Seychelles has amended legislation to address deficiencies identified in the mutual evaluation report published in 2018 by the Eastern and Southern Africa Anti-Money Laundering Group.
The amendments to six laws were approved by the National Assembly last week for the Mutual Legal Assistance in Criminal Matters Act; the Extradition Act; the Anti-Money Laundering and Countering the Financing of Terrorism Act; the Beneficial Ownership Act; the International Trust Act; and the Prevention of Terrorism Act.
SNA met with the Secretary of State for Finance, Patrick Payet, to learn more about the amendments to bring Seychelles' financial sector at par with international norms.
SNA: Tell us why there was a need to make amendments to the existing laws?
PP: In accordance with the standard of the Financial Action Task Force, there was a national risk assessment conducted on Seychelles in 2017. The assessment required the island nation to identify plausible risks within its financial sector. The risks were classified under three categories; low, medium, and high.
The report rated the country to be compliant in 20 areas, partially compliant in 16 and non-compliant in four. In December last year, we were able to upgrade three recommendation and now we are left with 17.
SNA: What is the law on anti-money laundering and financing of terrorism activities really addressing?
PP: The law on anti-money laundering and financing of terrorism activities has existed since 2006. Then we decided to review it as a whole through the Anti-money Laundering and Countering the Financing of Terrorism (AML/CFT) amendment bill, 2020. The role of the Financial Intelligence Unit (FIU) was reviewed and given more of an administrative role.
On top of that FIU will sign an agreement with other enforcement agencies such as the police, Seychelles Revenue Commission and the Anti-Corruption Commission to allow the swift exchange of information when identifying law offenders.
It was found that the element of proliferation financing was missing and non-existent in Seychelles laws. Based on that, we needed to at least ensure that there is a coordination between the National Committee for AML/CFT and National Committee for Terrorism Financing chaired by Minister Roy Fonseka.
Another component that we have inserted in the law is to ensure that the sharing of information is not affected by laws in place on the secrecy or confidentiality of a client.
The amendments made also touched on the non-for-profit organisations (NGOs). We have made clear in the law the procedures between Registrar and FIU. All registrations for NGO's is done at the Registrar but there needs to be a risk assessment conducted on those identified as high risk.
As a matter of fact, no names will be published even though an NGO is found to be high risk. This is because we do not want to prevent others that are genuine from receiving funds that are vital for their functioning. On the other hand, there are instances were NGO's might not know if the funds are being derived from illegal activities.
SNA: The International Trust was one of the laws approved last week. What standards and requirements have Seychelles met and how would it address concerns raised in the report?
PP: Recommendation 25 in the report obliges jurisdictions to ensure that trustees share their information with financial institutions when forming a business relationship or performing a transaction above the set threshold. As a result of implementing the recommendation, trustees will have no other choice, but to disclose their information.
Nevertheless, I cannot attest to the mere point that there are criminals creating trust already in Seychelles. It may happen that a criminal is gaining money through laundering or are not paying tax, thus, using the money to create trusts. In the eye of international bodies, rating our system will simply put us as encouraging or participating in these activities if our legislatures are taciturn about it.
Anyone can create a trust, but they would eventually have to make the information available for audit purposes. Failure to do so will definitely be punishable under the law.
SNA: A fine not exceeding $5,000 will be applied to trustees who are not compliant. Do you think it is a strong form of deterrence?
PP: The fine works as an administrative sanction based on international standards. However, if trustees are still not deterred, there are other instances whereby you can go through other procedures such as going to court or simply removing the trustee in your respective jurisdiction.
SNA: What are your views on the comment that Seychelles might be seen as succumbing to international pressure to adopt these different laws?
PP: Almost every country is moving towards the direction to improve laws governing their financial sector. So what do we do as a country? Do we lag behind? In fact, there are 18 countries that form part of the ( Eastern and Southern Africa Anti-Money Laundering Group) group. They all need to complete their mutual evaluation assessment within the space of five years.
SNA: What impact will the financial reforms have on investors?
PP: Since the country is aligning itself with international standards, our reputation has become trustworthy. Before that, investors borrowing money internationally to invest in Seychelles needed to have a risk premium with banks which come at a cost. While we are undergoing reforms, this might no longer be needed.
SNA: What action can FATF take f Seychelles does not take steps to implement and comply with their requirements?
PP: There are countries that have lost their banking relationship for not complying with FATF standards. We do not want Seychelles to reach that stage where people have to physically carry out huge amount of cash to do their transactions internationally or to have their credit/debit cards non-usable. Vice-versa, holidaymakers might face the same issue if they are not having a corresponding bank to recognise their transactions.
SNA: The amendments have been made to the relevant laws now what is the next step for Seychelles?
PP: According to procedures of the Financial Action Task Force, Seychelles has three years to make significant changes to its legislation to bring it on par with international standard.
Out of the 17 recommendations that were left, Seychelles has initially submitted a request through a report for re-rating of 14 recommendations to which the country was deemed partially compliant.
The report must be sent six months for the due diligence process before it is being reviewed for re-rating in September. For this purpose as well, the international community will have the chance to view the report and progress that we have made in due course.
On the way forward, there are three recommendations that have not been dealt with yet and we are working to review some laws including the Registration of Association Act, and those relating to virtual asset service providers.
We are now discussing the policy framework with the Seychelles' Central Bank and FIU.
Additionally, we are working on the Asset Management Regime. Currently, there isn't a standardised way or procedure to deal with the seizure of assets. Therefore, the law will be reviewed to take this into consideration.