Seychelles Faces Growing Concerns Over Money Laundering and Terror Financing

A recent National Risk Assessment (NRA) has revealed that Seychelles is facing significant threats from money laundering (ML) and terrorist financing (TF). The assessment, conducted by the National Risk Assessment Committee, found that many sectors of the business environment are vulnerable to ML/TF risks.

Offshore Sector: A Medium-High Risk

The Offshore Sector, including Trust or Company Service Providers (CSPs), poses a medium-high risk for ML. This is due to the fact that personal accounts are often used for business purposes, potentially as a mechanism to evade tax and engage in large cash transactions.

Critical Points of Concern

• Some critical points of concern exist in the sector, which are prone to misuse by individuals for illegitimate purposes.
• The use of personal accounts for business purposes can lead to evasion of tax and large cash transactions.

Securities Sector: A Medium-Low Risk

The Securities Sector was assessed as having a medium-low risk for ML. This is due to its small size and strong anti-money laundering (AML) framework. However, the NRA warns that there is still room for improvement.

Banking Sector: A Medium Risk

• The Banking Sector has an overall ML risk rating of medium.
• The sector’s ratings vary, with:
  • High compliance with international standards
  • Medium-low effectiveness of supervision procedures and practices
  • Low availability and enforcement of administrative sanctions

Designated Non-Financial Business or Profession (DNFBP) Sector: A Medium-High Risk

The DNFBP sector, which includes motor vehicle dealers, casino operators, real estate agents, lawyers, and others, was found to have a medium-high risk for ML. This is due to the fact that many business activities are conducted in cash, and Seychelles has a reputation as an offshore haven.

Other Financial Institutions Sector: A Medium-High Vulnerability

• The Other Financial Institutions Sector, including those involved in buying and selling foreign exchange and remittance activities, was found to have a medium-high vulnerability to ML.

Terror Financing Threats and Vulnerabilities

• Seychelles faces no known terrorist groups or cells.
• However, there are concerns about potential threats from Somalia, Madagascar, and Yemen, where terrorism and deficiencies in AML/CFT controls exist.

Recommendations for Mitigation

The NRA made several recommendations to mitigate these risks, including:

• Reviewing existing laws and enacting new ones to be in line with international requirements
• Strengthening AML/CFT supervision
• Enhancing capacity building for ML/TF training
• Increasing transparency and understanding of predicate offenses
• Formalizing the AML/CFT Committee
• Providing more support to reporting entities

Government Response

The Seychelles government has acknowledged the findings of the NRA and is working to implement the recommendations. However, it is clear that a concerted effort will be required to address these growing concerns and maintain the country’s reputation as a safe and secure financial hub.