Digital Assets and Registered Exchanges (Anti-Money Laundering, Countering Financing of Terrorism and Countering Financing of Proliferation) Rules, 2022

EXTRAORDINARY
OFFICIAL GAZETTE
THE BAHAMAS
PUBLISHED BY AUTHORITY
16th NASSAU March, 2022 (A)

DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 Arrangement of Rules Rule

1. Citation................................................................................................................3
2. Interpretation.......................................................................................................3
   PART II – RISK RATING DUTY OF REGISTRANT 4
3. Duty of registrant to implement risk rating framework........................................4
   PART III – INTERNAL CONTROLS 6
4. Duty of registrant concerning internal controls....................................................6
5. MONEY LAUNDERING REPORTING OFFICER............................................7
6. Outsourcing..........................................................................................................7
7. Suspicious transaction reporting..........................................................................8
   PART IV – VERIFICATION OF CUSTOMER IDENTITY 8
8. Due diligence measures........................................................................................8
9. Simplified due diligence measures.......................................................................9
10. Enhanced due diligence measures........................................................................9
11. Verification of customer identity........................................................................11
12. Required information.........................................................................................12
13. Politically exposed persons................................................................................16
14. Reliance on third party verification procedures..................................................17
15. Eligible introducer..............................................................................................18
16. Suspension or termination of activity or business..............................................19
17. Exemption from verification of identity.............................................................19
18. Ongoing monitoring...........................................................................................20
    PART V – RECORD KEEPING 20
19. Maintenance of records......................................................................................20
20. Transaction records............................................................................................21
21. Other records......................................................................................................22
    PART VI – MISCELLANEOUS 22
22. Education and training.......................................................................................22

S.I. No. 32 of 2022
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 DIGITAL ASSETS AND REGISTERED EXCHANGES ACT 2020 (NO. 28 OF 2020) DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI￾MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 The Securities Commission of The Bahamas, in exercise of the powers conferred by
section 50 of the Digital Assets and Registered Exchanges Act 2020 (No. 28 of 2020)
makes the following Rules –

1. Citation.
   These Rules may be cited as the Digital Assets and Registered Exchanges (Anti￾Money Laundering, Countering Financing of Terrorism and Countering Financing of Proliferation) Rules, 2022.
2. Interpretation.
   In these Rules—
   “Act” means the Digital Assets and Registered Exchanges Act, 2020 (No. 28 of 2020); “beneficial owner” has the meaning specified in the Register of Beneficial Ownership Act, 2018 (No. 38 of 2018); “Commission” means the Securities Commission of The Bahamas as continued under Part II of the Securities Industry Act, 2011 (No. 10 of 2011). “digital assets” has the meaning specified in section 2 of the Act; “financial institution” has the meaning specified in the Financial Transaction Reporting Act, 2018 (No. 5 of 2018);
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   DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 DIGITAL ASSETS AND REGISTERED EXCHANGES ACT 2020 (NO. 28 OF 2020) DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI￾MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 The Securities Commission of The Bahamas, in exercise of the powers conferred by
   section 50 of the Digital Assets and Registered Exchanges Act 2020 (No. 28 of 2020)
   makes the following Rules –
3. Citation.
   These Rules may be cited as the Digital Assets and Registered Exchanges (Anti￾Money Laundering, Countering Financing of Terrorism and Countering Financing of Proliferation) Rules, 2022.
4. Interpretation.
   In these Rules—
   “Act” means the Digital Assets and Registered Exchanges Act, 2020 (No. 28 of 2020); “beneficial owner” has the meaning specified in the Register of Beneficial Ownership Act, 2018 (No. 38 of 2018); “Commission” means the Securities Commission of The Bahamas as continued under Part II of the Securities Industry Act, 2011 (No. 10 of 2011). “digital assets” has the meaning specified in section 2 of the Act; “financial institution” has the meaning specified in the Financial Transaction Reporting Act, 2018 (No. 5 of 2018);
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   MINISTRY OF FINANCE

DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 “financing of proliferation” means the financing of proliferation of weapons of mass destruction specified in section 9 of the Anti￾Terrorism Act, 2018 (No. 27 of 2018); “identified risks” has the meaning specified in the Proceeds of Crime Act, 2018 (No. 4 of 2018); “key personnel” means senior management or other key employees who effectively manage the business of a registrant; “Money Laundering Reporting Officer” or “MLRO” means the person appointed pursuant to regulation 5 of the Financial Intelligence (Transactions Reporting) Regulations, 2001 (S.I. No. 7 of 2001); “occasional transactions” has the meaning specified in the Financial Transactions Reporting Regulations, 2018 (S.I. No. 5 of 2018); “registrant" means a person registered under the Act; “senior management” means an officer or employee of a registrant with sufficient knowledge and seniority to make decisions affecting the registrant’s risk exposure and need not involve a member of the board or directors and includes a person responsible for compliance or duly authorised to bind the registrant.
PART II – RISK RATING DUTY OF REGISTRANT
3. Duty of registrant to implement risk rating framework.
(1) Every registrant shall implement a risk rating framework which assesses and identifies – (a) the risk profile of each customer; (b) its own risk profile in relation to the countries or jurisdictions in which it operates; (c) the risk profile associated with its own business practices, products, services, transactions and delivery channels; (d) the nature and extent of risks related to the registrant’s non-face-to￾face business relationships; and (e) the nature and extent of risks related to the registrant’s business activities that permit customers to receive payments from unknown or unassociated third parties. (2) The risk rating framework shall be approved by the registrant's senior management based on the scope of the registrant's activities, and shall be designed to—
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (a) take appropriate measures to continuously identify, measure, manage, and mitigate identified current and emerging risks; (b) take account of any risk assessment carried out at the national level and any regulatory guidance issued by the Commission; (c) categorize customer relationships and products to identify the level of risk associated with each customer relationship or product; (d) categorize customer relationships and products to take account of risk factors related to the particular customer relationship or product, including— (i) customer type or profession; (ii) country of domicile; (iii) complexity of ownership; (iv) complexity of legal structure; (v) source of business; (vi) type of assets; (vii) type, size and volume of transactions; (viii) level of cash transactions; (ix) non-face-to-face Know Your Customer document submission; and (x) adherence to customer activity profile; (e) address which level of management can approve a decision for the registrant to enter into customer relationships at the various levels of risk rating categories; (f) establish Know Your Customer and due diligence information requirements appropriate for the risk profile of the customer relationship or product; (g) require the periodic review of the customer relationship or product to— (i) ensure that the categorizations are current and appropriate; and (ii) enable the registrant to determine whether any adjustment should be made to the risk rating; (h) require the re-categorization of a customer relationship or product offered by the registrant in the event of a change in the risk profile of a customer relationship or product;
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (i) require the documentation of the basis for the risk rating applied to a customer relationship or product and of any changes in the risk rating of particular customer relationship or product; (j) mitigate any additional risks due to the cross-border nature of a transaction, particularly where the transaction takes place in a jurisdiction which could reduce the registrant’s ability of oversight and the application of effective anti-money laundering, countering the financing of terrorism and countering the financing of proliferation controls; (k) identify and mitigate potential risks arising from products, services or activities, provided to or by anonymous or private sources including, but not limited to, unhosted wallets, the darknet and blacklisted addresses, particularly where the risk rating is high or where the type, size and volume of transactions is substantial. (3) A registrant shall assess the risk profile of each new customer and carry out a risk assessment of each new product, business practice or technology prior to establishing a business relationship with such customer or introducing such product, business practice or technology. (4) The outcome of each customer or product risk assessment conducted shall be documented and retained as part of the registrant’s document keeping requirements. (5) A registrant’s risk rating framework shall be subject to review by the Commission.
PART III – INTERNAL CONTROLS
4. Duty of registrant concerning internal controls.
(1) A registrant shall implement internal control policies and procedures for the prevention, detection, and disclosure of identified risks associated with money laundering and the financing of terrorism and the financing of proliferation, in accordance with the Financial Transactions Reporting Act, 20181 and— (a) document and track financial crime typologies specific to digital assets; (b) have a MLRO approved by the Commission; and 1 (S.I. No. 5 of 2018)
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (c) verify, on a regular basis, compliance with internal policies, procedures, and controls relating to money laundering and the financing of terrorism and the financing of proliferation activities. (2) A registrant shall comply with the provisions of the Financial Transactions Reporting (Wire Transfers) Regulations, 20182 and ensure proper internal controls are in place. (3) A registrant shall ensure it understands its operating processes and procedures, regularly verifies their integrity, and accounts for identified money laundering and the financing of terrorism and the financing of proliferation risks.
5. MONEY LAUNDERING REPORTING OFFICER.
(1) A MLRO shall—
(a) if an individual, be sufficiently senior in the organizational structure of the registrant's business operations to exercise the necessary authority to carry out their functions and duties; (b) if a legal person, is approved under the Act to provide outsourced services as a MLRO; (c) have responsibility for making suspicious transactions reports to the Financial Intelligence Unit regarding money laundering, and the financing of terrorism and the financing of proliferation. (2) A registrant shall submit the name of the person proposed to be the MLRO to the Commission, and where the person is approved and appointed as the MLRO, the registrant shall— (a) register the name of the person with the Financial Intelligence Unit; (b) ensure that the MLRO or any person appointed to assist the MLRO has timely access to systems, customer records and all relevant information required to perform their duties; and (c) submit a statement that the MLRO is a fit and proper person.
6. Outsourcing.
(1) A registrant may outsource the role of the MLRO.
(2) Prior to outsourcing the registrant shall— (a) notify the Commission of the particulars and regulatory status of the proposed MLRO, including whether that person is an employee of a parent company or a company affiliated with the registrant; 2 (S.I. No. 36 of 2018)
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (b) satisfy the Commission that the proposed MLRO has the relevant qualifications, knowledge, experience, managerial resources and operational capacity to meet the obligations of a Compliance Officer; and (c) provide the Commission with a copy of the executed outsourcing contract with the MLRO. (3) The outsourcing arrangement must permit the Commission access to any records and information held by the MLRO relating to the activities carried out in relation to the registrant, as if those records and information were held by the registrant. (4) Notwithstanding paragraph (1), a registrant shall retain ultimate responsibility for ensuring compliance with the provisions of the Financial Intelligence (Transactions Reporting) Regulations (Ch. 367). (5) The Commission may, by notice to the registrant, object to the proposed appointment or to the continued use of a MLRO and the registrant shall terminate the appointment promptly after receipt of such notice from the Commission.
7. Suspicious transaction reporting.
(1) A registrant shall implement policies and procedures to facilitate an employee exercising their duty to report their knowledge or suspicions that a customer is or may be engaged in money laundering or the financing of terrorism or the financing of proliferation to the MLRO. (2) It shall be the responsibility of the MLRO to assess the sufficiency of the information contained in a report referred to in paragraph (1).
PART IV – VERIFICATION OF CUSTOMER IDENTITY
8. Due diligence measures.
(1) Except where specifically exempted by any Rules issued by the Commission, the customer due diligence measures implemented by the registrant shall use independent and reliable source documents, data or information (whether or not electronically sourced). (2) The risk rating framework of a customer shall be applied by a registrant to its due diligence measures.
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (3) Once a business relationship has been established with a customer, the registrant shall take reasonable steps to ensure that due diligence measures are periodically reviewed and kept up to date.
9. Simplified due diligence measures.
Where a registrant determines a client to be of lower risk and intends to utilise a simplified due diligence procedure to verify the identity of that client— (i) the registrant shall submit a written outline of the registrant’s risk rating procedure and proposed simplified due diligence process; and (ii) the Commission shall review the proposed simplified due diligence process; and approve the registrant to proceed with the verification of the client utilising due diligence processes appropriate to such client.
10. Enhanced due diligence measures.
(1) Enhanced due diligence measures shall be applied by a registrant for categories of customers, business relationships, or transactions that may present a higher risk for money laundering, or the financing of terrorism or the financing of proliferation based on the risk profile developed relative to the customer, business relationship or transaction, which measures shall include taking additional verification measures. (2) A customer may present a higher risk for money laundering, or the financing of terrorism or the financing of proliferation if, without limitation, a customer— (a) is involved in digital asset mining operations (either directly or indirectly through relationships with third parties) that take place in a high-risk jurisdiction, relate to higher-risk digital assets including, without limitation, those with anonymity enhancing features, or where its organisation gives rise to higher risk; (b) is unable to produce the required Know Your Customer information and documentation; (c) uses anonymous or randomly generated email addresses or a temporary email service; (d) requests an exchange to or from cash or other digital assets with anonymity enhancing features; (e) persistently avoids Know Your Customer thresholds through smaller transactions;
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (f) requests an exchange to or from state-sponsored digital assets that are suspected of being used to avoid sanctions; (g) is a politically exposed person as defined in rule 13. (3) A transaction may present a higher risk for money laundering, or the financing of terrorism or the financing of proliferation if, without limitation— (a) it is a peer-to-peer transaction; (b) a significant proportion of the digital assets held or used in a transaction is associated with anonymity enhancing features or products and services that potentially obfuscate transactions or undermine a registrant’s ability to know its customers and implement effective anti-money laundering, countering the financing of terrorism and countering the financing of proliferation controls; (c) the digital asset comes from, or is associated with, the darknet or other illegal/high-risk sources, such as an unregulated exchange, or is associated with market abuse, ransomware, hacking, fraud, Ponzi schemes or sanctioned digital asset addresses or accounts; (d) the results of blockchain analysis or similar analysis indicate a higher risk. (4) Enhanced due diligence measures may include— (a) corroborating the identity information received from the customer with information in third party databases or other reliable sources; (b) for non-face to face Know Your Customer verification— (i) video conferencing with the proposed customer; (ii) requiring identification documentation to be certified by a notary public or the equivalent; (iii) verifying with the customer, additional aspects of their identity (or biometric data) which is held electronically; (c) tracing the customer’s IP address; (d) corroborating activity information consistent with the customer’s transaction profile; (e) obtaining additional information on the source of funds and source of wealth of the customer; (f) obtaining information on the reasons for the intended or performed transaction; (g) enhanced monitoring of the business relationship and transactions;
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (h) requesting data relating to transaction and trading history.
11. Verification of customer identity.
(1) A registrant shall not enter into a business relationship or execute an occasional transaction with any person without applying customer due diligence measures to verify the identity of the person, including any beneficial owner(s). (2) When verifying the identity of a person referred to in paragraph (1), the registrant shall – (a) satisfy itself that the prospective customer is who the customer claims to be by applying the customer due diligence measures referred to in rules 8 to 10; (b) ensure that sufficient information is obtained and documented – (i) on the nature and purpose of the business that the customer intends to undertake; and (ii) concerning any expected or predictable volume and pattern of transactions and activities; and (c) satisfy itself that any independent and reliable source documents, data or information (whether or not electronically sourced) sufficiently verifies a customer’s identity. (3) Where a prospective customer fails or is unable to provide adequate evidence of identity, or a registrant is not satisfied that a new transaction with an existing customer is legitimate, the registrant shall – (a) determine whether – (i) other steps should be taken to verify the customer's identity; (ii) it is appropriate to proceed or continue with the business relationship; and (b) file a suspicious transaction report with the Financial Intelligence Unit. (4) Registrants shall have a clear policy regarding the escalation of decisions to senior management concerning the acceptance or continuation of high￾risk business relationships. (5) When verifying the identity of a customer, a registrant shall only accept either— (a) original documents; (b) certified copies of documents from a prospective customer where submission of original documents is impractical or impossible;
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (c) independent and reliable source documents, data or other information (whether or not electronically sourced) which sufficiently verifies a customer’s identity; or (d) photographed or scanned copies of identifying documents provided that the registrant has adequate internationally recognized tools to verify the authenticity of the documents. (6) Notwithstanding any provision of these Rules, a registrant shall in all cases verify the identity of a customer, prospective or existing, where the registrant knows or suspects money laundering, or the financing of terrorism or the financing of proliferation and where such suspicion or knowledge is confirmed, shall make a report to the Financial Intelligence Unit.
12. Required information.
(1) Every registrant shall obtain independent and reliable source documents, data or other information (whether or not electronically sourced) appropriate to the nature and structure of the proposed customer when verifying the proposed customer's identity, which shall include, but is not limited to the following, in the case of – (a) a natural person – (i) full and correct name(s); (ii) at least two current means of contact which may include— (aa) personal email address; (bb) business email address; (cc) personal mobile telephone number; (dd) personal landline number; (ee) business landline number; (ff) personal mailing address, which must include where applicable, the street, post office box number, city, state or province, postal or zip code, landline telephone contact, and country; (gg) business mailing address, which must include where applicable, the street, post office box number, city, state or province, postal or zip code, landline telephone contact, and country; (hh) residential mailing address, which must include where applicable the street, post office box number, city, state
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 or province, postal or zip code, landline telephone contact, and country; or (ii) any specific means of contact which the Commission may specify; (iii) date of birth; (iv) country of domicile; and (v) the purpose of the account and nature of the business relationship; (b) a corporate customer – (i) the original or a certified copy of the certificate of incorporation, registration or the equivalent; (ii) certificate of good standing or the equivalent evidence that the company has not been or is not about to be struck off the register or wound up; (iii) a copy of the relevant board resolution authorizing the establishment of the business relationship, or authorizing the opening of an account and conferring permission on any person authorized to undertake transactions; (iv) satisfactory evidence of the identity of all persons authorized to undertake transactions and details of their relationship with the company; and (v) satisfactory evidence of identification of each natural person having a beneficial interest of ten percent or more of the company, or having principal control over the company's assets or otherwise exercising control over the management of the company; (c) a partnership or unincorporated business— (i) a copy of the partnership agreement or document establishing the partnership agreement, or document establishing the partnership or unincorporated business; (ii) a mandate authorizing the establishment of the business relationship or the opening of an account, and conferring permission on any person authorized to undertake transactions; (iii) satisfactory evidence of the identity of all partners and controllers of the firm or business; and (iv) satisfactory evidence of the identity of all persons authorized to undertake transactions;
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (d) other legal structures and fiduciary arrangements, such as trusts, fiduciary or nominee structures – (i) the applicable documents establishing the legal structure or fiduciary or nominee arrangement; (ii) all applicable documents, identifying persons exercising effective control over the legal structure or fiduciary or nominee arrangement, including the power to direct, withhold, consent to or veto the exercise of any power related to the legal structure or fiduciary or nominee arrangement; (iii) satisfactory identification evidence of all persons providing funds or assets to the structure; (iv) all applicable documents, identifying the known beneficiaries of the trust; (v) all applicable documents, identifying all beneficiaries of a fiduciary or nominee structure; (vi) all applicable documents, appointing and identifying any signatory powers in relation to the legal structure or fiduciary or nominee arrangement; and (vii) satisfactory evidence of the identity of all persons authorized to undertake transactions; (e) a foundation – (i) the foundation Charter; (ii) the foundation's certificate of registration issued by the Registrar General, or the foreign equivalent; (iii) the source of funds, and where a person other than the founder provides funds for the foundation, verification of the identity of the third party providing the funds or for whom the founder may be acting; (iv) identification evidence of each founder, officer, and council member of the foundation as may be signatories for the accounts of the foundation; (v) identification evidence of beneficiaries that hold a vested interest in the foundation; and (vi satisfactory evidence of the identity of all persons authorized to undertake transactions; (f) a non-profit association or charity – (i) identification evidence of at least two signatories, and anyone authorized to give instructions on behalf of the entity;
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (ii) the nature of the proposed association's or charity's purpose and operations; (iii) the source of funds; and (iv) satisfactory evidence of the identity of all persons authorized to undertake transactions; (g) powers of attorney – (i) identification of each donee; (ii) identification evidence of the donor; (iii) proof of any third party mandates; and (iv) satisfactory evidence of the identity of all persons authorized to undertake transactions. (2) A registrant shall, in the case of services being provided to the estate of a deceased person, obtain identification evidence of each personal representative of the said estate. (3) A registrant shall review its records periodically to ensure that the identification and other information kept by it is current and reflects the existing facts related to a customer, and in all cases when there have been changes to – (a) persons authorized to undertake transactions; (b) board resolutions or mandates authorizing the opening of an account and authorizing any person to undertake transactions; (c) partners, controllers, trustees, fiduciaries or nominees; and (d) the corporate structure of a customer. (4) Where there has been a change to any of the items specified in paragraph (3), the registrant shall undertake the verification process in compliance with the provisions of this paragraph. (5) For the purpose of the verification process, a registrant shall exercise additional care in relation to the provision of trading services with respect to digital assets with anonymity enhancing features or that obscure a user’s identity or other transactional information. (6) Where a registrant offers the service specified in paragraph (5), the registrant shall independently verify the identity of the proposed facility holder and any beneficial owner(s) through reliable and independent source documents, data, or information. (7) In all cases, a registrant shall maintain adequate documentation to evidence the implementation of due diligence measures and shall ensure that the verification of identification procedures implemented, are
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 appropriate to the nature and structure of the proposed customer being verified. (8) A registrant shall, as part of due diligence measures, implement procedures for the periodic reverification of customers, which at the minimum, shall require re-verification to occur where – (a) during the course of the business relationship, the registrant has reason to doubt the identity of the customer; (b) there is a material change in the way transactions are undertaken; or (c) there is a reasonable suspicion that any transaction carried out by the customer might have breached the law concerning money laundering, the financing of terrorism or the financing of proliferation.
13. Politically exposed persons.
(1) A registrant shall, in addition to applying enhanced due diligence measures, develop clear procedures and controls for the identification and verification of a politically exposed person when— (a) establishing a business relationship with that politically exposed person, or a legal person in which any politically exposed person – (i) is a director, officer, founder or council member; (ii) is a partner or trustee; (iii) is a signatory or person authorized to undertake transactions; (iv) has a beneficial interest of ten per cent or more in the legal person; (v) has principal control over the legal person's assets; (vi) exercises control over the management of the legal person; or (b) the registrant is continuing a business relationship with a customer who has become a politically exposed person, after the establishment of the business relationship. (2) For the purposes of this rule the terms set out below are defined as follows — “international organization” means an entity established by a formal political agreement equivalent in status to an international treaty, made between, and recognized by law, in member countries, and which is not treated as a resident institutional unit of the country in which it is located; “politically exposed person” means—
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (a) an individual who is or has been entrusted with— (i) a prominent public function within The Bahamas, inclusive of a head of state or government, senior politician, senior government, judicial or military official, senior executive of a state-owned corporation, or an important political party official; (ii) a prominent public function by a foreign jurisdiction, inclusive of, a head of state or government, senior politician, senior government, judicial or military official, senior executive of a state-owned corporation, or senior political party official; or (iii) a prominent function within an international organization, including directors, deputy directors, members of the board, members of senior management, or individuals who have been entrusted with equivalent functions; (b) an individual who is related to a politically exposed person, including a parent, child, spouse or sibling; (c) an individual who is closely associated to a politically exposed person either socially, or professionally and includes a person who can conduct substantial domestic or international financial transactions on behalf of the politically exposed person; (d) any corporation, business or other entity formed by or for the benefit of a head of state, head of government or individuals referred to in paragraph (a) above.
14. Reliance on third party verification procedures.
(1) A registrant may rely on the customer due diligence procedures implemented by another virtual asset service provider or financial institution, provided that the virtual asset service provider or financial institution is a regulated entity subject to anti-money laundering, countering the financing of terrorism and countering the financing of proliferation obligations and is an entity located in a country which is not the subject of any list issued by an international organization relative to the issues of money laundering, or the financing of terrorism or the financing of proliferation activities, and is able to – (a) provide written confirmation that it has verified the identity of the relevant customer; and
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (b) confirm the existence of the account or facility provided to the customer by the virtual asset service provider or financial institution. (2) Notwithstanding paragraph (1), a registrant shall only rely on the due diligence measures implemented by another virtual asset service provider or financial institution with respect to those categories of transactions, services, or products which that other virtual asset service provider or financial institution provides to the customer, and in all other circumstances, must undertake its own verification procedures.
15. Eligible introducer.
(1) In all cases, a registrant's duty to verify the identity of all prospective customers shall apply to any customer introduced by another virtual asset service provider or financial institution, except where a virtual asset service provider or financial institution is an eligible introducer. (2) Where a registrant relies on the verification procedures of an eligible introducer, it shall obtain from that introducer – (a) written confirmation that the eligible introducer has verified the customer's identity in accordance with the national laws of the eligible introducer; (b) certification from the eligible introducer that any photocopies provided to the registrant are identical to the original document; and (c) clear and legible copies of all documentation, including where appropriate, certified translations, within thirty days of receipt of the written confirmation referred to in subparagraph (a). (3) For the purposes of this paragraph, an eligible introducer shall be – (a) in relation to a domestic financial institution – (i) a person registered under Part VI of the Securities Industry Act, 2011 (No. 10 of 2011); (ii) an investment fund administrator licensed under section 34 of the Investment Funds Act 2019 (No. 2 of 2019); (iii) a bank or trust company licensed by the Central Bank of The Bahamas under the Banks and Trust Companies Regulation Act 2020 (No. 22 of 2020); (iv) a digital asset business registered under the Act; or (b) in relation to a foreign virtual asset service provider or financial institution, a service provider or institution –
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (i) exercising functions similar to a domestic digital asset business or financial institution to which subparagraph (a)(i) through (iv) applies; (ii) registered or functioning pursuant to Part VI of the Securities Industry Act, 2011 (No. 10 of 2011); (iii) located in a country which is not the subject of any list issued by an international organization relative to the issues of money laundering or the financing of terrorism or the financing of proliferation activities; and (iv) having no obstacles administrative or otherwise which would prevent the registrant from accessing the original documentation.
16. Suspension or termination of activity or business.
A registrant shall – a. suspend activity on the account of a prospective customer, if reasonable efforts have been made to directly verify the prospective customer's identity without success; and b. terminate the business relationship with a prospective customer where it is unable to obtain the relevant information and documentation from the eligible introducer within thirty days of receiving the eligible introducer's confirmation.
17. Exemption from verification of identity.
A registrant shall not be required to verify the identity of a prospective customer where that customer is – (a) a digital asset business or financial institution licensed or registered by the Central Bank of The Bahamas, the Securities Commission of The Bahamas, The Insurance Commission of The Bahamas, or the Gaming Board for The Bahamas; (b) a virtual asset service provider or financial institution which – (i) is subject to anti-money laundering, countering the financing of terrorism and countering the financing of proliferation obligations; (ii) is under supervision for compliance with the obligations referred to subparagraph (i) and; (iii) has adequate procedures for compliance with customer due diligence and record keeping requirements;
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (c) any central or local government agency or statutory body; (d) a publicly traded company listed on The Bahamas International Stock Exchange or any other marketplace registered by the Commission and specified in the Schedule to the Financial Transactions Reporting Regulations, 2018.
18. Ongoing monitoring.
(1) A registrant shall, after the verification procedures have been concluded and a business relationship has been established – (a) monitor the conduct of the business relationship periodically; and (b) ensure, on an ongoing basis, that the business relationship is consistent with the risk profile and nature of the business stated when the relationship was established. (2) Ongoing monitoring of business relationships includes, without limitation — (a) scrutiny of transactions undertaken throughout the course of the relationship (including, where necessary, the source of funds) to ensure that the transactions are consistent with the registrant’s knowledge of the customer, their business and risk profile; (b) ensuring that the source documents, data or other information obtained for the purposes of applying due diligence are kept up to date; (c) analysing blockchain and similar transactions in line with a risk￾based approach including, without limitation, taking into account the nature of the registrant’s business and whether it is appropriate to use such analysis for all transactions; (d) where large volumes of transactions occur on a regular basis, using automated systems to monitor transactions provided that flagged transactions are subject to human expert analysis to determine whether such transactions are suspicious.
PART V – RECORD KEEPING
19. Maintenance of records.
(1) A registrant shall, in compliance with all relevant laws, prepare and maintain records of its business relationships and transactions that enable –
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (a) competent third parties to assess the registrant's compliance with anti-money laundering, countering the financing of terrorism and countering the financing of proliferation policies and procedures; (b) transactions effected through the registrant to be reconstructed; (c) the registrant to satisfy court orders or enquiries from the Commission or appropriate authorities; and (d) the identification of customers. (2) A registrant shall keep all records required to be maintained by these Rules, for a period of seven years from the date that the customer ceases to be a facility holder. (3) For the purpose of paragraph (2), a person ceases to be a facility holder from the date of – (a) the carrying out of a one-off transaction or the last transaction in a series of transactions; (b) the closing of the account(s) or the ending otherwise of the business relationship; or (c) the commencement of proceedings to recover debts payable on insolvency. (4) The seven-year period referred to in paragraph (2) commences on the date of the completion of the last transaction where formalities to end a business relationship have not been undertaken but a period of seven years has elapsed since the date of the last transaction. (5) Where the registrant is a company that is being liquidated, the liquidator shall retain the relevant records of the regulated person for the balance of the prescribed period remaining at the date of dissolution. (6) A registrant may maintain records in the form of original documents or other electronic media provided— (a) there are appropriate internal controls in place to guard against the risk of loss, damage, destruction or falsification (b) such method provides a means to furnish promptly to the Commission upon request legible, true and complete copies of those records; and the registrant has suitable back-up and disaster recovery programs.
20. Transaction records.
A registrant shall maintain transaction records containing – (a) a description of the nature of the transaction;
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (b) details of the transaction, including the amount of the transaction and the denomination of the currency; (c) the date on which the transaction was conducted; (d) the identification verification details of the parties to the transaction; (e) the public keys (or equivalent identifiers) of relevant parties; (f) where applicable, information on the facility through which the transaction was conducted and any other facility directly involved in the transaction; and (g) the files, business correspondence, and records connected to the facility.
21. Other records.
A registrant shall maintain records of – (a) suspicions raised internally by the Money Laundering Reporting Officer, but not disclosed to the relevant authorities; (b) suspicions which the Financial Intelligence Unit, the Commissioner of Police, or the relevant supervisory authority have advised are of no interest; and (c) findings of inquiries conducted by the regulated person into unusual activity.
PART VI – MISCELLANEOUS
22. Education and training.
(1) A registrant shall take appropriate measures to ensure that every employee is aware of – (a) the policies and procedures put in place to detect and prevent money laundering, to counter the financing of terrorism and to counter the financing of proliferation, including those for the identification, record keeping, detection of unusual and suspicious transactions and internal reporting; and (b) the anti-money laundering, countering the financing of terrorism and countering the financing of proliferation legislative framework. (2) A registrant shall ensure that—
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DIGITAL ASSETS AND REGISTERED EXCHANGES (ANTI-MONEY LAUNDERING, COUNTERING FINANCING OF TERRORISM AND COUNTERING FINANCING OF PROLIFERATION) RULES, 2022 (a) the relevant staff members and key personnel are trained on an ongoing basis to— (i) identify, prevent, detect and disclose financial crime risks; (ii) recognise and handle suspicious transactions; (b) its key personnel possess the adequate knowledge, skills, experience and capability to understand the registrants’ business and customer needs; (c) key personnel and staff are aware of their obligations to comply with policies and procedures. Made this day of , 2022. Deputy Chairman Securities Commission of The Bahamas
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Made this 16th day of March, 2022.
.
Signed
MICHAEL PATON
Deputy Chairman
Securities Commission of The Bahamas