Financial education |17 January 2022
Overview on Anti-Money Laundering and Countering the Financing of Terrorism
Globally, criminals tend to have one major goal – to be able to enjoy the proceeds from crime, free and undetected, upon acquiring illegal funds from conducting a criminal activity. For that purpose, criminals abuse the financial systems of a country to launder any benefits obtained from criminal activities in such a way, so as to disguise the origins of the benefits and to prevent law enforcement authorities from linking the financial transactions undertaken to obscure these benefits to them. Similarly, an individual wishing to finance a terrorist activity or a terrorist group, will most likely utilise the financial system as a means to transfer funds to be used for the terrorist activity or the terrorist group.
In short, the definition of money laundering can be described as a process used by criminals to hide the origins of any asset derived from a criminal activity, and making it appear as if the asset has been obtained from legal or legitimate means. Terrorism financing, in turn, is the process whereby individuals provide funds or any other assistance, in support of a terrorist activity or terrorist group.
To ensure that the global financial system is not abused by criminals, international bodies such as the Financial Action Task Force (FATF) tasked with the responsibility to oversee and formulate global standards and policies designed to counteract the threat of money laundering and terrorist financing in the global financial markets, work proactively with law makers in any given jurisdiction to implement measures to be adopted by these jurisdictions to deter criminals from being able to access financial services and products and to easily detect any criminal who chooses to use any such services and products. As a result, jurisdictions become safer and more secure from criminals, and financial markets become more stable.
Seychelles, as a jurisdiction, is committed to maintaining the required international standards formulated for the prevention of money laundering and terrorist financing. In August 2020, the Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020 (“AML/CFT Act”), was enacted following the repeal of the Anti-Money Laundering Act, 2006, to encompass deficiencies identified during the Mutual Evaluation undertaken in 2018 by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a FATF-Style Regional body, as a means to strengthen the measures adopted by Seychelles against money laundering and terrorist financing risks.
Under the AML/CFT Act, Seychelles has imposed a number of preventive measures to be undertaken by reporting entities (including but not limited to financial institutions such as insurance companies and securities dealers etc.), obligating them to apply certain measures and controls in their internal processes and procedures, on par with the recommendations of the FATF. This ensures that these reporting entities identify, mitigate and manage the money laundering and terrorist financing risks faced.
In line with the AML/CFT Act, a reporting entity is obligated to:
- Conduct its institutional risk assessment which should be regularly reviewed and updated;
- Appoint an individual as Compliance Officer, who shall be a resident in Seychelles;
- Apply Customer Due Diligence (CDD) measures in respect of its customers, business relationships and transactions;
- Cease transaction in circumstances where it is unable to conduct the necessary CDD measures or undertake ongoing monitoring with respect to a business relationship;
- Maintain records and retain identification details of wire transfers;
- Maintain records of CDD measures, all transactions carried out both domestically and internationally, including correspondences relating to the transactions, and all reports made to the Financial Intelligence Unit (FIU) including enquiries relating to money laundering and terrorist financing activities, made to it by the FIU; and
- Report suspicious transaction and/or activities to the FIU.
The competent Seychelles authorities concerned with the fight against money laundering and terrorist financing, such as the Financial Services Authority (FSA), are mindful that the different safeguards to combat money laundering and terrorist financing will have certain impacts on traditional set ways of doing business for the financial institutions and other reporting entities concerned and ultimately on the end users of the financial services they offer (i.e. the clients). That said, such measures are essential to preserve the integrity and overall stability of the financial systems we all use from the illicit intentions and activities of criminals.
Contributed by the Financial Services Authority