duties.

And, said Mr. Cox, global efforts to fight terrorism is placing increasing pressure on financial institutions to be “diligent about attempts to use their services to fund terrorist activities”.

“It is not intended that the Authority initiate criminal investigations per se, being more akin to police investigations. Furthermore it is not intended that the Authority take on the role of prosecutor as well as regulator which has been the model adopted in other jurisdictions,” Mr. Cox added.

“However the Authority is expected to be proactive in detecting and promoting prevention of financial crime.”

But Opposition members expressed alarm at the wording of the bill and asked the Minister to withdraw the bill and bring it back after consultation with the financial services industry.

UBP Leader Grant Gibbons and Legislative Affairs Minister John Barritt both expressed support for the intent of the bill, but argued that it effectively expands the Authority's role into playing detective - or could be interpreted that way by international business and scare off business.

The bill “radically changes the objects of the Bermuda Monetary Authority into a crime fighting organisation which is a huge departure” from its customary functions, Dr. Gibbons said.

He added that he did not think that the private sector had been consulted and that the bill might open the way for foreign regulators to go on “fishing expeditions” not necessarily related to fighting crime. The Opposition also argued that the measures could have a chilling effect on clients who have legitimate expectations of confidentiality and privacy and questioned whether the Finance Minister should be allowed to delegate powers with a letter to the BMA.

Another point of contention was the lack of specific definitions of what constituted a financial crime. All crimes could be considered financial, said Mr. Barritt.

Defending the bill, Labour Minister Terry Lister said that Bermuda's private sector had always operated on a “know your customer” basis and that the measures continued that tradition on a governmental level.

The bill, he said, would improve prevention and detection of crimes by linking up the specific skills sets of BMA personnel with those of law enforcement agencies.

“The police doesn't have a lot of lawyers, bankers and business people,” he said. “We are doing this to protect Bermuda's interests.”

Mr. Cox dismissed the UBP's anxiety as a “very strange interpretation of a simple clause that says in your work as a regulator. It's your responsibility. Your obligation to pass on that information to the appropriate authorities so they can take action.”

But at the committee stage, where each clause of the bill is discussed, Mr. Cox acknowledged the Opposition's concerns about consultation.

“I'm going to go forward with this bill, but I'll give an undertaking that if we find after consultation that an amendment is needed. I'll come back to the House and do it. Because I do feel that we need to have everybody on board.”