The Financial Services Authority (FSA) of Seychelles, via the issuance of its Circular on 29^th of November 2022, wishes to provide clarifications regarding the contents of the Annual Compliance Form required to be submitted by Securities Dealers.

The Annual Compliance Form is an obligation imposed under Regulation 13(h) of the Anti-Money Laundering and Countering the Financing of Terrorism Regulations, 2020, under which the Compliance Officer of the Securities Dealer needs to ensure the preparation and submission of the Form to the FSA within 90 days after each calendar year.

The said Circular clarifies that the submission of the reporting obligation related to the Annual Compliance Form should be made, as per the following:

1. The Annual Compliance Form template to be used has been provided by the FSA;
2. The Form submitted needs to be accompanied by the institutional risk assessment as per section 32(5) of the AML/CFT Act and any other documentation on the identification, assessment and mitigation of ML/TF risks that the Securities Dealer applies;
3. The Annual Compliance Form to be submitted should additionally cover the areas below:

1. Introduction
2. Compliance structure and staffing
3. Institutional Risk Assessment
4. Customer Due Diligence (e.g. results of due diligence on customers, business relationships, transactions, etc.)
5. Enhanced Due Diligence (e.g. results of the enhanced due diligence conducted)
6. Politically Exposed Persons (e.g. results of the enhanced due diligence on persons identified as PEPs)
7. Reliance on regulated persons
8. Statistical history concerning the transactions reported to the FIU as well as the amount of the funds involved.
9. Breaches under the AML/CFT Act
10.   AML/CFT trainings
11.   Staff: Summary of the disciplinary actions, resignations or terminations of compliance staff including the reasons for same.
12.   Requests for information received from supervisory authorities and law enforcement agencies.
13.   Review of compliance program and top deficiencies identified.
14.   Plans for next year.

FiveComply’s team of experts can assist you in meeting your reporting obligations with the FSA Seychelles; contact us now to find out more about our services.

During their Board meeting, the Cyprus Securities and Exchange Commission (“CySEC”) concluded to the replacement of Circular 256 by issuing Circular C534, regarding the provision of investment and ancillary services and/or performance of investment activities in third countries.

CySEC stated the need for CIFs of notifying CySEC via a letter for their intentions to provide investment and ancillary services and/or perform investment activities in third countries.

More specifically, the CIFs should perform the following actions:

1. i) Prior to providing/performing the said services/activities in third countries, CIFs need to acquire the necessary authorisation by the respective competent Authorities of the third countries, in accordance with their legislative framework.
2. ii) CIFs should provide CySEC with a certified copy of the authorisation for the provision of these services by the competent Authority of the third country.

• iii) In the case that the third country does not require such authorization, the CIF must provide CySEC a relevant certificate from the Competent Authority of the Third country, stating that the legislation does not require such authorisation for the services/activities to be carried out.

The main change with the issuance of the new Circular C534, refers to the point (iii) above – Please note that a legal opinion (issued by a qualified lawyer or legal firm) shall not suffice anymore, as the Commission shall require a certificate form the respective competent authority of the third country instead.

CIFs that are already operating in third countries should ensure that they continue to comply with the Legislative Framework applicable in the relevant Third Country.

Our dedicated team at FiveComply is constantly updating in the matter to offer to you the latest updates in the legal framework. We can assist you with your queries; contact us for more information!

On 22 November 2022, the European Court of Justice (ECJ) has decided that open public access to the registers of the beneficial owners (BO) of companies registered in EU member states is no longer valid, as it contravenes with Articles 7 (Respect for Private Life) and 8 (Protection of Personal Data) of the Charter of Fundamental Rights of the European Union.

In particular, the ECJ took the view that the unrestrained public access to the BO registers of EU Member States constitutes a serious interference with the aforementioned fundamental rights, enabling a potentially unlimited number of persons to have access, retain or disseminate information related to the material and financial situation of a beneficial owner.

Despite the fact that, the EU legislature by the introduction of the said measure seeks to prevent money laundering and terrorist financing, the Court considers that the said measure is disproportionate to the objective of general interest pursued and poses a more serious interference able to offset any benefits.

In the aftermath of the ECJ ruling, various EU Member States have suspended the open access to their BO registers. However, the impact of the decision remains to be seen, as one might consider that it might not only affect the European legislative framework, but might also influence jurisdictions on an international level, an example being the United Kingdom.

The official press release of the European Court of Justice can be found here.

The FiveComply team of experts shall remain vigilant and keep you updated in regards to all recent legislative and regulatory developments.

Contact us now for any questions you may have:
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While the crypto market is shaken by the failure of FTX, a digital asset settlement platform will be going live inside the financial system of United States (U.S.) for 12 weeks testing the regulatory framework existed in the United States as well as the adoption and collaboration of the broader U.S. banking community.

A group of banking institutions including HBSC, Mastercard, PNC Bank, SWIFT and TD bank among others will participate in this experimental project alongside the New York Federal Reserve Bank.

The project, that will be using Distributed Ledger Technology (DLT) (e.g., blockchain) and it will run exclusively on US dollars, has as a main scope the simulation of digital money issued by regulated entities in the U.S. context.

The pilot will test how banks using digital dollar tokens in a common database can help speed up payments. The banking group stated that they are not committed to further development of the project. Also, it is important to note that during this project only simulated data will be used. Despite that, there is potential for digital money to be used in multi-currency operations and regulated stablecoins.

FTX one of the biggest crypto-exchanges in the last few years has collapsed overnight and filed for bankruptcy last week, leaving many of its users unable to withdraw their funds and causing a chaos in the global crypto-scene.

The FTX case has highlighted once again a fundamental issue about the crypto-industry i.e.  never use a token you have created as collateral, unless you have the cash available behind it for withdrawals.

Different stakeholders should also take some lessons from this collapse, including regulators and investors.

Most importantly, regulators should be in a position to continuously assess the financial position of systemic financial firms like FTX and they should always allocate their resources efficiently, in order to proactively identify issues before they arise. FTX possesses multiple licenses from regulators worldwide that unfortunately failed to identify the issues and risks.

As a result, one might expect increased regulatory scrutiny resulting from the FTX collapse including stricter requirements by the regulators before and after issuing any crypto-related licenses. In Europe, it now becoming even more essential for the EU Proposed Regulation on Markets in Crypto Assets (MiCA) to enter into force. EU lawmakers are expected to vote on the Markets in Crypto-Assets regulation bill (MiCA) by February 2023, however, the FTX case might create further delays. Furthermore, we might see enhanced and/or new crypto-regulations in other jurisdictions as well.

Last but not least, let’s hope that investors have now learned their own lesson; that is investing in only what they can understand.

The FiveComply team is consisted of a team of experts on regulatory compliance matters and can provide you with the latest updates about existing and upcoming crypto-related regulations worldwide.

On 10 October 2022, the European Securities and Markets Authority (ESMA) has officially announced and published its strategic priorities for the next 5 years (2023-2028). The Strategy takes into account the key priorities of the European Union (EU) in the area of financial services and aims to address the most significant risks linked to EU financial markets.

ESMA ensures that the retail clients’ protection and the stability of the financial markets remain always its top priorities. Therefore, in order to further focus on these priorities, ESMA has set up the following strategic goals for the next 5 years:

• Fostering effective markets and financial stability.
• Strengthening supervision of EU financial markets.
• Enhancing protection of retail investors.
• Enabling sustainable finance.
• Facilitating technological innovation and effective use of data.

One of the most important goals for ESMA is the enhancing protection of retail investors. Based on that, ESMA and the NCAs will ensure that investors are effectively protected, with a particular focus on the protection of retail investors. ESMA will further develop retail investor trend monitoring and analysis. It will concentrate its efforts on risks posed among others by new and innovative products or services (e.g., crypto assets or non-fungible tokens) and products with strong retail investor demand (e.g., ESG). ESMA will also assess risks to retail investors that may stem from distribution of complex products, alternative marketing and distribution channels, such as e.g., social media advertising.

ESMA will reinforce its convergence work, particularly with regards to the supervision of cross-border activities, aiming to prevent significant consumer detriment by fostering a common supervisory culture and consistent supervisory outcomes for investors. ESMA will fully use its convergence toolkit in this area, including product intervention, where appropriate. New initiatives on ensuring effective supervision of cross border services will aim to facilitate:

• effective information exchange between the home and host authorities;
• joint supervisory measures to support effective supervision and enforcement such as joint supervisory work, supervisory colleges or the use of delegation.

ESMA will also enhance supervision and convergence through common supervisory exercises for example CSAs and mystery shopping, to be performed by all or a significant number of NCAs.

ESMA ensures that it will further strengthen its role as data and information hub in the EU and contribute to extending the effective use of data in financial market supervision.

For further information about the Strategy, you can read the ESMA Strategy here.

The Cyprus Securities and Exchange Commission (CySEC) has issued Circular C487 (‘the Circular’) informing Cyprus Investment Firms (‘CIFs’) on the revised threshold criteria that determine a ‘significant CIF’ for the purposes of the Investment Services and Activities and Regulated Markets Law of 2017, as amended, (‘the Investment Services Law’) in light of a new prudential framework for investment firms (IFR/IFD). It should be noted that, Circular C487 updates and replaces Circular C228 that was issued on 26 July 2017, in relation to the matter.

According to the Circular, a CIF should be considered a ‘significant CIF’ where its on and off-balance sheet assets are on average, greater than EUR 100 million over the four‐year period immediately preceding the given financial year (‘the threshold’).

CIFs should assess/decide within four months from the end of each of their financial year, whether they meet the threshold to become a ‘significant CIF’ for the purposes of the Investment Services Law and for the purposes of sections 22(4) and 27 of the Prudential Law. This assessment is considered as valid, until the next assessment is made for the following year. Where a CIF has been in business for less than four years, for the purposes of the above assessment it shall use its on and off-balance sheet assets for the periods available.

CIFs that after the abovementioned assessment are qualified as ‘significant CIFs’ must make arrangements to establish and have in place sound, effective and comprehensive strategies, processes and systems to achieve compliance with the following requirements:

You can contact our firm for more information and guidance.

The Financial Intelligence Unit (FIU) of Seychelles has issued Guidelines for Suspicious Transaction Reporting (STR) in an effort to provide practical assistance and comprehensive approach to reporting entities by enabling them to recognise suspicious transactions and meet their reporting obligation under Section 48 of the AML/CFT Act 2020 to the FIU.

More specifically, the issued Guidelines, explain reporting timelines, the information that must be included in the Suspicious Transaction Report (STR) and the procedure for submitting reports electronically to the FIU.

It is also important for reporting entities, to differentiate their STR reporting obligations from the currency transaction threshold reporting obligations (i.e., the Cash Transaction Threshold Report (CTTR) and Wire Transfer Threshold Report (WTTR). The difference is that, CTTR and WTTR are merely threshold reports and such transaction(s) shall not necessarily involve criminal behaviour.

The FIU emphasises that, any reporting entity that suspects that any service or transaction may be related to criminal conduct, including an offence of money laundering or terrorist financing activities, it shall submit an STR to the FIU, in line with the requirements under section 48 of the AML/ CFT Act and related Regulations.

Our specialised team can assist you to be compliant; contact us now for any information you need.  

On 24 September 2020, the European Commission published its proposal on the Regulation on Markets in Crypto Assets (‘MiCA Regulation’), which shall form part of a wider set of publications on Europe’s Digital Finance Strategy. On 24 November 2021, the European Council published a significantly expanded proposed MiCA Regulation (available here).

The objectives of MiCA Regulation are the following: 

• To provide legal certainty for crypto-assets not covered by existing EU financial services legislation;
• To establish uniform rules for crypto-asset service providers and issuers at an EU level; and
• To establish specific rules for the so-called ‘stablecoins’, including when these are e-money.

The proposed MiCA Regulation aims to enhance consumer protection, transparency and governance standards, given the fact that, the AML risks related to cryptos were addressed with the introduction of the 5^th EU Anti-Money Laundering Directive.

It is expected that, the MiCA Regulation will be formalised within 2022 and EU competent authorities shall need to comply with the provisions of the Regulation which shall be directly applicable in all EU Member States.

Our FiveComply team is always vigilant to provide you with the latest updates on the matter.

The European Commission via its Commission Delegated Regulation of 07/01/2022, amending Delegated Regulation (EU) 2016/1675, has deleted the Mauritius from the EU list of high-risk countries. Along with Mauritius, the Bahamas, Botswana, Ghana and Iraq were also removed.

For all the above-mentioned countries, it was concluded that, the strategic deficiencies in their AML/CFT regimes have been rectified, they have strengthened the effectiveness of their AML/CFT regimes and addressed related technical deficiencies to meet the commitments in their action plan regarding the strategic deficiencies that the FATF identified and the additional benchmarks or preliminary concerns set by the EU Commission.

These developments are of paramount importance for Mauritius which can now be considered as a jurisdiction with an enhanced AML/CFT system equivalent to European and international AML standards.

You can contact us now to find out why Mauritius is considered a great choice for establishing your business!