FIU reflects on 10 years of operation


23-July-2016

This month, the Seychelles Financial Intelligence Unit (FIU) is celebrating ten years of operation since it was first launched in 2006. In the course of that decade, it has achieved a significant measure of success and encountered serious challenges in its fight to confront the abuse of our financial services sector for criminal and terrorist purposes.

 

Rationale

The Republic of Seychelles is completely reliant on access to the global financial system so that it can trade using foreign currencies. Over the last decade, the main criminal risk to financial stability in Seychelles has been in the offshore corporate services and banking sector, and the associated facilitation of transnational organised crime in the concealment of criminal proceeds and activities. Unchallenged, this would have led to the progressive isolation of Seychelles from the global financial system, resulting in forex shortages, higher costs and stunted tourism and trade. 

The Seychelles FIU was created within the Central Bank from a strong political commitment to address the vulnerabilities arising in our international financial services and to counter the international misperception that Seychelles was an offshore financial centre for money laundering and other clandestine company practices. In the same year, Seychelles was subjected to an assessment by the Financial Action Task Force (FATF), which is an intergovernmental body, on its anti-money laundering and terrorist financing framework. The FATF findings led to the strengthening of the legislation. Late in 2008, the Anti Money Laundering Act was enhanced to establish an independent FIU with investigative and asset preservation powers. A critical step forward was the introduction of the Proceeds of Crime Act, providing for the first time in Seychelles a lawful regime for the freezing and ultimate civil confiscation of the proceeds of crime by the courts. 

 

FIU operation and outcomes

The primary role of the FIU is to protect the Republic of Seychelles from being used by terrorists, organised crime groups or other criminals to conduct activities or launder monies in our financial services sector. It does this by deterring and preventing the funding of crime or laundering of proceeds through the financial services. It also works closely with the Attorney General's Office to prosecute assets confiscation and, more recently, money laundering cases through the courts. Its secondary role is to assist the international community in protecting the global financial system by exchanging information with foreign agencies investigating crimes which have links to Seychelles offshore companies or bank accounts. Crimes encountered by the FIU in its investigations have included financial crimes, illegal weapons and nuclear proliferation crime, child pornography, bank embezzlement, corruption, drug-trafficking, murder and other crimes.

The FIU has brought dozens of cases to the courts. Since 2009, approximately SCR400,000,000 in criminal assets has been transferred to the Republic of Seychelles arising from FIU work in tracing proceeds from offshore crime and local drug-trafficking assets. Numerous victims of financial crime around the world have had their defrauded monies returned to them. Many rogue bank accounts and offshore companies in Seychelles have been shut down and information on thousands of offshore company formations linked to criminal activities has been passed to international investigators.

On a daily basis, the FIU interacts with domestic partners (such as the Central Bank, the Financial Services Authority, the Seychelles Revenue Commission, the National Drugs Enforcement Agency, the Police and a range of government ministries) and international partners to ensure that people seeking sanction to invest or purchase property in Seychelles, to obtain a financial services or other business license, or to become permanent residents or citizens of the state are subject to a comprehensive due diligence. This mitigates the risk of damage to the safety, economic welfare and reputation of Seychelles. FIU staff work closely with stakeholders across the industry and non-governmental sector to bring better awareness of the risks. 

 

International recognition

The work of the Seychelles FIU and its contribution to helping to protect national and regional financial services has been recognised internationally. In 2013, Seychelles was accepted as a member of the Egmont Group, a financial intelligence sharing community that shares information to stem the tide of transnational money laundering and terrorist financing.  International observers such as the OECD and the Tax Justice Network have recognised the contribution made by the FIU to the national framework protecting Seychelles reputation as an international financial services jurisdiction. In 2015 Seychelles was proposed for membership of CARIN, a global network for criminal assets recovery, and joined its Southern African regional body ARINSA this year. In June 2016, the Republic of Seychelles became the first country within the East and Southern African regional body of the FATF to exit from the ongoing AML review process, ahead of states such as Mauritius and South Africa.

The Seychelles FIU model is highly progressive and is regarded as a model of excellence by other FIUs within the African region and beyond. Colleagues from other countries have visited on attachment to help improve the efficiency of their FIU. The Seychelles FIU is routinely asked to make presentations at international conferences and is often the only African country invited to do so. 

 

National risk assessment

The Seychelles is permanently engaged in review of its legislative and standards recommendations. It is currently conducting a strategic National Risk Assessment (NRA) facilitated by the World Bank. The NRA will identify key risks in financial services over the next ten years and suggest how we can mitigate their potential impact on our economy. It will be a critical informant on future government policy and legislation on financial services. The 1st NRA Workshop saw the participation of the public sector, industry and civic society, and is backed by a political commitment of key ministries. The Seychelles is also currently preparing for its next round of assessment of anti-money laundering implementation, which is an important opportunity for the State to demonstrate our commitment to achieving competitive compliance. 

 

Looking forward : A much-changed environment, sanctions and targeting drug traffickers

Tolerance for the facilitation of terrorist financing, corruption, money laundering and tax evasion in the international financial services sector is fast disappearing. Change is being driven by the imposition of punitive sanctions on institutions and individuals.  These issues will continue to dominate the international agenda for some time and international financial services will remain a highly challenging environment for governments, regulators and industry alike. Going forward we anticipate that individuals, companies and institutions in Seychelles may be the subject of international sanction for the facilitation of these criminal activities, particularly in the area of corporate services. There is also a growing international demand for domestic regulators and law enforcement in offshore services jurisdictions to sanction and prosecute offenders.

Seychelles is a developing and largely compliant international financial services centre which is struggling to survive in a challenging international environment. It is somewhat ironic that while we are often labeled an offshore tax haven and money laundering centre, we may well represent the lowest risk offshore services jurisdiction in the world in terms of the low level of financial crime and money laundering that takes place in the jurisdiction. Government is fully committed to promoting an attractive and competitive environment but will also ensure that it remains a sector that is not conducive for criminals and their activities. The FIU is fully committed to working with government, industry and non-governmental stakeholders so that the country can offer an effective, transparent and competitive combination of legislation and implementation in financial services. We strongly believe that a combination of adaptive legislation, competitive transparency and access to justice is the key to making Seychelles one of the most attractive financial services sector in the world for investors, stakeholders and citizens alike. The Judiciary is the cornerstone of our future success.

Investigation of transnational corruption cases with external partners has been and continues to be a significant component of the FIU’s work. We note the recent and first ever Universal Declaration on Anti-Corruption issued after the recent Global Anti-Corruption Summit in London and subscribe to the aspiration of exposing, prosecuting and preventing corruption. With the progressive strengthening of the anti-corruption framework in Seychelles, the FIU stands ready to support the Anti-Corruption Commission as needed.

Finally, while considerable effort (about thirty per cent of all FIU work) has gone into tracing drug trafficker’s assets in Seychelles, the process of permanent seizure in the courts has been frustrated by the taking of multiple constitutional challenges and appeals by the lawyers defending the assets. This was highlighted recently in a case which, starting in 2009, has taken seven and a half years to progress through the courts. The case passed through the Supreme Court, the Constitutional Court and two Appeal Court hearings before being finally dealt with. The FIU is optimistic that the recent final Appeal Court ruling on the matter may assist in speeding up the process of preventing persons benefiting from the proceeds of drug crime using the court processes to delay outcomes. Going forward, the FIU is prioritising the work with its close partners, the NDEA and the AG’s office, in seeking more convictions and asset seizures related to the trafficking of illegal drugs in Seychelles. Targeting criminal assets hidden overseas is the next stage of development for anti-drug operations. The FIU welcomes the government announcement that the funds raised from seized drug trafficking assets would be used to help address the rehabilitation of victims of drug abuse and to relieve the hardships facing the communities suffering from this scourge on our society.

On this our anniversary, the FIU would like to extend our best wishes to all of our colleagues in other agencies, ministries and throughout the industry. We thank all of our agents, past and present, for their service to their country and remember with fondness our late deputy director, Liam Hogan who died in service in August 2014.

 

Contributed by the FIU

 

 

 

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