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31 January 2019
Amendments to Bermuda's AML and ATF laws
Private trust companies record keeping
Requirement to file bye-law information
Private trust companies and beneficial ownership registers
Summary of obligations
Filing of minimum required information
Private trust companies as trustees of charitable trusts
Economic substance requirements
Many offshore jurisdictions saw notable reforms in 2018. This article considers how recent changes to the regulation of financial services in Bermuda have affected private trust companies.
These legislative amendments were made primarily to ensure that Bermuda's legal framework remains up to date with international standards, which are aimed at maintaining the international financial system's integrity.
Bermuda's proceeds of crime laws require companies that fall within the definition of 'anti-money laundering/anti-terrorist financing (AML/ATF) regulated financial institutions' to:
In 2018 the definition of 'AML/ATF regulated financial institutions' was amended to include companies (ie, private trust companies) that are exempt from the requirement to be licensed to carry on trust business in or from Bermuda because they satisfy the private trust business exemption in the Trusts (Regulation of Trust Business) Order 2002. To secure the private trust business exemption a company must:
Notably, the 'AML/ATF regulated financial institution' definition provides that private trust companies which "utilise the services" of a Bermuda licensed corporate service provider or a Bermuda licensed trust business are not within the scope of the definition.
Bermuda's Trustee Act 1975 now requires private trust companies to keep accurate and adequate accounts and records (including underlying documentation) of the trustee's trusteeship which are appropriate to the trust and the trust property with respect to asset liabilities, additions to trust and distributions, purchases and sales, and income and expenses, for a minimum of five years from when they are prepared.
Private trust companies must "keep the information current, accurate and updated on a timely basis".
The amendments provide that a trustee who knowingly and wilfully contravenes the above requirements is liable to a Ber$20,000 penalty. Private trust companies must now:
Further amendments made to the Trustee Act require a private trust company to retain adequate identification information in respect of the following persons for the trusts of which it acts as trustee or administers:
Further, private trust companies must keep the information, current, accurate and updated.
Private trust companies that are subject to these requirements are liable on summary conviction to a fine of Ber$75 per day for every day of non-compliance.
The amendments to Bermuda's Companies Act 1981 (made in 2016) require companies that are registered thereunder to file a list of their directors with the registrar of companies. The list is available for public inspection. The list of directors must contain a complete and current record of its directors and include the full name and address of individual directors or the company name and registered office address in the case of corporate directors.
The 2018 amendments to the Companies Act require companies established thereunder that have a share capital to file the following information (for which they must make a provision for in their bye-laws) with the registrar:
The information that is filed under this requirement is not publicly available.
Failure to comply may result in the registrar exercising its enforcement powers which include issuing fines and ultimately, in more extreme cases, striking the company from Bermuda's company register.
The Companies and Limited Liability Company (Beneficial Ownership) Amendment Act 2017 (Beneficial Ownership Act) will, from 28 February 2019, require Bermuda companies to keep a register of beneficial owners (register) and file 'minimum required information' with the BMA.
Bermuda law does not impose obligations to keep registers of trusts or trust beneficiaries. However, subject to the scope of the Beneficial Ownership Act and the availability of exemptions, information in respect of trusts may need to be recorded on the register in circumstances where a trustee of a trust owns shares in a Bermuda company. A private trust company may also be required to comply with the Beneficial Ownership Act in respect of its beneficial owners.
The information recorded on a Bermuda company's register is not available for public inspection.
A Bermuda company (including a Bermuda private trust company) which is not exempt must:
The following types of Bermuda company and their subsidiaries are among the entities which are exempt from the obligations under the Beneficial Ownership Act (exempt entities):
Under the Beneficial Ownership Act a company is considered a 'subsidiary' of one or more exempt entities if:
The Beneficial Ownership Act sets out the following key terms:
The minimum required information to be included on a company's register includes:
Unless the company is reasonably satisfied that its register is accurate, it must issue written notices seeking confirmation, as applicable, to and in respect of:
Unless exempt, relevant companies must file the minimum required information with the BMA:
Companies must file a notice of changes to the minimum required information with the BMA within 14 days after the company is notified (or otherwise becomes aware) of the change.
Any persons who:
In certain circumstances, directors and other officers of the company may also be liable to the fines along with the company. It is a defence to an offence if the person can show that they took reasonable steps to identify the companies' beneficial owners.
The amendments to Bermuda's Charities Act 2014 made in 2018 are as follows:
The amendments require Bermuda's privately funded charitable trusts to have at least one trustee that is a Bermuda licenced trustee in order to be exempt from registration.
As with many other major offshore jurisdictions, late in 2018 Bermuda introduced economic substance requirements to comply with the European Council's requirements. In summary:
If they have not already, directors and administrators of private trust companies should urgently determine whether they are AML/ATF regulated financial institutions and ensure that they comply with the new record-keeping requirements and the pending beneficial ownership regime. Private trust companies that are trustees of charities must consider their circumstances and whether they need to attend to the notification, registration and associated requirements with respect to the charity. Bermuda private trust companies must consider the application of the economic substance requirements in respect of Bermuda's underlying companies in particular.
Bermuda private trust companies remain flexible vehicles that can be used in a range of private and commercial structures. The legislative amendments affecting private trust companies are consistent with trends of reforms in other offshore jurisdictions and ensure that Bermuda maintains its international reputation.
For further information on this topic please contact Ashley Fife at Carey Olsen Bermuda by telephone (+1 441 542 4500) or email (firstname.lastname@example.org). The Carey Olsen Bermuda website can be accessed at www.careyolsen.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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