Financial Crime World

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Seychelles Takes a Pioneering Step in Preventing Financial Crimes with Technology

In a significant move towards ensuring a secure and thriving virtual asset market, Seychelles is set to implement the Virtual Asset Service Providers Bill, 2024. This groundbreaking legislation aims to regulate virtual asset service providers (VASPs) and mitigate potential financial crimes such as money laundering and terrorist financing.

Background

The bill comes in response to the 2021 National Risk Assessment, which highlighted substantial exposure to money laundering and terrorist financing risks linked to virtual assets. Seychelles has taken a proactive approach to address these risks, in line with recommendations from the Financial Action Task Force (FATF).

Key Features of the VASP Bill

The bill introduces several critical measures aimed at creating a secure and transparent environment for virtual assets. These include:

  • A licensing regime for specific virtual asset products and services
  • Licensing criteria that ensure VASPs meet certain standards, including:
    • Capital requirements
    • Solvency requirements
    • Insurance requirements
    • Cybersecurity measures
    • Fit and proper assessments of directors and principal officers
  • Substance requirements to ensure transparency and accountability
  • Registration of promoters of initial coin offerings (ICOs) and non-fungible tokens (NFTs)
  • Prohibition of unauthorized activities, including the promotion or provision of virtual asset products and services without proper authorization

Empowering the Financial Services Authority

The Financial Services Authority (FSA) has been designated as the regulatory authority responsible for enforcing the VASP legislation. The FSA will be empowered to:

  • Inspect and investigate cases of non-compliance
  • Grant and revoke licenses
  • Register ICO and NFT promoters
  • Issue guidelines and directives
  • Request information
  • Undertake enforcement actions

Consumer Protection and Education

The bill places a strong emphasis on consumer protection and education, with measures aimed at:

  • Raising awareness about scams and virtual asset misuse
  • Providing sufficient protections for victims of such activities
  • Promoting responsible innovation and use of technology within the virtual asset space

Consequential Amendments and Transitional Provisions

To ensure seamless integration, the VASP Bill includes amendments to related acts, including:

  • The Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020
  • The Financial Services Authority Act, 2013
  • The International Business Companies Act, 2016
  • The Financial Consumer Protection Act, 2022

When the bill comes into force, all persons providing virtual asset services must apply for a license or authorization by December 31, 2024. Transitional provisions allow for business activities to continue until applications are processed or refused.

Conclusion

The Virtual Asset Service Providers Bill, 2024 marks a significant milestone in Seychelles’ journey towards a secure and innovative financial landscape. By introducing comprehensive regulatory measures, the bill not only addresses current financial crime risks but also lays the foundation for sustainable growth and consumer confidence in the virtual asset space.