Proliferation refers to the manufacture, acquisition, possession, development, export, transhipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical, or biological weapons, which pose a significant threat to global peace and security. Proliferation financing (PF) involves providing the financial support necessary to facilitate these activities. While Bermuda has no evidence of direct involvement in PF activities, its role as an international financial centre means there is potential exposure to exploitation by bad actors. By enforcing robust sanctions, Bermuda continues to safeguard its financial system from these risks.

The guidance emphasises several key areas of compliance that financial institutions and other entities must address to mitigate proliferation risks effectively. Here are some of the primary obligations and considerations:

1. Understand international and domestic obligations

Bermuda’s sanctions framework incorporates international obligations from the United Nations and regional agreements such as those outlined by the Financial Action Task Force (FATF). For example:

• UN Security Council Resolutions (UNSCR): These require the freezing of funds or assets linked to designated persons and entities involved in proliferation activities.
• FATF Standards: These mandate countries and businesses to identify, assess, and mitigate proliferation risks while maintaining compliance with evolving sanctions lists.

Domestically, Bermuda enforces these mandates through laws like the International Sanctions Act 2003 and the Proceeds of Crime Act 1997, ensuring compliance with both global and local standards.

2. Recognise red flags and conduct risk assessments

The guidance highlights specific indicators or “red flags” that could signal proliferation-related activities. These include:

• Customers involved in industries dealing with dual-use goods (items that can serve military and civilian purposes).
• Vague or incomplete trade documentation, unusual shipping routes, or discrepancies in transaction details.

Entities are expected to conduct thorough risk assessments, paying close attention to customer profiles, geographic risks, and industry-specific vulnerabilities.

3. Implement robust compliance measures

A proactive compliance programme is essential to prevent breaches or evasion of sanctions.

Organisations are expected to:

• Continuously monitor customers and transactions against updated sanctions lists.
• Implement both rules-based (strict adherence to regulations) and risk-based (tailored to identified risks) approaches to screening transactions.
• File timely reports of suspicious activity to the FSIU and the Financial Intelligence Agency.

4. Seek legal and expert advice when necessary

The FSIU provides technical guidance but cannot offer legal advice. Organisations should seek independent legal counsel to fully understand their obligations and ensure their compliance practices align with Bermuda’s sanctions regime.

The FSIU, under Bermuda’s Ministry of Justice, plays an essential role in the implementation of financial sanctions. It oversees compliance with targeted financial sanctions, provides technical support, and works to ensure that financial institutions, corporations, and individuals understand and fulfil their responsibilities.

Sanctions and associated obligations are subject to change. The guidance strongly encourages organisations to stay updated with the latest legislation and FATF recommendations, regularly review their compliance policies, and maintain vigilance against emerging proliferation financing threats. Importantly, individuals and entities are reminded that failing to comply with reporting obligations or sanctions can result in severe legal consequences, including heavy fines or imprisonment.

Bermuda’s CPF guidance can be found here.