Seychelles Financial Services Authority clamps down on unregistered virtual assets service providers

The Financial Service Authority (FSA) of the cryptocurrency-friendly Seychelles has published a list of unregistered virtual asset service providers (VASPs) in the country that carry out their activities as if they were licensed.

It warned Seychellois to refrain from dealing with these companies. 

The details 

• In a joint press release dated Nov. 20, the FSA and the registrar of companies accused 50 unlicensed companies of offering VASP services without authorization. 
• It said that the services of the listed companies do not follow the country’s anti-money laundering and counter-terrorism financing (AML/CFT) guidelines. 
• The FSA added that since these companies are unregulated, it is difficult for the government agency to oversee their affairs, ensure compliance, and protect consumers. 
• In addition, the FSA warned its citizens to stop patronizing these companies and report any activities of these VASPs to the relevant authorities. 

Key quotes 

• The FSA said: 

“The FSA and ROC strongly advise consumers to remain cautious about the risks and potential financial loss and damage that can be incurred when dealing with VAs or VASPs which are either not registered or authorized as VASPs service providers under any law, especially the Seychelles laws.

These businesses are not applying the controls required under the Seychelles Anti-Money Laundering and Countering the Financing of Terrorism law, intended to detect, prevent and disrupt possible financial crimes.” 

Why this matters 

• Seychelles, often described as crypto-friendly, is the legal home to many global crypto companies. This is because of its relaxed know-your-customer guidelines, making it a haven for international businesses looking to avoid strict regulations. 
• The country has played home to some of the world’s largest crypto exchanges, such as Binance, KuCoin and OKEx. 
• The country has no defined laws regulating virtual assets and virtual assets service providers. 
• In January, the FSA issued a public notice that it has not licensed any international crypto companies operating in the country. As such, it has no oversight over its activities. 
• It noted that while these international companies are registered under Seychelles’ International Business Companies Act, the FSA does not regulate the “conduct of their chosen business activities.” 
• Consumers were advised to be adequately informed about the risks inherent in dealing with virtual assets, as the FSA could not intervene in cases of lost funds. 
• In addition, a national AML/CFT committee inquiry endorsed by the country’s cabinet of ministers in 2022 found that many unlicensed VASPs operate in the country and offer enhanced anonymity to their customers. This violates global AML/CFT guidelines. 
• Following increased complaints of crypto-related activities in the country causing consumers to lose money, the country’s finance minister, Naadir Hassan, announced earlier that the Seychelles was working on a policy to regulate virtual assets. 
• The country expects to finalize work on the legislative framework for virtual assets early in 2024.