Seychelles -- Travel Rule Implementation Regulatory Overview

Seychelles has made significant strides in strengthening its Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) framework, particularly after being added to the FATF greylist in 2020 and subsequently removed in 2023. This push included addressing Virtual Asset Service Providers (VASPs) and the FATF Travel Rule.

Here's a breakdown of the FATF Travel Rule implementation in Seychelles:

Status of Adoption and Effective Date

• Adopted: Yes, Seychelles has adopted the FATF standards for VASPs, including the principles of the Travel Rule, through its comprehensive AML/CFT legislative framework.
• Effective Date: The primary legislation governing this came into force with:
  • Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020 (AML/CFT Act 2020): Enacted in May 2020. This Act provides the foundational definitions and general obligations.
  • Anti-Money Laundering and Countering the Financing of Terrorism Regulations, 2021 (AML/CFT Regulations 2021): Published in March 2021. These regulations provide the detailed implementation rules for the Act, including specific obligations for various financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs), which now explicitly include VASPs.

While the term "Travel Rule" may not be explicitly used in the national legislation, the requirements for collecting and transmitting originator and beneficiary information for virtual asset transfers align with FATF Recommendation 16 (Wire Transfers), which the Travel Rule extends to virtual assets.

Threshold Amounts

The Seychelles AML/CFT Regulations 2021 generally mirror the FATF recommendations for wire transfers, which are extended to virtual assets.

• Threshold: For transfers of funds (including virtual assets) equal to or exceeding EUR 1,000 (or its equivalent in other currencies/virtual assets), the VASP must obtain and transmit full originator and beneficiary information.
• Below Threshold: For transfers below EUR 1,000, simplified due diligence may apply, but the VASP is still required to obtain and transmit some information (e.g., originator's name and account number, beneficiary's name and account number), and monitor for linked transactions that exceed the threshold.

This is primarily covered under Regulation 33 of the AML/CFT Regulations 2021, which details requirements for "Electronic Transfers of Funds" and applies to VASPs given their status as reporting entities.

Which VASPs are Covered

The AML/CFT Act 2020, Section 2, defines a "Virtual Asset Service Provider" (VASP) comprehensively, aligning with the FATF definition. It includes any natural or legal person who, as a business, conducts one or more of the following activities or operations for or on behalf of another natural or legal person:

1. Exchange between virtual assets and fiat currencies.
2. Exchange between one or more forms of virtual assets.
3. Transfer of virtual assets.
4. Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets (e.g., custodial wallet providers).
5. Participation in and provision of financial services related to an issuer's offer and/or sale of a virtual asset.

This broad definition ensures that all relevant entities dealing with virtual assets are covered under the AML/CFT framework and, consequently, the Travel Rule's principles.

Technical Implementation Requirements

The Seychelles legislation, like most national AML/CFT laws, specifies what information needs to be collected and transmitted, rather than prescribing how this technical transmission should occur. VASPs are expected to:

• Collect Required Information:
  • Originator: Name, residential address or registered address, official personal document number or customer identification number, date and place of birth (for natural persons), or customer identification number (for legal persons).
  • Beneficiary: Name and account number or unique transaction identifier.
• Transmit Information: The originator VASP must transmit this information securely, reliably, and on an immediate basis to the beneficiary VASP during or before the transaction.
• Record-Keeping: Both originator and beneficiary VASPs must retain all required information for a period of seven years (as per Regulation 46 of the AML/CFT Regulations 2021) for potential disclosure to authorities like the Financial Intelligence Unit (FIU) or supervisory bodies.
• Risk-Based Approach: VASPs are expected to implement a risk-based approach to identify and mitigate ML/FT risks, which includes screening transactions and parties for sanctions and suspicious activity.

VASPs operating in Seychelles are therefore responsible for selecting and implementing a technical solution (e.g., using Travel Rule Protocol solutions like TRISA, Sygna, etc.) that enables them to meet these legislative requirements.

Penalties for Non-Compliance

Non-compliance with the AML/CFT Act 2020 and its Regulations carries significant penalties, demonstrating Seychelles' commitment to enforcing its framework. These can include:

• Administrative Sanctions: Imposed by supervisory authorities (e.g., the Financial Services Authority (FSA) for VASPs it licenses/regulates, or the FIU generally). These can range from warnings and directives to impose specific remedial measures, to monetary penalties.
• Financial Penalties:
  • For corporate bodies (VASPs), fines can be substantial, reaching SCR 10 million (approximately USD 750,000) or more for serious breaches.
  • For individuals (directors, officers, employees), fines can also be imposed.
• Imprisonment: Individuals found guilty of certain AML/CFT offences (e.g., tipping-off, failure to report suspicious transactions, or obstructing investigations) can face terms of imprisonment, potentially up to 15 years.
• Revocation of License/Registration: Persistent or severe non-compliance could lead to the revocation of a VASP's license or registration, effectively forcing them to cease operations.

References

• Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020:
  • Often available on the Seychelles National Assembly website or the Attorney General's Office portal.
  • [Example link (may require searching for the latest official version): seychelles.gov.sc (search for "AML CFT Act 2020") or via legal databases.]
• Anti-Money Laundering and Countering the Financing of Terrorism Regulations, 2021:
  • [Example link: seychelles.gov.sc (search for "AML CFT Regulations 2021") or via legal databases.]
• Financial Services Authority (FSA) Seychelles: The primary regulator for many financial services entities, including some VASPs. Their website often publishes guidance and circulars.
  • [Website: https://www.fsaseychelles.sc/]
• Financial Intelligence Unit (FIU) Seychelles: The central agency for receiving and analyzing Suspicious Transaction Reports (STRs) and for enforcing AML/CFT.
  • [Website: https://www.fiuseychelles.sc/]

VASPs operating in Seychelles should consult the explicit provisions of the AML/CFT Act 2020 and the AML/CFT Regulations 2021, and seek legal advice to ensure full compliance with all obligations, including those related to the FATF Travel Rule.