Developments in Seychelles’ Financial Sector

The authorities, (Ministry of Finance, Trade and the Blue Economy, Central Bank of Seychelles (CBS), Financial Services Authority (FSA) and Financial Intelligence Unit (FIU)) wish to comment on ongoing developments in Seychelles’ financial sector.

It has recently been announced that Barclays Bank Seychelles Ltd (BBS) has taken a strategic decision to discontinue banking business that gives rise to foreign sourced income; commonly referred to as ‘offshore’ banking business. This refers to banking activities conducted with non-residents in foreign currencies, a service which has primarily been conducted by BBS and BMI Offshore (BMIO).

Following a remediation exercise, BBS determined that the level of risk arising from its offshore banking activities is not in line with its risk appetite, which refers to the level of risk that the bank is prepared to take.

Risk is inherent in banking business and Central Banks require banks to adopt adequate risk management practices. This includes banks setting their risk appetites and ensuring that they have the capacity to operate within these set parameters. However, as a result of global tightening in the regulatory environment and large fines imposed on international banks, financial institutions are increasingly restricting business relationships with high risk clients or categories of clients to avoid the risk of sanction. International standards for risk management in financial services identify offshore banking as a higher category of risk in view that most of the customers do not have a presence in the jurisdiction in which the bank operates which makes it more difficult to apply Know Your Customer procedures and consistent monitoring.

Given BBS’ decision, CBS acknowledges the difficulty for the bank’s affected clients and is engaging with BBS to ensure they are provided with sufficient time to shift their deposits.

On a general level, local authorities in Seychelles are undertaking initiatives to ensure that as well as complying with certain requirements, banks also observe best practices that are applicable across the financial services sector, as part of a strategy which is relevant to the prevailing environment.

There have additionally been notable developments to address Seychelles’ non-compliant status as rated by the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes in 2013. Important moves include modifications to the IBC Act to bring the legislation in line with international  standards; commitment to the OECD’s Automatic Exchange of Information; and Seychelles entering into the Inter-Governmental Agreement for the Foreign Accounts Tax Compliance Act (FATCA). These are positive initiatives, non-compliance to which would have adverse implications on the reputation and sustainability of the financial sector. As such, international compliance is recognised as paramount to ensure Seychelles’ success as a visible and modern international financial centre.

Further to the afore-mentioned, the authorities are receiving assistance from external partners such as the International Monetary Fund, US Treasury and the World Bank in order to build capacity within the financial services sector, including the banking component. Correspondingly, in order to develop an appropriate and modern strategy for the sector, the Government in collaboration with the private sector has sought consultancy assistance from experts in the area. This seeks to embed the characteristics required to develop Seychelles as a sustainable international financial centre and maintain recognition as a responsible and acceptable participant in the global financial services industry.