Bermuda is a self-governing British Overseas Territory with its own Parliament and Constitution. The Governor of Bermuda represents the British monarch and is appointed by Her Majesty The Queen on the advice of the British government. The role of the Governor is to act as head of state, and he or she is responsible for appointing the Premier and the 11 members of the Senate (the upper house of Bermuda’s Parliament).
Bermuda is an important regional and global offshore financial center with a robust financial regulatory system. The United States provides 80% of imported goods and is the island’s largest resource for imports. International business and tourism are Bermuda’s top economic drivers. The re/insurance industry is one of Bermuda’s key leading industries and covers substantial liabilities in the U.S.
Bermuda’s annual 2019 GDP report recorded growth by 0.5 percent to $6.5 billion. The largest increases were from construction, human health and social work industries, and real estate. Gains were offset by decreases in value added for financial and insurance activities, accommodation and food service activities and the wholesale and retail trade industry. Economy-wide inflation, as measured by the implicit price index, increased by 3.1 percent. Including inflation, GDP at current prices increased by 3.6 percent compared to 2018.
Bermuda’s investment climate presents a series of advantages for potential investors. These include:
A stable, democratic government.
Low personal and corporate taxes.
A pool of skilled professionals.
Proximity to the United States, and extensive air and communication networks.
The Bermuda dollar (BMD) is pegged at par to the USD.
As a British Overseas Territory, Bermuda’s legal system is grounded in UK common law. Its legal, regulatory and accounting systems adhere to high ethical and transparency standards. It generally effectively and impartially enforces its laws to combat corruption and money laundering. There is no government interference in the court system that could affect foreign investors. Bermuda law recognizes and enforces secured interests in real property. The Government of Bermuda’s policies facilitate the free flow of financial resources in the product and factor markets, and the U.S. Securities and Exchange Commission recognizes the Bermuda Stock Exchange (BSX) as a Designated Offshore Securities Market. There is a general awareness of responsible business conduct among both producers and consumers. Bermuda continues to advocate for its leadership in global tax transparency and compliance and collaborates with international business stakeholders to protect its interests. The government welcomes new business to the island and introduced legal and regulatory framework to support fintech startups.
In 2018, the Bermuda Government passed legislation in the House of Assembly that created a regulatory framework for digital coin offerings as an amendment to The Companies and Limited Liability Company Act. The Fintech Business Unit is responsible for engaging with interested startups, engaging with key stakeholders and partners to support and manage the industry as it continues to develop.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Bermuda welcomes foreign direct investment (FDI). The Bermuda Business Development Agency (BDA) is an independent, public-private partnership, funded by both the Bermuda Government and the private sector. The agency is governed by a Board of Directors comprised of senior industry professionals representing the diversity of Bermuda’s financial services sector. The BDA carries out pro-active, targeted marketing and business development strategies to stimulate growth in the Bermuda economy and create and maintain jobs. (http://bda.bm)
The BDA acts as a partner for existing Bermuda-based companies and assists entities that are considering establishing operations in Bermuda. It connects prospective companies with industry partners and relevant representatives in the Bermuda Monetary Authority (BMA) and the Bermuda Government’s Business Development Unit, making formal introductions, troubleshooting, and communicating with clients to simplify the process. The BDA has segmented its business development efforts into four distinct pillars or industry areas of focus: Risk (insurance, reinsurance, captives, and insurance linked securities), Asset Management, Trust & Private Client, and International Commerce (technology, international markets, etc.). These are key sectors of the Bermuda marketplace, or areas for potential growth, and the BDA has separate business development managers, strategies and goals for each.
Limits on Foreign Control and Right to Private Ownership and Establishment
The 60/40 rule in Bermuda requires all companies to be controlled by at least 60% Bermudians. In February 2020, the Bermuda Government proposed to introduce a bill that will reduce the current required ownership regulations for a local company from 60% owned by a Bermudian, to 40%, as outlined in the 2020 Budget Report, to help stimulate and promote economic competition.
Some local businesses support relaxing the 60/40 rule to encourage FDI, increase liquidity in the local market, and boost the economy. Other businesses oppose it out of concern that they might not be able to compete with majority foreign-owned businesses.
In addition to ownership regulations, there are restrictions governing ownership of land by businesses.
‘Control’ is defined as the percentage of Bermudian directors, and the percentage of its shares beneficially owned by Bermudians, in the company being not less than 60% in each case. Amendments are expected to create more opportunities and foreign investments by Permanent Resident Certificate (PRC) holders who reside on the island.
Local companies can be exempted from the 60/40 rule by obtaining a license (pursuant to section 114B of the Companies Act) from the Minister of Finance, who decides if the granting of a license is in the best interest of the country. When considering an application for a Section 114B license, the Minister considers:
The economic situation in Bermuda and the due protection of persons already engaged in business in Bermuda.
The nature and previous conduct of the company and the persons having an interest in the company whether as directors, shareholders or otherwise.
Any advantage or disadvantage which may result from the company carrying on business in Bermuda.
The desirability of retaining in the control of Bermudians the economic resources of Bermuda.
Certain activities are excluded from the requirement of a license, including:
Doing business with other exempted undertakings (e.g., exempted companies, permit companies, exempted partnerships and exempted unit trust schemes) in furtherance of the business of the exempted company that is being conducted outside Bermuda.
Dealing in securities of exempted undertakings, local companies, or partnerships; and
Carrying on business as manager or agent for, or consultant or advisor to, any exempted company or permit company which is affiliated (whether or not incorporated in Bermuda) with the exempted company or an exempted partnership in which the exempted company is a partner or, in the case of mutual funds, selling or distributing their shares in Bermuda.
In 2012 local companies were exempted from the 60/40 rule if its shares were listed on a designated Stock Exchange, the company conducted business in a material way in a ‘prescribed industry,’ or if the company was a wholly owned subsidiary of such a listed company.
The prescribed industries are capital-heavy and include, inter alia, telecommunications, energy, insurance, hotel operations, banking, or international transportation services (by ship or aircraft).
Other Investment Policy Reviews
Bermuda is a World Trade Organization (WTO) member through the United Kingdom. Bermuda has not conducted an investment policy review through the OECD, WTO, or UNCTAD within the past three years.
The Investment Business Act 2003 is the statutory basis for regulating investment business in Bermuda. The act provides a licensing regime for any person or entity (unless otherwise exempted or excluded) engaging in investment business, as defined by the act, either in or from Bermuda.
There are several options for registering a business in Bermuda which depend on the nature of the business and whether business will be conducted in the local market. The Registrar of Companies (ROC) is responsible for the day-to-day responsibilities regarding the administration of companies including name reservation, fees, insolvency and real estate. (https://www.gov.bm/department/registrar-companies).
Formation of a limited company, partnership or LLC, which does not require consent of the Minister of Finance may be accomplished within one day after an application is received. Where a business requires the consent from the Minister, the processing time can take up to one week. The ROC reviews all information relating to the company, and all personal declarations from the proposed beneficial owners.
The Bermuda Government requires those seeking to establish a limited company, partnership or LLC, to get assistance from a law firm, accounting firm, or corporate service provider (CSP) located in Bermuda for guidance on completing steps towards establishing a company, including:
Disclosure and vetting of proposed beneficial owners of the company, including personal declarations where required
Drafting the Memorandum of Association and byelaws of the company
Based on the nature of the proposed business activities, any license or permit applications required to be submitted
Selecting a registered office in Bermuda
Selection of directors, officers, and company secretary
Payment of government fees
Regulations for the emerging Fintech industry have been established. Fintech Bermuda offers information to assist those seeking to establish a digital business on the island (https://fintech.bm/start-a-business/) In 2018, the Government of Bermuda established the Digital Asset Business Act, which outlines the foundation for the government’s regulatory approach towards the industry. The Bermuda Business Development Agency (BDA) also provides guidance for those seeking to establish a digital business on the island and can provide information about immigration, tax and social insurance applications. The BDA also liaises with the Bermuda Monetary Authority, Department of Immigration, Ministry of Finance, Fintech Business Unit and ROC as needed for new incorporations and to monitor the processing of new applications.
Bermuda is not involved in outward investment.
2.Bilateral Investment Agreements and Taxation Treaties
There are no bilateral investment treaties or free trade agreements between the U.S. and Bermuda. Bermuda is listed under category ‘A’ of signatories to the International Organization of Securities Commissions Multi-lateral Memorandum of Understanding (IOSCO MMOU), which provides for mutual co-operation and the exchange of information among securities regulators. In June 2009, the International Association of Insurance Supervisors (IAIS) approved the BMA as a signatory to the Multi-lateral Memorandum of Understanding. The MMOU establishes a formal basis for cooperation and information exchange between signatory regulators who supervise insurers with international or cross border operations.
There are two bilateral taxation-related treaties between the U.S. and Bermuda: the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland (on Behalf of the Government of Bermuda) and the Government of the United States of America Relating to the Taxation of Insurance Enterprises and Mutual Assistance in Tax Matters (Convention) (1986), and the Tax Information Exchange Agreement (TIEA) (1988). Under the latter, the U.S. agreed to waive income and excise taxes on insurance premium income derived from the U.S. for eligible Bermudian insurance companies, i.e., companies whose predominant business activity is the issuing of insurance, reinsurance, or annuity contracts and the investing of insurance reserves and other capital incident to the carrying on of the insurance business and that does not operate as a permanent establishment in the U.S.
Bilateral Investment Treaties:
Bermuda is fully cooperative with global partners through its 41 tax information exchange agreements (TIEAs). Bermuda has held a TIEA with the United States since the USA-Bermuda Tax Convention Act 1986 and has signed Model 2 intergovernmental agreements (IGAs) with the US and UK under the Foreign Account Tax Compliance Act (FATCA), along with Chile, Hong Kong, Japan and Switzerland.
On December 2013, Bermuda signed an IGA Model 2 with the U.S. to implement U.S. FATCA. Under an IGA Model 2 the U.S. and the FATCA partner enter into an IGA whereby the FATCA partner would agree to implement legislation to direct and enable FFIs in its jurisdiction to collect and report FATCA required information (including Specified U.S. Persons) directly to the Internal Revenue Service (IRS). It is important to note Bermuda law already enables Foreign Federal Institutions (FFIs) in its jurisdiction to collect and report FATCA required information directly to the IRS, as there is no Bermuda law conflict that prevents FFIs from doing so, unlike in those countries that do have conflicting laws that do not enable FFIs to report directly to the IRS and therefore had to adopt IGA Model 1. In Bermuda’s case the government only needs to amend its law so as to direct FFIs in its jurisdiction to abide by the US’s FATCA Regulations as may be modified by the IGA Model 2 and to impose a fine and or penalty if the FFIs do not, whereby such fine and or penalty is sufficient to serve as a deterrent to non-compliance.
The IGA Model 2 to implement FATCA is primarily aimed for use by those FATCA partners that have little or no local law conflicts with FATCA and where substantial local legislation is not required. IGA Model 2 provides that FFIs in such FATCA partnerships enter into a FFI agreement with the IRS. Such FFI agreements introduce obligations that are similar to the obligations on FFIs under an IGA Model 1 who comply with the IRS registration requirement.
(The NAFTA and all U.S. FTAs (except Bahrain) entered into since 2002 contain investment chapters.)
Transparency of the Regulatory System
Bermuda is a cooperative jurisdiction and practices ethical transparency standards. Bermuda’s legal, regulatory and accounting systems adhere to a high level of transparency, compliance, cooperation and exchange of information.
Bermuda is a member of regulatory standard-setting bodies for banking (via the Basel Committee on Bank Supervision), insurance (via the International Association of Insurance Supervisors or IAIS), and investment business (via the Financial Services Authority or FSA). In December 2013, Bermuda signed the Foreign Account Transaction Compliance Act (FATCA) Intergovernmental Model 2 Agreement with the U.S. to promote transparency on tax matters, having concluded a FATCA-type agreement with the UK in the previous month. Bermuda financial institutions now automatically transmit FATCA information to the U.S. and UK.
The BMA is the sole regulatory body for financial services, responsible for the licensing, supervision, and regulation of financial institutions conducting deposit-taking, insurance, investment, and trust business on the island. The Bermuda Government continues to strengthen its anti-money laundering and anti-terrorism financing (AML/ATF) framework to ensure a high level of compliance with international standards. Amendments to the Proceeds of Crime Act in 2013 created an obligation to report suspicions of money laundering or terrorist financing and to allow civil proceedings before the Supreme Court for the recovery of property obtained through unlawful conduct. Neither unlicensed nor unregistered entities are permitted to operate in the financial services sector.
Bermuda’s Financial Intelligence Agency is a member of the Egmont Group of Financial Intelligence Units. It shares information with other agencies, within and outside Bermuda. The BMA Amendment (No. 3) Act 2004 clarified the power of the BMA to share information with other overseas authorities. Other laws that authorize the sharing of information with overseas regulators include the Banks and Deposit Companies Act 1999, the Trusts (Regulation of Trust Business) Act 2001, and the Investment Act 2003.
The Investment Business Amendment Act 2012, the Trust (Regulation of Trust Business) Amendment Act 2012, and the Banks and Deposit Companies Amendment Act 2012 regulate investment businesses, trusts, and banks in the areas of civil penalties, public censure, prohibitions against providing certain services, and publication of decisions. The Investment Business Act 2003 granted the BMA stronger intervention powers, including the ability to cooperate with foreign bodies, while the Investment Business Investment Act 2012 brought the Bermuda Stock Exchange (BSX) under the regulation of the BMA. Other provisions provide for criminal penalties, e.g., the Banks and Deposit Companies Amendment Act.
The BMA regulates collective investment schemes (CIS). The 1997 Proceeds of Crime Act (POCA) and the 2006 Investment Funds Act (IFA) regulate fund administrators. CIS are also subject to IFA, which clarifies and codifies the current regulation of funds in order to strengthen Bermuda’s position in the international funds market.
In February 2020, EU Finance Ministers (ECOFIN) listed Bermuda as a ‘cooperative jurisdiction’ with respect to tax good governance. ECOFIN endorsed the assessment of the European Commission and the EU’s Code of Conduct Group on Business Taxation (CoCG) that Bermuda has met its commitments to address concerns raised by the EU in 2019, relating to economic substance requirements. The announcement followed Bermuda’s placement on the EU’s ‘Blacklist’ of uncooperative jurisdictions and ‘Grey-list’ respectively, for jurisdictions that have undertaken sufficient commitment to reform tax policies. The Government reported that the listings were a result of a technical error in its submission to the EU and not because of regulation standards.
Legal System and Judicial Independence
Bermuda’s legal system is based on the English common law of England and Wales and has a Westminster form of government. The Judiciary is established by the Bermuda Constitution as a separate and independent branch of government and is considered to be competent, fair and reliable. The court system is made up of the Court of Appeal, Supreme Court and Magistrates’ Court. There is a specialized Commercial Court within the Supreme Court which also includes civil matters. The final appeal stage is the UK’s Privy Council. Bermuda’s legal system marked its 400th anniversary in 2016.
Laws and Regulations on Foreign Direct Investment
The Bermuda Monetary Authority (BMA) acts as Bermuda’s principal regulatory body. It is responsible for processing applications for incorporation and approving the issue of shares. It approves the beneficial ownership of all entities created in Bermuda and supervises and regulates the financial services sector. The BMA also acts as a central bank, advising the government on banking, financial and monetary matters. www.bma.bm
The Registrar of Companies, previously a department of the Ministry of Finance, is now a division of the Bermuda Monetary Authority. It monitors and regulates all companies operating within Bermuda. The Registrar’s responsibilities include incorporating and registering new companies and international partnerships, granting licenses to allow overseas companies and partnerships to do business on the Island, collecting and storing public documents such as prospectuses, and registering charges against companies.
The BMA also assists other authorities in Bermuda to detect and prevent financial crime and develops risk-based financial regulations that it applies to the supervision of Bermuda’s banks, trust companies, investment businesses, and insurance companies. The Companies Act 1981 as amended is the principal statute governing the formation and operation of Bermuda companies and foreign investment.
Compliance with Organization for Economic Cooperation and Development (OECD) guidelines that seek to eliminate separate regulatory regimes for local and international companies may have been a factor contributing to the decision to ease ownership restrictions. The Limited Liability Company Act was passed in 2016, which introduced the limited liability company (LLC) vehicle, a hybrid entity which merges characteristics of both a partnership and a company limited by shares, for the first time ever in Bermuda. This provides a useful alternative structuring option to complement the existing choice of vehicles available in Bermuda. 2016 also saw the introduction of the Contracts (Rights of Third Parties) Act 2016 modelled on the UK equivalent which allows parties to vary the common law doctrine of privacy of contract. Bermuda is the leading market for the relatively recent mass influx of insurance-linked securities, catastrophe bonds and other alternative risk transfer vehicles. Insurance-linked funds converge the investment funds industry and insurance/reinsurance industry, and Bermuda is by far the most popular jurisdiction for ILS-linked fund managers with approximately US$55 billion in aggregate under management in Bermuda.
Bermuda continues to promote transparency and global compliance standards and has adopted the OECD’s Common Reporting Standard as an early adopter jurisdiction which took effect on 1 January 2016. In April 2016, Bermuda became the 33rd signatory of the Multilateral Competent Authority Agreement for Country-by-Country reporting which is a component of the OECD’s base erosion and profit shifting (BEPS) project.
Bermuda’s commercial (re)insurance regime also became fully equivalent with Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II Directive), as amended in 2016 meaning Bermuda has “third-country equivalence”. This is a significant step for Bermuda and Bermuda commercial reinsurers, insurers and insurance groups as it ensures that they are on equal footing when operating in Europe or globally.
Recent company law changes mean that Bermuda companies are now required to file director information with the Registrar of Companies to be held in a central database that will be open to public inspection and 2016 saw the implementation of the requirement by the Bermuda Monetary Authority for Bermuda’s corporate service providers to be licensed and regulated.
The Regulatory Authority promotes fair business practices and promotes sustainable competition in the telecommunications sector, covering services such as fixed and mobile telephone, long distance, internet access and subscription television and Regulate electricity licensees to ensure compliance with the provisions of the Electricity Act 2016.
The Registrar of Companies, now a division of the Bermuda Monetary Authority, monitors and regulates all companies operating within Bermuda.
Expropriation and Compensation
The Housing Loan Insurance (Mortgage) Regulations 1984 and the Municipalities Act 1923 regulate expropriations. There is no history of expropriation in Bermuda without proper compensation and no expropriator acts against foreign investors.
ICSID Convention and New York Convention
Through the United Kingdom, Bermuda has ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Under the convention, foreign arbitral awards are enforceable within Bermuda’s domestic courts. Likewise, under the United Kingdom, Bermuda is also a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention).
The Bankruptcy Act 1989, the Companies Act 1981, and the Companies (Winding Up) Rules 1982 govern bankruptcy and the winding-up of companies. The Supreme Court (the first instance court of general jurisdiction) administers the bankruptcy process. A foreign creditor may apply for the bankruptcy of an individual or for the winding-up of a company provided the creditor follows the procedures set out in the aforementioned statutes.
Bermuda is a tax-neutral jurisdiction, with zero income, corporate, withholding or capital gains taxes. Its consumption-based system does, however, levy payroll tax, import duties, social insurance, and custom duties on goods and services—a major component of the island’s tax revenues.
Bermuda has 41 bilateral Tax Information Exchange Agreements (TIEAs) and more than 125 multilateral treaty partners. The island exchanges information with all G20 nations, European Union members’ states, and other OECD countries. Bermuda has implemented US FATCA and exchanges OECD Common Reporting Standard (CRS) and OECD Country-by-Country (CBC) information with every country around the world that belongs to the OECD’s Convention.
Bermuda has no free port or duty-free import zones.
Performance and Data Localization Requirements
Local government policy for all companies is to give first preference to Bermudian applicants, their spouses and/or permanent residents. Regulations are in place to ensure that Bermuda nationals are given preference for a job before an external applicant can be considered. Non-Bermudian nationals require a work permit to legally gain employment and reside in Bermuda. Different types of permits varying in length of eligibility are issued by Bermuda’s Department of Immigration following options to renew or extend. Most work permit categories require employers to conduct a genuine search including advertising vacancies on https://www.bermudajobboard.bm and in the newspaper (The Royal Gazette).
Work permits are issued by the Department of Immigration and vary based on the employer’s requirements. Work permits can be issued for up to five years with options to extend the period of employment or apply for a renewal.Only an employer can apply for a work permit. The employee can only enter the country to work after receiving permission. Tourist visitors cannot seek employment.
In May 2018, the Minister of Home Affairs announced a new work permit policy for Fintech Companies, allowing a new company registered in Bermuda to receive immediate approval of five work permits within the first six months of obtaining the first Fintech Business Work Permit. Plans for hiring, training and development of Bermudians in entry level or trainee positions must be submitted for a company to be considered for automatic permit approvals. Positions designated for Bermudians are not subject to a work permit. The new policy aims to encourage investment in Bermuda’s economy and create jobs for Bermudians.
Additionally, a Global Work Permit allows a person who is already employed by a global company in another jurisdiction to transfer to the Bermuda office without the requirement to advertise the position.
In response to the global pandemic, Bermuda is currently offering a Work from Bermuda Certificate, allowing executives and students to work and study remotely from the island. Resources will be made available to assist with accommodations, electric car rentals and broadband and remote workspaces. Those interested must submit an online application https://www.gotobermuda.com/workfrombermuda
5.Protection of Property Rights
Bermuda law recognizes and enforces secured interests in movable and real property. The Registry General, the Land Tax Office and the Land Valuations Office regulate the acquisition and disposition of property, including land, buildings, and mortgages. The Land Title Registration Act 2011 moved Bermuda from a deeds-based property transaction to a parcel-based land registration system.
Individuals, businesses or organizations who become landowners or own interests in land must apply to the Land Title and Registration Office to register land, register a new owner of a registered property following a sale and register an interest affecting registered land, such as a mortgage, lease or a right of way.
Intellectual Property Rights
Under the Ministry of Home Affairs, the Registry General manages the registration and restrictions for Intellectual Property. Intellectual Property registered in the UK can be applied in Bermuda if permission from the UK certificate of registration extends it.
In 2014, the Government of Bermuda reviewed its intellectual property legislation and in 2015 began dialog with the UK Intellectual Property Office to extend to Bermuda, as a UK Overseas Territory, the right to join the WTO’s Trade Related Intellectual Property Rights (TRIPS) Agreement, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (“the Madrid Protocol”), the Paris Convention for the Protection of Literary and Artistic Works, the Patent Cooperation Treaty, and the Hague Agreement Concerning the International Registration of Designs. Bermuda has yet to sign the World Intellectual Property Organization (WIPO) internet treaties, the WIPO Copyright Treaty (WCT), or the WIPO Performances and Phonograms Treaty.
The Bermuda Stock Exchange (BSX) offers a variety of domestic and international listing options. Established in 1971, the BSX is globally recognized for commercially sensible listing requirements and partners with the Bermuda Monetary Authority (BMA) and Bermuda Business Development Agency (BBDA) to further develop Bermuda’s reputation.
Bermuda does not have a central bank, but the BMA issues and redeems notes and coins, supervises, regulates, and inspects financial institutions which operate in or from Bermuda, and generally promotes the financial stability and soundness of financial institutions. The BMA does not, however, determine interest rates, which are set by the market, regulated by the Ministry of Finance, and usually follow the Federal Reserve System rates.
Bermuda does not have developed capital markets and does not control monetary policy. Commercial credit lines are normally arranged through U.S. or other overseas institutions. Credit is allocated on market terms, and foreign investors may get credit on the local and international markets. The private sector has access to various credit instruments via local banks. Many companies, particularly the larger ones, maintain external banking relationships.
Money and Banking System
Bermuda is a highly successful offshore financial center. The Bermuda Monetary Authority (BMA) oversees financial services with a risk-based approach to the regulation and supervision of banks and deposit companies in Bermuda. The regulatory and supervisory framework is supported by principal legislation, The Banks and Deposit Companies Act 1999, which is regularly supplemented with updated statements of principles, policy and guidance.
There are four banks on the island – HSBC Bank Bermuda Ltd., Clarien Bank Ltd., Bank of Butterfield Ltd. and Bermuda Commercial Bank.
The BMA published the ‘Basel III for Bermuda Banks – Final Rule’ effective from 1 January 2015, which was updated in November 2017. The Authority’s final Basel III document outlines a range of new capital and liquidity standards as prescribed by the Basel Committee on Banking Supervision (BCBS). The Authority has adopted all three pillars as proposed by Basel III: i) Pillar I – minimum capital requirements; ii) Pillar II – supervisory review process; and iii) Pillar III – market discipline.
Whilst the final Basel III rules supersede Basel II, elements of Basel II and corresponding guidance will remain in force subject to future revisions, and as such relevant components of the Authority’s ‘Revised Framework for Regulatory Capital Assessment’ remain applicable.
The BMA updated its regulatory framework in response to new international standards proposed by the Basel Committee. The following changes were introduced throughout 2018 and 2019:
Net Stable Funding Ratio (NSFR) as a new component to our liquidity requirements
Revisions to our stress testing guidance to include new standards around Interest Rate Risk in the Banking Book (IRRBB)
New required forms and templates for the Pillar 3 Disclosure requirement
Transitional arrangements for the regulatory treatment of new accounting standards around provisions
The BMA helped to establish a Banking Liaison Panel (BLP) in 2017 – a statutory body contemplated in the Banking (Special Resolution Regime) Act 2016. In addition, the Authority joined the IAIS Resolution Working Group with a view to commencing work on a special resolution regime for large international insurers.
The Banks and Deposit Companies Act 1999 implemented the Base Committee’s Core Principles for Effective Banking Supervision. Bermuda banks are compliant with the Basel II Accord and have either implemented or are moving toward full implementation of Basel III.
Supervision is intended to assist the Authority with assessing the ongoing financial viability of a money service provider, the fitness and propriety of its management, the prudent conduct of its business and its compliance with the Money Service Business Act 2016 (the Act).
The BMA’s supervision of money service businesses involves regular meetings with senior management of licensed firms, together with scrutiny of financial and statistical information in connection with the institution’s business activities and periodic compliance visits to the institution’s premises. In addition to prudential assessments, a review of compliance in relation to the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 also forms part of the Authority’s visits.
The Authority expects licensed institutions to cooperate fully in providing all relevant information and documents without its having routine recourse to legal powers as provided under the Act.
Section 2 of the Act defines money service business as “the business of providing any or all of the following services to the public”, including:
Money transmission services.
Cashing checks which are made payable to customers and guaranteeing checks.
Issuing, selling or redeeming drafts, money orders or traveler’s checks for cash.
Payment services business.
Operating a bureau de change whereby cash in one currency is exchanged for cash in another currency.”
Institutions licensed under the Banks and Deposit Companies Act 1999 are exempted from the Act. In addition, where a company provides any of the services listed above as an ancillary service to its clients and does not levy a separate charge, the Authority is not likely to treat such an activity as being within scope of the Act. For further details, please refer to section 7 of the Guidance Notes.
The Digital Asset Business Act 2018 (the Act) is the statutory basis for regulating Digital Asset Business (DAB) in Bermuda. The Act provides for a licensing regime for any person or undertaking (unless otherwise exempted) which carries out any of the following activities:
Issuing, selling or redeeming virtual coins, tokens or any other form of digital assets.
Operating as a payment service provider business utilizing digital assets which
Includes the provision of services for the transfer of funds.
Operating as an electronic exchange.
Providing custodial wallet services.
Operating as a digital asset’s services vendor.
According to the Act, “digital asset” means anything that exists in binary format and comes with the right to use it and includes a digital representation of value that—
Is used as a medium of exchange, unit of account, or store of value and is
Not legal tender, whether or not denominated in legal tender;
Is intended to represent assets such as debt or equity in the promoter;
Is otherwise intended to represent any assets or rights associated with such assets; but does not include—
A transaction in which a person grants value as part of an affinity or rewards program, which value cannot be taken from or exchanged with the person for legal tender, bank credit or any digital asset, or a
Digital representation of value issued by or on behalf of the publisher and used within an online game, game platform, or family of games sold by the same publisher or offered on the same game platform.
There have been notable employment changes at the Rosebank location of Butterfield Bank. Eleven positions were made redundant in April 2019 and over thirty employees accepted early retirement packages. It was reported that the closure was a result of increased use of electronic services, causing a fifty percent reduction in the volume of in-person transactions. Butterfield Bank has three other locations on the island that are still operating at full capacity.
Foreign Exchange and Remittances
The Bermuda Dollar (BMD) is interchangeable with U.S. currency with an exchange rate of 1:1. Both currencies are freely interchangeable and transferable without any restrictions.
The BMA issues Bermuda’s national currency and manages exchange control transactions. It administers the Exchange Control Act 1972 that states that no capital or exchange controls apply to non-residents or to the various forms of offshore entities, which are free to import and export funds in all currencies.
The Exchange Control Regulations 1973 and the Companies Act 1981 regulate the issue, transfer, redemption, and repurchase of securities. For exchange control purposes, the BMA must give prior approval for issues to and transfers of securities in Bermuda companies involving non-residents, except where general permission has been granted pursuant to the Notice to the Public of June 2005.
The 2009 Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Amendment gave the BMA the authority to oversee all money transactions involving wire transfers. The act requires financial institutions to verify the accuracy and completeness of the information on the payer before authorizing the transfer of funds. The institution must also retain all the records pertaining to the transaction for a period of no less than five years. In 2013, amendments created an obligation to report suspicious money transactions which could possibly be linked to money laundering or to monies being used to fund terrorism. It established a civil proceeding before the Supreme Court for the purpose of recovering money obtained through unlawful conduct.
In 2009, Bermuda updated the 1898 Revenue Act to strengthen the requirements related to cross-border transporting of currency and negotiable instruments. The threshold was set at USD 10,000, after a financial transaction surpasses that amount; the financial institution is automatically required to report the transaction. Passengers arriving to Bermuda (regardless of point of embarkation) must complete a mandatory declaration form. This mandatory disclosure system applies to all outgoing passengers traveling to the U.S., Canada, and the UK.
The 2010 Foreign Currency Purchase Tax Amendment Act is applied to the purchase of all non-local currencies, including the USD.
Bermuda is a member of the Caribbean Financial Action Task Force (CFATF), an organization of states and territories of the Caribbean basin which have agreed to implement common countermeasures against money laundering, and it is listed under the 2014 International Narcotics Control Strategy Report (INCSR) as being a monitored country.
The Bermuda Financial Network (BFN) Limited is a local international financial services firm. Its main objective is to facilitate banking transactions for consumer and business including e-commerce and money service businesses. In May 2008, the BFN was granted a Money Service Business License from the Bermuda Monetary Authority (BMA) in conjunction with the launch of its Western Union agency in Bermuda which offers international money transfer services. The BFN provides guidance on compliance policies and procedures with local regulations. Money transfer services are popular among foreign workers looking to send funds to their families overseas. The Money Shop is another business providing financial services in Bermuda with money transfer options through MoneyGram or wire transfers.
There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.
The Bermuda Financial Network (BFN) Limited is a local international financial services firm. Their main objective is to facilitate banking transactions for consumer and business including e-commerce and money service businesses. The BFN provides guidance on compliance policies and procedures with local regulations. Money transfer services are popular among foreign workers looking to send funds to their families overseas through businesses including The Money Shop, MoneyGram and Western Union.
There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.
Sovereign Wealth Funds
Not applicable/information unavailable.
Bermuda has some traditional state-owned enterprises (SOEs) that compete with the private sector, including public transit, waste management, and the postal service. Governance of SOEs is led by a politically appointed Cabinet Minister. SOEs must provide financial information to the Minister, who submits the information annually to the Auditor General. Most are prohibited from having a board of directors but may have an advisory board.
Bermuda also has quasi-autonomous, non-governmental organizations (QUANGOs)/Public Authorities, established under their respective legislative incorporation acts. The Government of Bermuda controls several other organizations either through the possession of shares or voting rights or by some other means. These organizations include the National Sports Center, Port Royal Golf Course, Ocean View Golf Course, Bermuda College, Bermuda Housing Trust, Bermuda Housing Corporation, Bermuda Land Development Corporation, West End Development Corporation, Bermuda Hospitals Board, Bermuda Health Council, the Regulatory Authority (telecommunications), Bermuda Tourism Authority, Bermuda Economic Development Corporation, Pension Commission, and parish councils.
SOEs purchase or supply goods or services locally. However, the vast majority of goods are imported, because Bermuda produces virtually nothing of its own. Bermuda’s state-owned businesses are heavily subsidized, but nothing in law prohibits private-sector competition. Bermuda has no state-owned banks, development banks, or sovereign wealth funds or other state-owned investment vehicle.
Bermuda is not a party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization.
In 2017, a public-private partnership between the Bermuda Airport Authority, Government of Bermuda and Bermuda Skyport Corporation led to Bermuda’s new airport redevelopment project. The new L.F. Wade International Airport Passenger Terminal opened its doors to the public in December 2020. The Bermuda Airport Authority is the public sector party to the agreement, representing the interests of the Government of Bermuda and owner of the L.F. Wade International Airport. The Bermuda Skyport Corporation Limited is the private sector party to the project agreement. Skyport, a wholly owned subsidiary of Aecon, was responsible for delivering the new airport terminal building and is responsible for its ongoing operation and maintenance. The Authority continues to retain oversight of Skyport’s operations and maintenance for the duration of the project agreement.
Other examples of public-private partnerships are the King Edward VII Memorial Hospital Redevelopment Project and the establishment of the Bermuda Tourism Authority, formerly a government entity. In awarding contracts, the Government of Bermuda does not always follow established bidding processes if the Accountant General agrees that not doing so is in the public interest.
8. Responsible Business Conduct
The concept of responsible business conduct is strong in Bermuda, particularly among international companies. The Bermuda Monetary Authority (BMA) has issued the Insurance Code of Conduct, the Banking Code of Conduct, the Code of Conduct for Fund Administrators, the Advertising Code of Conduct, the Investment Business Code of Conduct, and the General Business Conduct and Practice Code of Conduct. There have been no high-profile, controversial instances of corporate impact on human rights. The Bermuda government effectively and fairly enforces domestic laws.
The BMA is responsible for the supervision, regulation and inspection of Bermuda’s insurance companies and for the licensing of all insurance companies, brokers, agents and managers. Applications are subject to internal and independent review by a committee of senior staff and are closely vetted for the fitness, propriety and underwriting experience of the management, the plausibility of the proposed business plan and the level of capitalization relative to the proposed risk profile, amongst other factors. The BMA maintains a register giving details of each licensed insurer that is available for public inspection at the Registrar of Companies.
The BMA conducts banking supervision and regulation in accordance with the standards established by the Basel Committee on Banking Supervision, in particular with the revised Concordat and with the precepts for the supervision of cross-border banking. It liaises closely with other regulators, both domestically and internationally, in order to ensure effective consolidated supervision, both in relation to entities for which the BMA acts as consolidated group wide supervisor and where licensed institutions may form part of international banking groups. The BMA’s supervision involves regular on-site visits and off-site surveillance, which includes the review of prudential returns on both a solo and consolidated basis and regular prudential meetings with senior management of licensed financial institutions. The BMA has also introduced a stress testing methodology and monitors on a regular basis a set of Financial Stability Indicators based on the IMF’s core and encouraged set.
The Corporate Service Provider Business Act 2012 and the Corporate Service Provider Business Amendment Act 2014 prohibit a person from carrying on corporate service provider business in or from within Bermuda unless that person is a licensed undertaking under the Act. The BMA has regulatory and information gathering powers over Corporate Service Providers.
The BMA supervises and regulates all investment business operating in or from Bermuda. As a guideline for the development and ongoing developments of the BMA’s investment business policies, the Authority refers to the core principles issued by the International Organization of Securities Commissions (IOSCO). To ensure the highest standards are upheld, the BMA liaises closely with other regulators, both domestically and internationally, to provide the most effective consolidated supervision. Supervision involves regular prudential and strategy discussions with senior management, together with off-site analysis and review of prudential data and certain on-site work, conducted both in Bermuda and in significant group operations abroad.
The BMA also supervises and regulates trusts. Trusts must provide audited financial statements and a Certificate of Compliance to the BMA within four months of their year-end. These are discussed with the undertaking, along with changes to strategy, staffing, etc., as part of the Authority’s off-site supervision. Routine on-site review visits are undertaken by BMA staff (including anti-money laundering compliance testing) and the Authority also has the power to commission reports from reporting accountants on key aspects of systems and controls.
The Bermuda and Canada Institutes of Chartered Accountants (CICA) work together to develop and enforce high standards to protect the public interest and maintain the good reputation and integrity of the CA profession. In addition, throughout their professional careers, CAs are subject to ongoing regulation in order to safeguard the public interest. They are subject to enforcement of exacting Rules of Professional Conduct; continuing professional development requirements; and comprehensive public oversight and discipline mechanisms. In addition, CAs practicing public accounting are subject to mandatory practice inspection and professional liability insurance programs. The Institute has a comprehensive complaints investigation and discipline process.
The Bermuda Bar Association is responsible for both the regulation and discipline of members of the legal profession in Bermuda. All members of the Bermuda Bar are bound by the Barristers’ Code of Conduct, which requires that members carry out their duties to their clients, the court, members of the public and their colleagues with integrity and in accordance with the code of professional conduct. Further, they are required to conduct themselves within or outside the professional sphere in a manner that will not be likely to impair a client’s trust in them as a legal advisor.
The Trade Union Act 1965 requires trade unions to exercise good governance and transparency when dealing with matters of finance. Union officers have a duty to render accounts to member trustees. Trade unions may impose penalties on any officer, member or person employed by the trade union for withholding money or falsifying an account.
The Government of Bermuda does factor Responsible Business Conduct (RBC) policies or practices into its procurement, through the Public Treasury (Administration and Payments) Act 1969 and the Good Governance Acts of 2011 and 2012. The legislation accords with the principles of the UN Convention against Corruption (UNCAC), and Bermuda has committed to identify and address gaps in the Bermuda legislation regarding the UNCAC.
The Code of Practice for Project Management and Procurement that sets out the rules for the procurement of goods, services and works, including procedures for tendering, evaluating proposals and selecting contractors; financial thresholds; requirements for awarding, monitoring, extending and varying contracts; and procedures for debriefing bidders, handling complaints, resolving disputes, retaining records and inspecting records.
The Government of Bermuda is also working with the Bermuda Economic Development Corporation to develop a government contracting program in support of small and medium-sized businesses. In addition, an electronic purchasing and tendering system is being implemented to facilitate public access to tenders, increase competition and improve transparency. The GOB’s procurement processes provide for the application of social, environmental, and economic criteria in the tender evaluation and selection process. Principles of environmental and sustainable development are being embedded in tender documentation and contracts.
Bermuda has laws, regulations and penalties to combat corruption, and effectively enforces them. The Good Governance Act 2012 discourages financial abuse by ministers and members of the civil service and protects whistleblowers. Under the Act, politicians who attempt to influence the award of government contracts could face a USD 10,000 fine and a year-long jail sentence. The penalties also apply to contractors and public officers found guilty of collusion. The Act also improved the transparency and accountability of government contracts, strengthened requirements for internal audits, and established an Office of Project Management and Procurement to strengthen oversight/control of government projects.
The Bermuda Criminal Code and the Proceeds of Crime Act provide for punishing corrupt practices in the area of investments, particularly for misleading statements and practices, market manipulation, and insider trading.
To distance itself from perceived impropriety often associated with offshore banking centers, Bermuda continues to update its regulatory framework to meet international standards, including those of the IMF, the Financial Action Task Force (FATF) and the OECD.
Resources to Report Corruption
1st Floor, Craig Appin House
8 Wesley Street
Bermuda Police Service
Organized Economic Crime Department
10 Headquarters Hill, Prospect
Bermuda Monetary Authority
43 Victoria Street, Hamilton
10.Political and Security Environment
Information not available.
11. Labor Policies and Practices
The Employment Act defines an employee as being “a person who is employed wholly or mainly in Bermuda for remuneration under a contract of employment” or any other person who “performs services wholly or mainly in Bermuda for another person for remuneration on such terms and conditions that his relationship with that person more closely resembles that of an employee than an independent contractor.” Independent contractors, do not therefore, acquire any rights or protections pursuant to the Employment Act, but expatriate workers do.
Individuals under the age of 16, casual workers, part-time employees (those who work less than 15 hours a week), temporary employees (those who work for no more than three months in any year by an employer), students and voluntary workers are excluded from the definition of employee.
Trade unions have the right to collectively bargain with employers in circumstances where the union has obtained recognition either voluntarily or through the statutory process. A union has the right to take in members and charge union dues, own property, sue and be sued and generally conduct business in the ordinary course. Most importantly, a union has the right to initiate grievance procedures and represent workers in relation to such grievance.
The Human Rights Association (HRA) prohibits discrimination and harassment in the employment sector based on any protected characteristic (including race, place of origin, color, ethnic or national origin, sexual orientation, pregnancy, marital status, disability, family status, religion or beliefs, political opinions, or criminal record – other than where valid reasons relevant to the nature of the particular offence where convicted). Age is not a protected characteristic under the HRA.
In response to Covid-19, Bermuda passed the Public Health (COVID-19 Emergency Powers) (No. 3) Regulations 2020 requiring businesses to ensure physical distancing between staff, clients, and customers. The Occupational Safety and Health Temporary Regulations 2020 require an employer’s health and safety committee to identify and control health and safety hazards within the workplace and establish safety and health programs for the education of employees.
The Employment Amendment Act 2020 and The Trade Union and Labour Relations (Consolidation) Act 2020 will come into effect on June 1, 2021. The new legislation is intended to modernize existing legislation to ensure it is in line with international best practices.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs.
Bermuda is not a member of the Overseas Private Investor Corporation (OPIC) or any other investment insurance programs. There is no deposit protection for owners of mutual funds or trusts, nor is there any central fund to reimburse investors. However, the BMA restricts many investments to institutional investors or high net worth individuals, who handle their own due diligence. The BMA also maintains as public information a register of all licensed investment service providers. Moreover, investment managers must be licensed pursuant to the Investment Business Act of 1998. Prior to licensing, the investment service must provide proof of adequate professional indemnity insurance. The 2006 Investment Funds Act clearly outlines how public funds are regulated, defines the framework for non-public, institutionalized funds, and includes requirements for fund administrators.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Data not available
Table 3: Sources and Destination of FDI
Data not available
Table 4: Sources of Portfolio Investment
Data not available
14. Contact for More Information
US Consulate General
Public Diplomacy, Political, Economic Assistant
16 Middle Road