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Cablegate: C O R R E C T E D C O P Y Bermuda's 2009-2010

VZCZCXRO2171
RR RUEHHT
DE RUEHHT #0015/01 0192003
ZNR UUUUU ZZH
R 192003Z JAN 10
FM AMCONSUL HAMILTON
TO RUEHC/SECSTATE WASHDC 3979
INFO RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHLO/AMEMBASSY LONDON 0933
RUEHHT/AMCONSUL HAMILTON 2157

UNCLAS SECTION 01 OF 13 HAMILTON 000015

SIPDIS

SENSITIVE

INL; SCT; EEB
JUSTICE FOR AFMLS, CIA, OPDAT;
TREASURY FOR FINCEN (BEZEK AND MICHAEL);
EUR/WE (MARBURG AND ABBASZADEH);
EUR/PPD (MCMANIS AND PIPKIN);
LONDON FOR HUBER AND M. JOHNSON

E.O. 12958: N/A
TAGS: KCRM EFIN KTFN SNAR PGIV BD
SUBJECT: C O R R E C T E D C O P Y BERMUDA'S 2009-2010
INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT (INCSR)

REF: A. HAMILTON 0006
B. 2009 STATE 114960

1. U.S. Consulate General Hamilton provides this corrected
copy of the money laundering and

financial crimes section of the 2009-2010 INCSR (REFTEL A).
Post has re-numbered the paragraphs beginning with paragraph 40.

GENERAL QUESTIONS

2. (18) Yes. An overseas territory of the United Kingdom
(U.K.), Bermuda is considered an

important regional and global financial center. It is the third
largest reinsurance center in the world and the second largest
captive insurance domicile, with firms based in the jurisdiction
writing significant volumes of business in the U.S. and U.K. It
is not considered to be significant in terms of money
laundering. Bermuda is not considered a major drug source or
transshipment country; however, the majority of the money
laundering that occurs in Bermuda is believed to be related to
the domestic drug trade.

3. (19) Money laundering in Bermuda is related primarily to
proceeds from domestic criminal

activity involving marijuana, cocaine, cocaine freebase and
heroin. Amounts seized in 2008 were 241.2 kilos, 4.8 kilos, .22
kilos and .8 kilos respectively. The Island is an end-user
jurisdiction in narcotics trafficking, rather than a
transshipment point for drugs. Bermuda's drugs originate in
South and Central America, using the Caribbean, the U.S. and to
a lesser extent the U.K. as transshipment points into Bermuda.
Money laundering proceeds are controlled primarily by gangs,
which have proliferated in recent years. Public corruption does
not contribute to money laundering/terrorist financing.

4. (20) There is no significant black market for smuggled
goods in Bermuda.

5. (21) The Bermuda Monetary Authority (BMA) closely
supervises Bermuda's financial services

sector for prudential and Anti-Money Laundering/Combating
Financing Terrorism (AML/CFT) purposes, and permits no
unlicensed or unregistered entities to operate in this sector.
There have been no cases of terrorist financing in Bermuda, and
there was no significant increase in financial crimes in 2009.
In December the Government of Bermuda (GOB) passed the
Anti-Terrorism (Financial and Other Measures) Amendment Act
2009, effective January 13, 2010. In conjunction with that act,
and in conformance with the U.S. and the U.K., the GOB will
issue by January 15, 2010 a directive to sanction the Islamic
Republic of Iran Shipping Lines (IRISL), which has obtained
insurance through a company legally domiciled in Bermuda - the
South of England Protection and Indemnity Association (SEPIA).
The directive to SEPIA to cease doing business with IRISL would
be effective immediately, with provision for winding up existing
contracts within seven days. The GOB responded expeditiously
and comprehensively to U.S. concerns on this issue.

There are cases where criminals utilize the formal financial
sector for money laundering purposes, resulting in criminal
investigations and pending prosecutions. There are no free
trade zones, hawalas or other informal financial sector entities
in Bermuda in which money laundering/financing terrorism occurs.
There are four banks, one deposit company and two money service
businesses involved in money transmission services, all of which
the BMA licenses.

HAMILTON 00000015 002 OF 013

6. (22) The National Anti-Money Laundering Committee
(NAMLC) believes that the currency

used in Bermuda for payment to international narcotics
traffickers is the U.S. dollar and that there have been cases
where traffickers utilized the formal financial sector for money
laundering purposes. The proceeds of narcotics trafficking may
be destined for the U.S. or may pass through the U.S. for
transmission to some other country.

7. (23) No, there are no indications that trade-based money
laundering occurs in Bermuda. There

are no free-trade zones in Bermuda.

OFFSHORE FINANCIAL CENTERS

8. (24) Within the specific definition of the term
provided, Bermuda is not considered an offshore

financial center as there is no distinction in how it regulates
businesses operating in the local economy and those operating
internationally from within Bermuda.

9. (25) No, Bermuda does not permit either shell companies
or offshore banks. However, a

foreign bank may establish a subsidiary as a Bermuda company
with its own board of directors, but may not establish a branch.
A large international business sector - including exempt
companies - underpins the Island's economy. Section 92A of the
Companies Act requires every company to maintain a register of
directors and officers that is to be open for inspection by
members of the public.

10. (25a) To post's knowledge, Bermuda performs adequate
background checks on applicants for

banking and business licenses for all entities.

11. (25b) According to the Registrar of Companies, at the end
of September 2009, there were

13,634 exempted or international companies registered in
Bermuda, 1,230 exempted partnerships, 536 overseas companies and
70 overseas partnerships. In March 2008, there were a total of
1,315 investment funds in Bermuda: 883 mutual funds, 80
umbrella funds, and 388 segregated accounts. There were also
106 unit trusts and 168 umbrella trusts.

Exempted companies are exempt from Bermuda laws that apply to
local entities, including the restriction that at least 60
percent of local entities must be owned by Bermuda residents.
Exempt companies are not subject to currency controls or capital
controls, and they are free from all forms of direct taxation on
income and capital gains. Therefore, exempt companies are
normally prohibited from doing business in the local economy.
The majority of exempt companies are not required to have a
physical presence on the Island, but designate local directors
(generally a local lawyer and secretary) to manage corporate
affairs in Bermuda. Directors must be natural persons. Before
exempt companies can be established or any shares transferred
between nonresidents, the owners and controllers must be vetted
by the BMA, the sole regulatory body for financial services.

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12. (25c) Anonymous directors and trustees are not allowed.

13. (26) Lotteries, casinos, and gambling, including Internet
gambling, are prohibited business activities. However,
gambling that does not use gaming machines is allowed, including
bingo, raffles, and Crown and Anchor. The Prohibition of Gaming
Machines Act 2001 prohibits the importation of gaming machines
and their parts and accessories. Casinos are illegal; a bill to
allow cruise ship casinos to operate while in port was defeated
in 2009. The Lotteries Act 1944 prohibits the import of foreign
lottery material.

14. (27) The BMA regulates Bermuda's entire financial services
sector. There are separate regulatory acts which apply to each
sector (e.g. trusts, deposit taking, investment business etc.),
but the requirements are the same whether the entity is
operating solely within the local economy or operating from
within Bermuda internationally. All classes of financial
institutions required to be regulated under the Financial Action
Task Force (FATF) standards are subject to customer due
diligence, ongoing monitoring, record keeping and all other
AML/ATF (Anti-Terrorist Financing) requirements, including the
filing of Suspicious Activity Reports (SARs) for money
laundering or terrorist financing.

FREE TRADE ZONES

15. (28-30) There are no free trade zones in Bermuda.

LEGAL FOUNDATION OF AML REGIME

16. (31) Bermuda has a robust legal framework as it relates to
AML/CFT and is committed to

keeping up to date with international standards. There have
been several waves of related legislation since the inception of
money laundering regulation in 1997.

The Proceeds of Crime Act (POCA) 1997, as amended, is the
foundation of the GOB's AML/ATF regulatory regime applying money
laundering controls to financial institutions such as banks,
deposit companies, and trust companies. Subsequent amendments
expanded the scope of the legislation to cover the proceeds of
all indictable offenses and added investment businesses,
including broker-dealers and investment managers, to the list of
regulated institutions. Trust service providers, lawyers and
corporate service providers are now subject to the same customer
due diligence, record-keeping and supervision arrangements as
financial institutions.

With respect to anti-terrorism financing, the GOB enacted the
Anti-Terrorism (Financial and Other Measures) Act (ATFA) in 2004
to criminalize terrorist financing and provide the framework to
ensure implementation of the FATF Special Recommendations on
terrorist financing. The Act makes it an offense to raise funds
for terrorism, creates specific offenses relating to the
raising, use, or possession of funds for purposes of terrorism,
imposes a duty to report suspicious activity, and provides for
the forfeiture of terrorist cash. The effect is to parallel the
provisions already in place under the POCA for money laundering
and the proceeds of other serious crimes. Financial
institutions were directed to conduct full reviews of their
clients against officially published lists of terrorist
suspects. There has been no known identified evidence of
terrorist financing in Bermuda.

In December 2009, to implement Schedule 7 of the UK Counter
Terrorism Act 2009, the Bermuda Parliament passed the
Anti-Terrorism (Financial and Other Measures) Amendment Act 2009
and the Proceeds of Crime (Anti-Money Laundering and Terrorist

HAMILTON 00000015 004 OF 013


Financing) Regulations 2009. The act and regulations are
expected to be enacted on January 13, 2010 and are a very high
priority for Bermuda. The Minister of Justice is empowered,
under certain strictly defined conditions, to give directions
relating to enhanced due diligence, enhanced ongoing monitoring,
systematic reporting and limiting/ceasing business. The BMA is
designated as the supervisory and enforcement authority. Local
and cross border wire transfers regulations aim to bring Bermuda
into compliance with FATF recommendations. The legislation
requires financial institutions to verify the accuracy of the
information on the payer/originator before transferring funds,
require financial institutions to retain for a period of five
years, complete records on the payor/originator of the fund
transfer, require financial institutions receiving wire
transfers to maintain effective procedures to detect whether
complete information on the payor/originator is received with
the wire transfer and specify how the receiving institution
should treat transfers with missing or incomplete information.

In March 2009 Bermuda updated the Revenue Act 1898 to strengthen
the requirements relating to cross border transportation of
currency and monetary instruments. The threshold for reporting
is $10,000. Mandatory declaration forms are used for all
incoming passengers (regardless of point of embarkation) and for
outgoing passengers to the US. For outgoing passengers to
Canada and the U.K. there is a disclosure system in place.
Additionally, goods, currency and negotiable instruments may be
forfeited if not declared or are falsely declared. Penalties
for related offenses were increased and directors and officers
of companies can now be charged.

The Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist
Financing) Regulations 2008, which came into effect on January
1, 2009, give the BMA broader responsibilities and powers for
monitoring and compliance enforcement of AML/CTF-regulated
financial institutions. It formalized the requirements for
customer due diligence, including for correspondence banking,
and broadened the range of financial institutions, including
trust service providers, lawyers and accountants. Financial
institutions are required to take specified measures to
compensate for higher risk when a customer has not been
physically present for purposes of identification and must
conduct enhance customer due diligence for politically exposed
persons (PEPs).

The GOB enacted the Proceeds of Crime (Supervision and
Enforcement) Act 2008 (SEA) effective January 1, 2009, to
establish a civil money penalty regime and to allow the BMA to
use its regulatory powers to address AML/ATF breaches. The
definition of "financial institution" under SEA includes
insurers, but not reinsurers, licensed under the Insurance Act.
The BMA has established a specialized AML/ATF unit to undertake
its supervisory and monitoring functions, including both on-site
and off-site monitoring.

Also effective on January 1, 2009, the Anti-Terrorism (Financial
and Other Measures) Amendment Act 2008 essentially addressed the
recommendations in the 2007 IMF Report relating to terrorism and
terrorist financing. It broadens the meaning of "terrorism,"and
terrorist financing" and adds the offences of "tipping-off,"
"organizing or directing others to commit offences," and
"offences by bodies corporate, partnerships, and unincorporated
associations." It also makes provisions for offenses by bodies
corporate, and authorizes the Minister of Justice to make
regulations for the purposes of detecting and preventing the
financing of terrorism. The latter provision resulted in the
Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist
Financing) Regulations 2008 relating to customer due diligence,
ongoing monitoring, record keeping, etc.

Collective investment schemes (CISs) are regulated by the BMA,
and fund administrators are regulated persons for the purposes
of the POCA. To strengthen regulations, CISs, including hedge
funds, are subject to the Investment Funds Act 2006, which came
into effect in January 2007. The Investment Funds Act is the

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legal framework for regulating investment funds, which includes,
in addition to mutual funds and unit trusts, other business
vehicles that pool and manage investment monies. The act also
required fund administrators in Bermuda to be licensed and
subjects them to minimum standards and a code of conduct.
Licensees are also recognized persons for POCA purposes and are
subject to compliance monitoring by the BMA. The BMA continues
to apply differentiated requirements involving lighter
regulation of schemes catering to institutional and
sophisticated investors, with greater reliance on transparency
and disclosure. The BMA is also able to conduct compliance
checks of POCA procedures as carried out by CIS administrators.

The Insurance Amendment Act 2004 implemented a number of changes
to Bermuda's insurance regime pursuant to the International
Association of Insurance Supervisors' (IAIS) adoption of revised
core principles for supervision. Further amendments to the
Insurance Act were enacted in the summer of 2006 to upgrade
provisions and powers to provide the BMA with the ability to
comply with IAIS core principles, like those existing for
banking and investments.

The amended Investment Business Act 2003 enhances the regulatory
powers of the BMA, granting the BMA stronger intervention powers
and clarifying certain provisions, such as the BMA's ability to
cooperate with foreign regulatory bodies. Other provisions
include measures to strengthen criminal and regulatory
penalties. The Act also brought the Bermuda Stock Exchange
(BSX) under the regulation of the BMA. In 2004, provisions were
added to the Criminal Code Amendment Act to create specific
offenses of insider trading and market manipulation in
securities markets. Fines up to $100,000 and prison terms of
five years are in place for market manipulation and up to
$175,000 and seven years jail time for insider trading. These
provisions are in addition to existing regulations of the
Bermuda Stock Exchange that prohibit members from insider
trading and market manipulation, on penalty of sanctions,
including expulsion from the BSX.

In March 2009, the BMA issued Guidance Notes for AML/ATF
Regulated Financial Institutions on Anti-Money Laundering and
Anti-Terrorist Financing, outlining and interpreting the legal
and regulatory framework, indicating good industry practices,
and assisting institutions to design and implement systems and
controls to limit AML/ATF risks to institutions.

2006 Guidance Notes broadened the scope of the POCA regulations.
The POCA includes "know your customer" requirements and provides
for the monitoring of accounts for suspicious activity.
Furthermore, the GOB performs due diligence on persons seeking
to undertake business on the island. The vetting process is
undertaken when an entity is incorporated. A personal
declaration form must be submitted for beneficial owners of
international businesses prior to incorporation. Similar
requirements apply to proposals to transfer shares.
Additionally, a company must detail its business plan and
maintain a register of shareholders at its registered office.

The Basel Committee's Core Principles for Effective Banking
Supervision are implemented through the Banks and Deposit
Companies Act 1999. Banks and other financial institutions are
required to retain records for a minimum of five years. Bermuda
has not adopted bank secrecy laws, but like the UK, recognizes a
banker's common-law duty of client confidentiality. Bankers and
others are protected by law with respect to their cooperation
with law enforcement officials. Bermuda law requires money
transmission services to be conducted in association with a
licensed deposit-taker, and conversion of funds is subject to
bank reporting standards.

17. (32) No, Bermuda has no secrecy laws.

FINANCIAL SECTOR

18. (33) No, Section 53 of the Companies Act 1981 prohibits
bearer shares.

19. (34) Responsibility for determining AML/CFT policy
statutorily rests with the National Anti-Money Laundering

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Committee (NAMLC), which was created by POCA in 1997. The NAMLC
now resides within the Ministry of Justice, and is headed by an
independent National AML/CFT Chairman. Bringing together key
ministries and departments - including the FIA, police, attorney
general, director of public prosecutions, Ministry of Finance,
and the BMA - the NAMLC advises the Minister of Justice in
relation to the detection and prevention of money laundering and
terrorist financing in Bermuda, the development of a national
plan of action, and the participation of Bermuda in the
international effort against money laundering. The BMA
supervises, regulates, inspects and secures compliance of
financial institutions operating in or from Bermuda and assists
other authorities in Bermuda with the detection and prevention
of financial crime.

The Bermuda Monetary Authority is the sole regulatory body for
financial services and is responsible for the licensing,
supervision, and regulation of financial institutions, including
those conducting deposit-taking, insurance, investment, and
trust business in Bermuda. The BMA Amendment Act 2002
formalized the BMA's responsibilities to include assisting with
the detection and prevention of financial crime. The BMA
conducts on-site reviews and detailed compliance testing of
financial institutions' AML/CTF controls. It engages in active
perimeter policing responsibilities and has legal powers to
undertake investigations of unlicensed persons suspected of
breaching the regulations, although the BMA has not found it
necessary to use these legal powers extensively. In 2008
Bermuda passed the Proceeds of Crime Regulations (Supervision
and Enforcement) Act 2008, which designated the BMA as the
supervisory body for securing compliance with the regulations by
regulated entities. BMA officers have indicated that it needs
more resources, including increased staffing, to handle its
responsibilities.

20. (35) Yes, banks and other financial institutions are
required to know and record the identity of customers. However,
Bermuda's reporting framework currently is based only on a
suspicion of money laundering or terrorist financing. Financial
institutions are required to conduct customer due diligence on
all customers and transactions without a threshold. Simplified
due diligence is only permitted in certain limited
statutorily-defined circumstances pertaining to specified types
of financial products. There is no general statutory threshold
for these purposes. However, in March 2009 Bermuda updated the
Revenue Act 1898 to strengthen the requirements relating
specifically to cross border transportation of currency and
monetary instruments. The threshold for such reporting is
$10,000.

21. (36) Yes, the Proceeds of Crime (Anti-Money Laundering and
Anti-Terrorist Financing) Regulations 2008 require that records
of a customer's identity and supporting evidence and records for
business relationships and occasional transaction which are the
subject of customer due diligence be kept for five years. In
any case where a police officer has notified a relevant person
in writing that particular records are or may be relevant to an
investigation which is being carried out, the relevant person
must keep the records pending the outcome of the investigation.

22. (37) Yes, all financial institutions are required to and do
report suspicious transactions. Such reporting is mandatory for
all persons who during the course of any trade, profession,
business or employment acquire knowledge or suspicion of another
person's involvement in money laundering. A failure to report
this knowledge or suspicion to the Financial Intelligence Agency
(FIA) is a criminal offence. There is no statutory threshold
for the reporting of suspicious transactions.

23. (38) Yes, there is statutory protection for all persons who
make the disclosure of any knowledge or suspicion of money
laundering which comes to them during the course of their trade,
profession, business or employment.

INFORMAL FINANCIAL SECTOR AND NONFINANCIAL BUSINESSES AND
PROFESSIONS

24. (39) AML/CFT controls apply to all categories of financial
institutions as defined by FATF, both bank and non-bank (NBFIs).

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Bermuda has not made Designated Non-Financial Businesses and
Professions (DNFBPs) subject to reporting obligations, customer
due diligence, etc., although the GOB is planning such
legislation for 2010. However, some intermediaries, such as
lawyers and accountants, are already included. Bermuda
considers trust service providers, brokerage houses and money
service businesses as financial institutions, so they are
covered.

FINANCIAL INTELLIGENCE UNIT (FIU)/INVESTIGATIONS

25. (40) Yes, Bermuda law establishes and authorizes funding for
an FIU, although it is called a Financial Intelligence Agency
(FIA) in Bermuda.

26. (41) Yes, Bermuda established the FIA in November 2008 to
replace the FIU housed within the Police Department. The FIA
operates as an independent agency within the Ministry of
Justice. It has both operational and budgetary independence.
It has a small staff, which the FIA has plans to augment.

27. (42) The FIA acts as an independent agency authorized to
receive, gather, store, analyze and disseminate information
relating to suspected proceeds of crime and potential financing
of terrorism, received in the form of Suspicious Activity
Reports (SARs). It does not have investigative or regulatory
responsibilities.

28. (43) Yes, Section 16 of the Financial Intelligence Agency
Act gives the FIA access to any information required for enquiry
into a SAR. Sections 18 and 19 also allow for disclosure of
information to relevant authorities. There are also the
necessary gateways in place to allow for sharing of information
with relevant authorities both domestically and internationally.
In addition, although not required for sharing of information,
the FIA has signed memoranda of understanding (MOUs) with a
number of other FIUs to ensure efficient and effective
cooperation.

29. (44) The FIA received 651 SARs in 2009. Of those, it
referred 73 to investigatory authorities - the BPS, Bermuda
Customs and the BMA. The GOB does not routinely keep statistics
on the number of SARS actually investigated. The following
information for 2008 was prepared especially in response to
Michael Foot's Review of the U.K.'s offshore financial centers,
released in October 2009.

Bermuda averaged 200-250 SARs per year from 2003-2008. Of those,
only a fraction was investigated: 24 cases in 2008, four in 2007
and one in 2006. Local prosecutions for financial crime
2003-2008 were in the single digits, although there were
prosecutions in other jurisdictions where Bermuda evidence
contributed: sixteen in 2007 and ten in 2006. The courts seized
proceeds of crime assets in 2008 amounting to $45.7 million;
assets confiscated that year were $22.9 million. The POCA, as
amended, provides protection from criminality resulting from a
SARs filing.

30. (45) The FIA is responsible for analyzing SARS; the BPS,
Bermuda Customs and the BMA investigate financial crimes. The
BMA has indicated it needs additional staffing. The Association
of Certified Anti-Money Laundering Specialists (ACAMS) conducted
training for 12 police officers from the Financial Crimes Unit
in Bermuda in September 2009; a number of officers have now
successfully achieved the CAMS certification. Candidates from

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the BMA, various financial institutions and the NAMLC office
also benefitted from the training. The BPS is focusing its
resources on increasing prosecutions for drug trafficking and
money laundering. There was realignment in 2009 to enable the
BPS's Financial Crimes and Narcotics Units to work more closely
together.

ASSET FORFEITURE AND SEIZURE LEGISLATION

31. (46) There have been no arrests, prosecutions or convictions
for terrorist financing in Bermuda. Since January 2009 the BPS
has arrested fifteen persons on suspicion of offences related to
money laundering. Of the fifteen arrested, two people were
charged and five people are waiting to be charged.

In the past five years there has been one prosecution and
conviction for money laundering. This case was in October 2008
and involved monies resulting from drug trafficking ($159,985)
being sent to Trinidad and Tobago. The monies were sent through
a variety of methods including the use of "nominees" (named
recipient who is not the ultimate beneficiary), wire transfers,
and ATM cards being sent to individuals in Trinidad and Tobago
who then withdrew money using the ATM cards.

Bermuda has assisted a number of other jurisdictions in money
laundering cases that have resulted in prosecutions.

32. (47) Yes, Bermuda has enacted asset forfeiture and seizure
legislation. For persons convicted of money laundering, the
POCA Amendment Act 2008 empowers the court to order the
forfeiture of any property used for the purposes of the money
laundering offense. Any payment received by a defendant in
connection with a money laundering offense is subject to
confiscation. Any agreement entered into for the purposes of
money laundering is void.

The SEA Act empowers the BMA to impose civil penalties not
exceeding $500,000. The Customs Traveler Declaration form
provides for reporting incoming transportation of currency and
bearer negotiable instruments from all countries and outgoing
transportation of currency to the US, and a disclosure system
for the outgoing transportation of currency and bearer
negotiable instruments to all countries, excluding the US.

When seized currency is suspected as being the proceeds of
crime, Bermuda Customs is required to forward the case for
investigation and prosecution by the relevant authority. The
Revenue Amendment Act 2008 imposes a penalty of $100,000 or a
term of imprisonment between 2-10 years.

33. (48) There are no obstacles or disincentives to enacting
asset seizure/forfeiture legislation.

34. (49) Bermuda's laws permit seizure of property directly
related to the commission of a crime. Although real estate used
in the cultivation of narcotics cannot be seized, it is possible
to prevent it from being disposed of or otherwise used so as to
deplete its value. Bank accounts and other property can be
restrained also to prevent use or depletion. Substitute assets
cannot be seized, unless made subject of a court order
restraining the disposal of such property insofar as they
represent realizable assets against.

35. (50) The Financial Crimes Unit (FCU) of the Bermuda Police
Service (BPS) is responsible for carrying out investigations
into and tracing of assets arising as proceeds from the
commission of crimes. With the assistance of the Department of
Public Prosecutions, the FCU is also responsible for seeking
restraint orders to prevent the disposal/depletion of such
assets. However, any investigating unit within the BPS
conducting an investigation that gives rise to the discovery of
property used in the commission of the crimes may seize such
property under warrant. A magistrate may issue an order to

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freeze assets for a period not exceeding seven days.

Restraint orders are made where there are reasonable grounds to
believe that a confiscation order may be made in relation to the
case in the future. Accordingly, as long as an investigation or
prosecution is pending or in progress, restraint orders will
usually remain in effect until the date a confiscation order is
made in relation to that case or until the court otherwise
orders termination.

Restrained funds are referred to the Accountant General's
Department, but if they were in a bank account at the time of
restraint, then they will remain with the bank in which the
account resides. Cash which had been seized by the Police and
retained under the Proceeds of Crime Act are deposited into the
statutory Confiscated Assets Fund until the court makes further
orders in relation to it.

A confiscation order is an order to the individual to pay an
amount specified by the court on or before a stipulated date.
There is no automatic procedure for restrained property to be
converted immediately for satisfaction of the confiscation
order. Therefore, in order to prevent the depletion of the
restrained funds when a confiscation order takes effect and
terminates the restraint order, then a charging order is usually
coupled with the confiscation order. This means that if at the
end of the stipulated time the confiscation order is not
satisfied then further action can be taken against the charged
property to satisfy the order.

The Department of Public Prosecution applies for a confiscation
order and pays this sum to a court or directly to the Accountant
General's Department. If the defendant fails to pay within the
required time, the Department of Public Prosecutions returns to
court to seek orders that will levy against his property. The
court can name a receiver to manage the process of levying
against the property.

The Minister of Finance has responsibility for the management of
the seized assets. Pursuant to Section 55A(3) of POCA, the
Minister of Justice and the Minister of Finance may authorize
payments to be made out of the Confiscated Assets Fund, which
are invested, with earned income returned to the fund. The
money can be disbursed for purposes related to law enforcement:
to investigate suspected cases of drug trafficking, terrorist
financing and money laundering; to cover costs associated with
the treatment and rehabilitation of drug addicts; to cover
costs associated with the prevention and public education
concerning drug abuse; to meet the expenses of the Department of
National Drug Control; to train officials in the effective
implementation of the provisions of POCA in relation to money
laundering and in relation to terrorist financing; to satisfy an
obligation of the Government of Bermuda to a foreign
jurisdiction in respect of confiscated assets, whether under a
treaty or arrangement providing for mutual assistance in
criminal matters or otherwise; to meet the expenses of the
National Anti-Money Laundering Committee; to meet the expenses
of the FIA; to meet the remuneration and expenses of a receiver
appointed under POCA or the Anti-Terrorism (Financial and Other
Measures) Act 2004; to pay compensation or costs awarded under
POCA or the Anti-Terrorism (Financial and Other Measures) Act
2004; or to cover costs associated with the administration of
the Confiscated Assets Fund. Post cannot make a judgment as to
the GOB's capacity to manage seized assets.

36. (51) Yes, the banking community cooperates with enforcement
efforts to trace funds and seize/freeze bank accounts.

37. (52) Yes, Bermuda law allows for civil as well as criminal
forfeiture.

38. (53) Yes, the Bermuda government enforces existing asset
seizure and forfeiture laws, and there are adequate police
powers and resources. The asset seizure and forfeiture laws are
set out in the Proceeds of Crime Act 1997, the Anti-Terrorism
(Financial and Other Measures) Act 2004 (ATFA) and the Terrorism
(United Nations Measures) (Overseas Territories) Order. Assets
can be frozen without delay.


HAMILTON 00000015 010 OF 013


39. (54) Yes, Bermuda does have an independent national system
and mechanism for freezing terrorist assets. The Terrorism
(United Nations Measures) (Overseas Territories) Order gives the
Governor power to freeze terrorist assets. ATFA provides for
`enabling cash' to be forfeited if it is intended to be used for
the purposes of terrorism; or is, or represents, property
obtained through terrorism; or is property earmarked as
terrorist property. Cash can be seized by an authorized officer
("authorized officer" means a police officer, a customs officer
or an immigration officer) if he has reasonable grounds for
suspecting that it is terrorist cash. An application for the
forfeiture of the whole or any part of it may be made and the
court may order the forfeiture if it satisfied that it is
terrorist cash.

40. (55) In 2009, $70,096 in cash was forfeited pursuant to the
Misuse of Drugs Act 1974, with two applications still pending
hearing. During that period, confiscation orders made under the
Proceeds of Crime Act 1997 totaled $104,329; two money
laundering cases were brought before the courts and are pending
trial.

41. (56) Yes, Bermuda has enacted laws for the sharing of seized
assets with other governments and has negotiated Mutual Legal
Assistance Treaties and other such agreements to allow for
effective cooperation in this regard.

TERRORIST FINANCING

42. (57) Yes, Bermuda has criminalized the financing of
terrorism. The act of terrorism is defined in section 3 of the
Anti-Terrorism (Financial and Other Measures) Act 2004 (ATFA)
and also the Terrorism (United Nations Measures) (Overseas
Territories) Order 2001, which the U.K. enacted under it powers
established by the United Nations Act 1946 and is applicable to
Bermuda.

In December 2009, to implement Schedule 7 of the U.K. Counter
Terrorism Act 2009, the Bermuda Parliament passed the
Anti-Terrorism (Financial and Other Measures) Amendment Act 2009
and the Proceeds of Crime (Anti-Money Laundering and Terrorist
Financing) Regulations 2009. The act and regulations will
become effective on January 13, 2010 and are a very high
priority for Bermuda. The Minister of Justice will be
empowered, under certain strictly defined conditions, to give
directions relating to enhanced due diligence, enhanced ongoing
monitoring, systematic reporting and limiting/ceasing business.
The BMA is designated as the supervisory and enforcement
authority. The act will also bring non-long term insurance
companies as potential recipients of Directions for Systematic
Monitoring and Limit/Cease business only, in respect of the risk
associated with the proliferation of certain types of weapons.
Local and cross border wire transfers regulations aim to bring
Bermuda into compliance with FATF recommendations.

In relation to the financing of terrorism, pursuant to section 5
of ATFA and article 3(1) of the Terrorism (United Nations
Measures)(Overseas Territories) Order, a person commits an
offence if he invites another to provide money or other
property, and intends that it should be used, or suspects that
it may be used, for the purposes of terrorism; receives money or
other property, and intends that is should be used, or suspects
that it may be used, for the purposes of terrorism; provides
money or other property, and knows or suspects that it will or
may be used for the purposes of terrorism.

Pursuant to section 6 of ATFA, a person commits an offence
relating to the use and possession if he uses money or other
property for the purposes of terrorism or possesses money or
other property, and intend that it should be used, or suspect
that it may be used, for the purposes of terrorism.

Pursuant to section 7 (funding arrangements) of ATFA, a person
commits an offence if he enters into or becomes concerned in an
arrangement as a result of which money or other property is made
available or is to be made available to another, and he knows or
suspects that it will or may be used for the purposes of
terrorism.

The U.K. has extended to Bermuda by Order in Council a number of
legislative measures to comply with UN requirements. These

HAMILTON 00000015 011 OF 013


measures include: The Terrorism (United Nations Measures)
(Overseas Territories) Order 2001; the Afghanistan (United
Nations Sanctions) (Overseas Territories) Order 2001; and the
Al-Qa'ida and Taliban (United Nations Measures) (Overseas
Territories) Order 2002 and its 2002 amendments. The UK has not
yet extended to Bermuda the Suppression of the Financing of
Terrorism (Vienna Convention) or the UN Convention against
Transnational Organized Crime 2000 (Palermo Convention), a
situation that the IMF said in its 2008 review "should be
remedied without delay." Although the GOB notes that the
provisions of those conventions have largely already been
incorporated into Bermuda's legislation, the government will
work with the U.K. in 2010 to officially extend those
conventions to Bermuda.

43. (58) Yes, Bermuda has circulated to its financial
institutions all of the relevant lists relating to terrorist
organizations/financiers. Bermuda did not identify, freeze,
seize and/or forfeit terrorist-related assets in 2009.

44. (59) Bermuda does not have alternative remittance systems
such as hawala or hundi or black market exchanges. Money
service businesses are required to be licensed by the financial
services regulator for them to operate within the jurisdiction.
Bermuda has a declaration/disclosure system in place to address
cross border cash transactions.

45. (60) Charities are required to be registered with the
Registrar General and to file annual accounts. The Ministry of
Culture and Social Rehabilitation, the Ministry of Justice and
the NAMLC are currently undertaking a review of laws and
regulations related to non-profit organizations to ensure that
they cannot be misused for financing terrorism.

CROSS-BORDER TRANSPORTATION OF CURRENCY AND NEGOTIABLE
INSTRUMENTS

46. (61) Yes, there are statutory requirements for monitoring
the cross-border transportation of currency and monetary
instruments. In March 2009 Bermuda updated the Revenue Act 1898
to strengthen the requirements relating to cross border
transportation of currency and monetary instruments. The
threshold for reporting is $10,000. Mandatory declaration forms
are used for all incoming passengers (regardless of point of
embarkation) and for outgoing passengers to the U.S. For
outgoing passengers to Canada and the U.K. there is a disclosure
system in place. Additionally, goods, currency and negotiable
instruments may be forfeited if not declared or are falsely
declared. Penalties for related offenses were increased and
directors and officers of companies can now be charged.

In December 2009, Bermuda's Parliament passed The Proceeds of
Crime (Anti-Money Laundering and Anti-Terrorist Financing)
Amendment Regulations 2009 authorizing the BMA to oversee wire
transfers. The regulations will become effective on January 13,
2010. The legislation requires financial institutions to verify
the accuracy of the information on the payer/originator before
transferring funds, require financial institutions to retain for
a period of five years, complete records on the payor/originator
of the fund transfer, require financial institutions receiving
wire transfers to maintain effective procedures to detect
whether complete information on the payor/originator is received
with the wire transfer and specify how the receiving institution
should treat transfers with missing or incomplete information.

47. (62) No, cash declarations are not entered into a database,
but smuggling reports are. The information for smuggling
reports is shared with the BPS and FIA if they pertain to cash.

INTERNATIONAL COOPERATION

48. (63) Yes, Bermuda executed its first Tax Information
Exchange Agreement (TIEA) in 1986 in a treaty between the United
States, the United Kingdom, and Bermuda. Bermuda has similar
arrangements with other jurisdictions. On January 12, 2009, the

HAMILTON 00000015 012 OF 013


United States and the GOB signed a Mutual Legal Assistance
Treaty (MLAT), authorizing authorities in the U.S. and Bermuda
to request and obtain assistance from each other in criminal
investigations and prosecutions and related administrative and
other proceedings. The MLAT provides for cooperation between
the U.S. and Bermuda in combating a wide variety of crimes,
including economic crimes and money laundering, by facilitating
the collection of evidence needed by authorities in one country
but located within the other country.

49. (64) In June 2009, Bermuda moved onto the OECD's "white
list" with the signing of the minimum required 12 TIEAs. As of
December 21, 2009 Bermuda has signed 18 TIEAs with the Aruba,
Australia, Denmark, Faroe Islands, Finland, France, Germany,
Greenland, Iceland, Ireland, Japan, Mexico, the Netherlands, New
Zealand, Norway, Sweden, the United Kingdom and the United
States. Bermuda expects to sign additional TIEAs in early 2010
with Belgium, Canada, Japan, Portugal, and Spain.

Bermuda is also a member of the Egmont Group of Financial
Intelligence Units, in which information sharing is implicit. In
May 2009, the FIA officially replaced the former FIU as the
member of record in Egmont. Subsequently, the FIA signed
Memoranda of Understanding (MOUs) to share AML/ATF information
and intelligence with Armenia, Australia, Belgium, Canada,
Indonesia, Korea, Monaco, Montenegro, the Netherlands Antilles,
Nigeria, the Philippines, Romania, St. Vincent, United Arab
Emirates, the United Kingdom, and the United States. Meanwhile,
the GOB continues to pursue MOUs with other countries.

The BMA Amendment (No. 3) Act 2004 clarifies the power of the
BMA to cooperate with other overseas authorities. Other laws
also authorize the sharing of information with overseas
regulators: the Banks and Deposit Companies Act 1999, the
Trusts (Regulation of Trust Business) Act 2001 and the
Investment Business Act 2003.

50. (65) Yes, Bermuda cooperates well with the United States and
other governments investigating financial crimes relating to
narcotics, terrorism, and terrorist financing.

51. (66) There are no known instances of refusals by the GOB to
cooperate with foreign governments.

52. (67) No, the U.K. has not yet extended to Bermuda the
Suppression of the Financing of Terrorism (Vienna Convention) or
the UN Convention against Transnational Organized Crime 2000
(Palermo Convention), a situation that the International
Monetary Fund said in its 2007 review "should be remedied
without delay." Although the GOB notes that the provisions of
those conventions have largely already been incorporated into
Bermuda's legislation, the government will work with the UK in
2010 to officially extend those conventions to Bermuda.

The U.K. has extended to Bermuda by Order in Council a number of
legislative measures to comply with UN requirements. These
measures include: The Terrorism (United Nations Measures)
(Overseas Territories) Order 2001; the Afghanistan (United
Nations Sanctions) (Overseas Territories) Order 2001; and the
Al-Qa'ida and Taliban (United Nations Measures) (Overseas
Territories) Order 2002 and its 2002 amendments.

53. (68) Yes, Bermuda strives to adhere to international money
laundering standards. Bermuda is a member of the
Caribbean Financial Action Task Force, and the FIA is a member
of the Egmont Group. Bermuda is also a member of regulatory
standard-setting bodies for banking, insurance and investment
business.


HAMILTON 00000015 013 OF 013


54. AMCONGEN Hamilton's points of contact are Douglas Boudreau
(boudreaudr@state.gov) or Astrid Black (blackac@state.gov).
SHELTON

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