international accountancy firm KPMG recommendations, Business reporter Sue Stuart examines the sections dealing with regulation, international co-operation and money laundering. The full response to KPMG's Review of Financial Regulation was published in The Royal Gazette last Monday.

The speed with which transactions can take place through today's technology make international co-operation vital if a jurisdiction is to retain its integrity. But sharing information must be done in a manner that does not legally compromise confidentiality.

The international accountancy firm KPMG examined the whole area of regulating and policing the finance sector as well as international co-operation with other regulatory bodies, and has recommended amending the legal gateways through which information can be passed. In Bermuda, says Government, this is being done.

The Investment Business Act will be updated to allow regulators to share information with other regulators. This legal facility is already written into the Acts for banks and public companies.

Another aspect of international information sharing is the need for a memorandum of understanding to be drawn up between each two countries that need to share information about individuals or corporate entities. Bermuda already has some in place but is currently working on drawing up others with required nations.

Government also accedes to KPMG's recommendation that the BMA, "should produce guidance for other regulators on how and when it can provide assistance. This guidance should also make clear what requirements need to be satisfied before co-operation can be given.'' In addition, Government will amend legislation to allow information sharing between bodies within Bermuda, as recommended by KPMG, especially between the BMA and the Police. The updated legislation will also address the need to protect the confidentiality of information received.

Bermuda urged to join battle against white collar crime KPMG recommended Bermuda participate in the White Collar Criminal Investigation Team (WCCIT), an international body that deals with financial crime. "We consider it would be of benefit for Bermuda as it would both provide additional intelligence and investigative capability.'' Government is currently exploring this.

The recommendation that the range of financial crimes be extended in the Island refers to the statement, "The Proceeds of Crime Act (PCA) depends upon dual criminality and therefore does not extend to conduct which may be a financial crime in a foreign jurisdiction but which is not an indictable offence in Bermuda. Therefore the provisions which permit the enforcement of foreign forfeiture (of assets) orders do not apply to such conduct.'' Government is willing to do this and has already passed legislation amending the PCA which is waiting to be effected. However Government stresses that it is not prepared to exceed legislation that is passed in the UK.

Together with examining extending the range of financial crimes, Government is conducting a full review of the PCA and any amendments to it, particularly with a view to remaining consistent with the UK's approach to these issues.

Several of KPMG's recommendations are being addressed in this current review.

These include amending the mens rea restriction (that is a legal term referring to mental intent to commit a crime) used in dealing with money laundering offences and KPMG want it extended from "actual knowledge'' (of an offence) to "reasonable grounds to suspect.'' KPMG also want section 58 of the PCA, which deals with disclosures by the Police, clarified as the way it is now "may not permit the Bermuda Police to proactively disclose information to an overseas law enforcement or regulatory authority.'' Also included in Government's review is the matter of `grandfathering', that is passing through existing clients without a full range of checks as would be done on a new client. And it is examining the question of distinguishing between money launderers who are public officials (potentates) and others.

KPMG said, "Sentencing discretion should enable the judiciary to set higher penalties for public officials who commit money-laundering offences.'' As recommended, Government is examining the scope of money-laundering regulations and the requirement to verify all existing clients. It is also dealing with compliance monitoring through a set of objectives established through questionnaires by the BMA. Government has agreed to examine the possibility of introducing additional reporting of substantial cash flows to and from the Island, as suggested.

"We consider the volume of suspicious activity reports being received by the Financial Investigation Unit and its responsibility for investigation means that it is currently insufficiently resourced to conduct this work,'' KPMG stated. Government agrees with this and is currently, together with the Police, reviewing the unit's needs.

In accord with KPMG's desire to see more public awareness of money laundering, Government said the local National Anti-Money Laundering Committee is working on a programme to effect this. The NAMLC comprises heads of relevant bodies such as the regulators, Police, Customs, etc. and is chaired by a member of the Ministry of Finance.

Other recommendations affecting the Bermuda Monetary Authority have been agreed by Government. The BMA will take responsibility for regulation of trust companies and a consultative paper on this has already been prepared.

Government is considering how the BMA can formalise supervision of the Bermuda Stock Exchange and how it can formalise the BSX's position as a self-regulating organisation.