Seychelles gets comprehensive National Risks Assessments report of Virtual Assets and Virtual Asset Service Providers |18 July 2022

SS Payet (left) accepting a copy of the report from Mr Sanhye (Photo: Salome Abel)

A comprehensive National Risks Assessments report of Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) in the country has been presented to the Seychelles government.

The assessment by the Financial Services Authority (FSA) in partnership with a number of local institutions within the National Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Committee - (NAC), was conducted by foreign consultant, Danny Sanhye of BDS Forensics UK.

It was the secretary of state in the Ministry of Finance, National Planning & Trade, Patrick Payet, who accepted the document on behalf of the Seychelles government from Mr Sanhye, following a closed-door session with the private sector, at the Savoy Hotel on Friday afternoon.

The assessment, at the request of the Financial Action Task Force (FATF), the global money laundering (ML) and terrorist financing (TF) watchdog, followed a non-compliant rating for Seychelles for the FATF Recommendation 15 in the last Mutual Evaluation of 2018 and the re-rating of 2021 after a follow-up review in 2020.

The FATF Recommendation 15 requires that VASPs be regulated for anti-money laundering and countering the financing of terrorism (AML/CFT) purposes, that they be licensed or registered, and subject to effective systems for monitoring or supervision.

A virtual asset is a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes and the most common example of a virtual asset is virtual currency such as Bitcoin, Litecoin, Ethereum or Dogecoin.

Speaking to the media following the half-day session, SS Payet said Seychelles presently does not have a licensing regime for VASPs. In line with FATF R15, Seychelles had to identify, assess and understand the ML/TF risks associated with VA and VASPs and develop and implement a risk-based national anti-money laundering (ML) and counter-terrorist financing (CTF) regime,” he said.

“Because there are no licensing regime, it took us a while to discuss what type of structure we will introduce but in our discussion we have opted to carry out an assessment, before making a decision so as to see and understand what was happening. We could not just ban as was being proposed initially,” explained SS Payet.

He further added that although Seychelles was rated non-compliant and partially compliant, the country would request a re-rating later this year.

“At present there are 11 recommendations rated non-compliant or partially compliant and today specifically we were discussing on Recommendation 15 FATF and we expect to ask for a re-rating for 9 out of the 11 of the recommendations in October. This will be discussed in April next year,” said SS Payet.

When outlining some of the points from the report, Mr Sanhye of BDS Forensics UK, who carried out the study, said he observed there were a lot of factors contributing to the exposure of Seychelles to VAs and VASPs.

“At the moment Seychelles does not have a comprehensive AML/CFT legislation which basically captures VAs and VASPs, meaning there is a gap in the legislation, and that gap is exposing the country to these service providers,” explained Mr Sanhye.

He added that as an offshore centre, Seychelles’ level of secrecy could also be contributing to motivating these businesses to operate in the country.

Mr Sanhye said using the World Bank tools and guidance, the assessment has been able to identify seven types of virtual assets and some products are high or medium risk.

He said some of the VASPs were already under investigation and some were getting some adverse media reports.

“These VASPs need to be licensed same as existing licensee, for example like the bank, they have all these mitigants in place to prevent their products from being abused,” added Mr Sanhye.

For his part, the acting director of the FSA, Randolf Samson, said although the report has been able to trace some of the VASPs registered as IBCs in Seychelles, they were unable to reveal the total number at the moment.

He said FSA will now go through the over fifty-one thousand active IBCs registered in Seychelles, to identify them.

“When we did the risk assessment we noticed that some say they are domiciled in Seychelles, but actually there are some which are incorporated here but are just using Seychelles’ name, so they are giving us a bad reputation although their transactions are not done in Seychelles. This exercise will help us determine which are the ones operating here,” explained Mr Samson.

For her part the Governor of the Central Bank, Caroline Abel, said having VAs and VASPs linked to Seychelles help to tarnish the country’s reputation and may have an economic impact because it can make it hard for Seychelles to find a corresponding international bank for its transaction.

“When we have a bad reputation and negative comments, the first institutions that are hit are the banks because Seychelles is considered a high risk country and banks caution against all transactions,” she explained, adding it was therefore high priority for this matter to be attended to swiftly.

Following the National Risks Assessment Report, Seychelles will work on an Action Plan that will be discussed internally with the national AML/CTF committee, and presented to the cabinet of ministers, and the National Assembly for approval.

SS Payet said due to urgency of the matter, Seychelles has to complete some plans within the next four months and all the legal frameworks have to be in place by December 2023.

Patsy Canaya