Seychelles is seeking to regulate the activities of Virtual Asset Service Providers (VASPs) registered in the island nation with the aim of meeting the standards of the Financial Action Task Force (FATF).

VASPs are businesses that facilitate the exchange of virtual assets and this includes cryptocurrency like Bitcoin, non-fungible tokens or utility tokens like Filecoin.

As part of the process, a national risk assessment on virtual assets and their service providers was conducted by Danny Sanhye of BDS Forensics and the finding was presented to local partners in the private sector last Friday at Savoy Resort and Spa.  

Participating in the presentation were the banking sector, corporate service providers, the insurance sector, the securities sector, lawyers and accountants and auditors among others.

In his presentation, Sanhye said that "there is a large number of VASPs operating in Seychelles, but the lack of structure and proper regulation in place, do not cater for their operations which means they cannot be properly monitored."  

Sanhye said that at the moment, Seychelles, an archipelago in the western Indian Ocean, does not have a system in place to mitigate vulnerabilities associated with VASPs.

"These VASPs need to be licensed the same as an existing licensee, for example like the bank, they have all these mitigants in place to prevent their products from being abused," he explained.

He said that Seychelles does not have a licensing regime for VASPs which is not in accordance with recommendation 15 of the Financial Action Task Force (FATF) Standards.

Sanhye further explained that the lack of proper legislation, coupled with Seychelles' level of secrecy are some of the factors that could motivate such businesses to settle in the country. He said that there are already some of these VASPs that are under investigation.

He said that there are two ways in which Seychelles could go about addressing the issue and that is to ban VASPs from the island nation or to properly license them.

"We discussed banning all such activities, but that would not work as then enforcement would become an issue, since there are no regulations," explained Sanhye, who added that these companies do come with some benefits Seychelles will get with proper regulations.

The acting director of the Seychelles Financial Services Authority, Randolf Samson, said that the report has been able to trace some of the VASPs registered as International Business Companies (IBC) in Seychelles but has not been able to identify the total number of VASPs from the over 51,000 registered IBC's.

"When we did the risk assessment, we noticed that some say they are domiciled in Seychelles, but actually there are some which are incorporated here but are just using the Seychelles' name, so they are giving us a bad reputation although their transactions are not done in Seychelles. This exercise will help us determine which are the ones operating here," explained Samson.

Without the proper regulation in place, Seychelles is currently deemed as being 'non-compliant' in the Mutual Evaluation Report published in 2018 and its subsequent follow-up report of the Eastern and Southern Africa Anti-Money Laundering Group.

The national risk assessment is part of recommendation 15 of the Financial Action Task Force (FATF) and the Secretary of State for Finance, Patrick Payet, said that this is part of the 11 recommendations that Seychelles was rated as non-compliant by the Eastern and Southern Africa Anti-Money Laundering Group (ESSAMLAG).

Following the National Risks Assessment Report, Seychelles will work on an action plan that will be discussed internally with the national AML/CTF committee and presented to the cabinet of ministers, and the National Assembly for approval