Seychelles - Threat Assessment - 2020 Page 1 of 34 modern day slaves in or the GSI Seychelles � incidence, yet the country is considered to have a “B” response. In the US Trafficking in Section 1 - Executive Summary Persons report, Seychelles has a Tier 2 rating.

Grey Lists: Seychelles is not listed by FATF, EU Sanctions & Terrorism: There are no sanctions nor by the US as a “Country of Primary against the country. Seychelles is a Tier 3 (Low Concern” in respect of ML & FC. threat) PPI 2019 (Proliferation) Index country with a “Moderate” response score of NRA: The NRA was published in 2017. The 426/1,300. Seychelles has a “0” impact score overall ML threat was rated “Medium High” (0/10) in the Global Terrorism Index 2019 with vulnerability level for ML as “Medium High” & ML risk for Seychelles rated overall at Response & Resilience: FATF MER 4th round “Medium High.” The potential threat level in results by ESAAMLG were 55/100 for technical respect of TF risk was rated as “Low”. Based on compliance (40 Recommendations), & 3/100 an assessment of ML threats from 2013-2015, for effectiveness (11 Outcomes). Seychelles estimated prevalence and proceeds of crime scored 5.38/10 for resilience (Moderate), generated were identified as drug trafficking, ranked 11/54 for Africa in the OC Index. which came first, followed by (in order), tax Indices: Seychelles scored 72/100 and was evasion, smuggling, corruption, company rated “partly free” in the 2019 Freedom in the fraud, fraud/forgery, theft & robbery. World report, and 64.3/100 for economic Organised Crime: According to the OC Index, freedom (Heritage Foundation) described as Low Criminality - High Resilience. Criminality “moderately free ”. The Mo Ibrahim Index of 3.93/10, (ranked 42nd lowest of 54 African African Governance (IIAG) scored Seychelles countries. Main markets are drugs (heroin 2nd in Africa at 73/100. The Basel AML Index (6.5/10), wildlife crime (6/10), human 2016 scored Seychelles 6/10. trafficking (4/10) and drugs (synthetics (4/10). Overall Ratings: Seychelles is rated 2nd best The main “Criminal Actors” are “Foreign out of 40 in SSA and 2nd best out of 10 in East Actors” (6.5/10), “Criminal Networks” (4.5/10), Africa, with an overall risk score of 72/100 - “State Embedded Actors” (4/10), and “Mafia “Low” risk, 83/100 “Very Low” level for Threats, Style Groups” (2/10). and 60/100 “High” level for Response, with an Corruption: TI CPI - 2019 - ranked 27/198, “Improving” trend. with a score of 66/100, an improvement from 2017, where Seychelles had a score of 60/100. FCN Rating:”Low” Risk 72/100 Modern Slavery: The 2018 GSI Index doesn’t “Improving” include data about the number of estimated

Seychelles - Threat Assessment - 2020 Page 2 of 34 Section 2 - Country Dashboard

Seychelles ↗ Improving Capital & Population: Victoria / 96,800 approx Political Leader: Danny Faure, President (since 2016) GDP: US$1.498 billion (2017) - 1.7% of the SSA economy. Economic Sector Breakdown: Agri (2.5%), Ind (13.8%), Services (83.7%). Exports: canned tuna, frozen fish, products (re-exports) to UAE 28.5%, 24%, UK 13.8%, 8.9% and 4.6% (2017) Imports: machinery and equipment, foodstuffs, petroleum products, chemicals, other manufactured goods from UAE 13.4%, France 9.4%, 5.7% and 5% (2017).

Score: 72/100 “Low” FCN Risk Rating (Average Country Score is 43 - SSA) Proceeds / Laundering Rank: 2/40 SSA - 2/10 Region EA range 4.5% - 7.5% GDP / 70 - 76% of Proceeds

Organised Crime Costs of Corruption range up to approx 24 - 26% of Proceeds range up to approx 5 - 10% of Proceeds (State Embedded 4/10, Criminal Actors 4.5/10, Foreign Networks 6.5/10 & Mafia Style 2/10)

Seychelles Higher (Inherent) Risk Factors Total Criminal Proceeds in Sub Saharan Africa in US$ Billions - FCN Customer Sector Geography 2020 (not including fraud and Risks Risks Risks corruption and tax evasion) Customers with elevated Banks (in particular commercial Major export / import partners exposures to criminal activities banks with international (trade mispricing via IFFs) such as: business - offshore links drug trafficking, and Drug trafficking threat from - smuggling, company fraud, Luxury real estate; Afghanistan Pakistan, SE Asia Mining and Western , as source Fishing fraud/forgery, theft & robbery 10 Dealers in motors vehicles, and destination countries. Also 2.5 along with corruption (e.g yacht’s and boats; trans-shipment point for heroin Wildlife Goods Piracy PEPs) which also help facilitate for East Africa including Kenya 2 9 these crimes & tax evasion as a TCPS - international / offshore Madagascar, Mozambique and business South Africa and from Dubai to high risk concern also to Higher Seychelles - (heroin). Logging Risk Sectors and/or Geography Bureaux de change. Risks Migrant workers—including 12.5 from Bangladesh, India, , Modern Slavery Kenya, Madagascar, and 8.3 countries in South Asia - some have working conditions akin Drugs to forced labour 3 Theft Illegal Fishing - China 15

TF Threat from - Somalia, Madagascar and Yemen

FCN SSA Country Risk Rating - “Very Low” Threats -

GTI GSI INCSR TI CPI US TIP WEF OC GFI IFF’s Overall US Terror IUUF Index OC Index US END Wildlife FCN SSA Country Risk Rating - “High” Response -

NRA Freedom OC Index FATF 40 FATF 11 Overall Governance GSI - Slavery Proliferation Seizures US$ FATF/EU Lists Basel AML Index

Seychelles - Threat Assessment - 2020 Page 3 of 34 3. Country Information

People & Geography: The Seychelles is an Economy & Trade: In 2017, the GDP was archipelago country in the Indian Ocean US$1.498 billion with government revenues consisting of 115 islands. It has a population of amounting to US$593.4 billion. The GDP per almost 100,000 people which is the smallest capita in 2017 was US$29,300. The population of any African country, yet it is one Seychelles’s economy is made up of of the wealthiest, classified as a “High Income 2.5%, industry 13.8%, services Economy” by the . Seychelles is a 83.7% and these sectors encompass the beautiful country, who’s diverse landscape , cinnamon, vanilla, fishing as well as encompasses coral reefs, beautiful boulder- financial services, information and strewn beaches, virgin jungles and UNESCO- communications technology, education, listed nature reserves. The island of Male is hospitality and property development. home to Seychelles capital Victoria. Of its Seychelles exports canned tuna, frozen fish, 96,800 population, Seychelles counts some petroleum products (re-exports) to UAE 28.5%, 12,900 migrants for 2019, and 36,800 France 24%, UK 13.8%, Italy 8.9% and emigrants. Germany 4.6% (2017) .The country imports machinery and equipment, foodstuffs, Recent History & Leadership: Whilst the petroleum products, chemicals, other French claimed possession of the Seychelles manufactured goods from UAE 13.4%, France islands in 1756, the Seychelles was ceded to 9.4%, Spain 5.7% and South Africa 5% (2017). Britain after the Napoleonic Wars in 1814. From then until 1903, it was administered from Environment: Seychelles is home to an array Mauritius. In 1964 the Seychelles Democratic of wildlife, including giant tortoises and sea Party (SDP), led by James Mancham, was turtles. Much of the land is protected as part of founded, although Seychelles would only nature reserves. become independent in 1976, with Mancham as President and rival Albert Rene of the SPUP : The total contribution of Travel & as Prime Minister. The SPUP staged an armed tourism GDP was SCR9,220.9 million coup in June 1977, and Seychelles became a (USD657.5mn), 40.5% of GDP in 2019. The socialist state, with René as its president, and labour force for this sector is more than 20,600 the SPUP was renamed the Seychelles People’s in direct , representing 43.8% of Progressive Front (SPPF) - the sole political the total employment rate in country. party. Thereafter there was extensive The main tourist attractions include: Anse nationalisation of enterprises, including hotels Lazio, La Digue, Morne Seychellois National and industries. There were also a number of Park, Cousin Island and Silhouette Island threatened coup plots against the René government. In December 1991, the Finance: In terms of remittances, the country government passed laws to provide for has estimated inflows of US$23 million (1.4% multiparty democracy. Danny Faure has been of the GDP) for the year 2019 according to the president since 2016, after previously holding World Bank. Connectivity-wise in 2019, there is the position of finance minister and the an internet penetration rate of 76% & 170,700 governor of the IMF, the World Bank and the mobile connections. African Development Bank.

Seychelles - Threat Assessment - 2020 Page 4 of 34 4. Country Ratings

Available information from leading sources produce over 60 ratings for Seychelles, covering both threats and responses in fighting financial crime, sanctions, proliferation finance and terrorism & terrorism finance.

Source Seychelles � Source Seychelles � Source Seychelles �

World Economic Forum 63.9/ 100 Transparency International (TI) 66/ 100 Proliferation Index - PPI Tier 3 Organised Crime Index* Corruption Perceptions Index* (27/198) Threat Low Threat Level

OC Index 3.93/10 TI & Afrobarometer Not Included Proliferation Index - PPI 426/ 1300 Criminality* Citizens Views and Experiences of Corruption Controls* Controls score Report

OC Index 4.25/10 TRACE 49 Global Terrorism Index Not Included Criminal Actors Bribery Risk Matrix (87/200) GTI - Impact*

OC Index 4/10 Global Slavery Index Not Included US Dept of State Not Included State Embedded Actors GSI Incidence* Country Reports on Terrorism*

OC Index 4.5/10 Global Slavery Index Not Included Global Cybersecurity Index 0.259/10 Criminal Networks No of estimated Modern Day Slaves 2018 (110/175)

OC Index 6.5/10 Global Slavery Index Not Included Mo Ibrahim Governance Index 73/100 Foreign Actors Country Response Rating* (49.9 - All Africa)* (Increasing improvement) (2/54)

OC Index 2/10 US Dept of Labor Not Included Freedom House 72/100 Mafia Style Gangs Child Labour Freedom Index* “partly free”

OC Index Heroin 6.5/10 & Synthetic’s 4/10 US Dept of State Tier 2 Rated Heritage Foundation 64.3/100 Drugs Trafficking Cannabis 3/10 & Cocaine 2.5/10 Trafficking in Persons* Economic Freedom Index “Moderately free”

OC Index 2.5/10 IOM Migration I - 96,800/E - 36,800 Basel AML Index* 6/10 Arms Trafficking E - Emigration / I - Immigration (2016)

OC Index 3.5/10 Illegal Unreported and Unregulated 2.13 FIU Egmont Yes People Smuggling (IUU) - IUU Fishing Index 107/152 Member

OC Index 4/10 EU Listing of Countries for Illegal No Interpol Yes Human Trafficking Fishing Member

OC Index 3/10 US DoS - Wildlife Trafficking Not Included Asset Confiscations No Illegal Timber Focus / Countries of Concern* over 1% of Proceeds*

OC Index 6/10 Environment Performance Index Not Included Country National Risk Assessment* Yes Illegal Wildlife (2017)

OC Index 1/10 EUIPO & OECD Counterfeit Goods 0.000 Financial Information Sharing No Illegal Mining Propensity of Exports (2016) Partnership

OC Index 5.38/10 70 US Dept of State No Resilience* Tax Justice Network 95/133 INCSR Vol I & Vol II* Financial Secrecy Index

OC Index 3.5/10 EU List of None Co operative Non co operative European Union List* Yes AML Jurisdictions for Tax purposes

OC Index 7/10 None Compliant FATF Standards 55/100 OECD - Global Forum Law Enforcement on Transparency & Exchange Info for Tax Purposes 40 Recommendations*

OC Index 6/10 Global Financial Integrity US$72million - 16.76% (2017) FATF Standards 3/100 International Co- operation Illicit Financial Flows* 11 IO’s on Effectiveness*

OC Index 3.5/10 Embassy’s from N Korea, Syria, Iran Yes - Cuba FATF Standards 50/100 Economic Regulatory Environment or Cuba Core 10 Recommendations

Illegal Drug Dependency / Disorders 772.06/0.79% Embargoes - Country Sanctions None FATF Standards 8/100 Number/Share (Comprehensive - UN, US, EU, UK) Core 4 IO’s on Effectiveness

Numbeo Crime Survey 2020 Not Included OFAC Listed Parties 8 FATF No with Local Addresses Counter - Measures Strategic Deficiencies List*

* Symbol Indicates the information is included in the FCN Country Index

Seychelles - Threat Assessment - 2020 Page 5 of 34 Section 4 Continued - Country Threats Heat Map

There are many threats that effect Seychelles, which are in most part targeted towards its resources, be they its natural resources, the people, it’s forests, crops and fish. The effect of corruption increases the threats and reduces the ability to effectively respond. For more details in summary form see the figure below.

Seychelles - Threat Assessment - 2020 Page 6 of 34 TI - Corruption Perceptions Index (Scores out of 100) - � (Scores out of 10 - higher scores are better)

66.0 60.0 60.0 52.0 54.0

2012 2014 2016 2018 2019

Seychelles - Threat Assessment - 2020 Page 7 of 34 Section 5 - Key Threats in Detail

In this Section 5, the most important criminal 5.3 Corruption: Corruption is not only a markets, are assessed and summarised based significant generator of illicit funds, but also an on available sources. enabler of other serious crimes which protects those involved from investigation, prosecution 5.1 National Risk Assessment (NRA): Seychelles published its AML/CFT NRA in 20171. The report , covering the period 1 TI - Corruption Perceptions Index (Scores out of 100) - � (Scores out of 10 - higher scores are better) January 2013 to 31 December 2015, found that based on assessing threats and vulnerabilities, the overall threat level for 66.0 60.0 60.0 money laundering (ML) for Seychelles was 52.0 54.0 “Medium High”. The terrorist financing (TF) risk was assessed “Low”. and the threat from 2012 2014 2016 2018 2019 abroad as “Medium Low”. and/or conviction.

Medium High Risk Transparency International’s (TI) Corruption National Risk Assessment 2017 Perceptions Index (CPI) in 2019 rated Despite “there being no data set reflecting the Seychelles 66/100 and ranked 27/198, an amount of money earned from criminal activity, improvement from 2017, where Seychelles the NRA found that the predicate offences had a score of 60/100 (scores are from zero (highly corrupt) to 100 (very clean). “Several which were generating the most proceeds of crime were drug trafficking, Tax evasion, anti-corruption laws, including a recent access Smuggling of goods, Corruption and Fraud”. to information law, and a newly established anti-corruption commission have helped For more details on specific threats see strengthen the country’s anti-corruption separate sections below on for example, drug framework. In addition, despite some trafficking, corruption, environmental crimes restrictions, dialogue between civil society and and tax evasion. government occurs through a national civil

2 5.2 US INCSR: Seychelles is not listed in society platform” . Volume 1 or Volume 2 as one of 80 countries Seychelles considered one of the least categorised by the US State Department as a corrupt nations in Africa Country/Jurisdiction of Primary Concern in OC Index 2019 respect of Money Laundering and Financial Notwithstanding the international perspective Crimes in its 2019 Report. and high scores for managing corruption, the Seychelles NRA considered that corruption

Seychelles - Threat Assessment - 2020 Page 8 of 34 was a significant generator of illicit funds, and Africa Integrity Indicators scores Seychelles a was rated “Medium High”. 57.7/100 (“Increasing Improvement” - ie progress over the last 10 years, with the rate of According to the NRA, “people who hold improvement increasing) under transparency positions of authority in Government, the and accountability 2019 (Global Integrity general public sector as well as private sector 2019)5. players are viewed perpetrators of the offence. The lack of transparency in relation to the 5.4 Organised Crime: The OC Index states award of contracts, tenders, land from the land that “Seychelles is rated as Low Criminality bank, the operations of companies fully owned and High Resilience, (as opposed to High by the government, no audit having been Criminality - High Resilience, High Criminality - carried out on capital projects, and the lack of Low Resilience and Low Criminality - Low capacity on the oversight and governance Resilience) alongside other Sub-Saharan mechanisms put in place by government are countries such as: Botswana, Ethiopia, Ghana, contributors to the high rating given to Mauritius, Namibia, Rwanda, Senegal and corruption as a predicate offence to ML”. Cape Verde. The OC Index report highlighted that “Seychelles was noted for being a centre The NRA went on to say that “state-embedded for money laundering and illicit financial flows, actors have a moderate influence in the yet committed investment has reduced those Seychelles, but are known to be involved in the flows and made it a significant partner in illegal fishing industry. Although levels of regional maritime security efforts. All of this corruption in the country are not insignificant, indicates that the quality of governance and state- embedded actors do not control any of determined political will can produce the illicit markets in Seychelles. Nor do they considerable results, even in the case of weak have any discernible links with domestic states”. criminal actors.” Low Criminality - High Resilience The 2018 TRACE Bribery Risk Matrix places Africa’s OC Index 2019 Seychelles in the “moderate” risk category, According to the 2019 OC Index “Seychelles ranking it 87 out of 200 surveyed countries has a high resilience to organised crime, with a risk score of 493. ranking 11th in Africa. The government is vocal TI also reported on the importance and and open about its stance against organised correlation between the lack of freedom and crime, particularly regarding piracy and drug corruption, citing Freedom House, in its 2019 trafficking. Seychelles is also considered one of Freedom in the World report, which accords the least corrupt nations in Africa.” the status of “partly free” to Seychelles with an aggregate freedom score of 72/1004.

Seychelles - Threat Assessment - 2020 Page 9 of 34 “Mafia-style groups are virtually non-existent in synthetic dugs trafficking (4/10) and human Seychelles. Criminal networks, with a score of smuggling (3.5/10), with illegal logging, and 4.5/10, have a moderate influence on cannabis trafficking (3.0/10), cocaine and arms organised crime the country. They also state trafficking (2.5/10) and illegal mining at that “Foreign actors are the highest-scoring 1.0/10). The main “Criminal Actors” are criminal actor type in Seychelles, with 6.5/10, “Foreign Actors” (6.5/10), “Criminal and are deeply involved in drug trafficking. Networks” (4.5/10), “State Embedded Foreign nationals are also responsible for a Actors” (4/10), and “Mafia Style Groups” (2/10). large proportion of the illegal fishing that occurs in Seychelles’ national waters; and are OC Index - Criminal Actor Types - Importance - � (Scores out of 10 - lower scores are better) involved in human trafficking, primarily for forced labour, within the Seychelles.”

6.5 OC Index Criminal Markets - Importance - � (Scores out of 10 - lower scores are better) 4.5 4.0 2.0

Criminal Networks State Embedded Foreign Actors Mafia Style

6.0 6.5 5.5.1 Environmental Crimes: Illegal Wildlife 4.0 4.0 3.5 3.0 2.5 3.0 Crimes: According to the 2019 OC Index, “As

Synthetics Fishing HT Heroin Logging Arms Cannabis People Smugg an island nation, Seychelles is largely protected According to the 2019 African OC Index, from the wildlife trafficking that afflicts many Seychelles scores Criminality at 3.93/10 and other African nations, such as ivory and rhino ranks 42nd (out of 54 African countries) and horn trafficking”. However, Seychelles is 7/13 in Southern African countries in the Index mentioned in a TRAFFIC report as a nation that for levels of criminality, with criminal networks conducts wildlife trade with China6. In 2016, having a “moderate influence on organised Air Seychelles signed the Buckingham Palace crime the country. They are involved in the drug Declaration pledging support for the United trade, acting as an interface between foreign for Wildlife Task Force. players in transnational drugs markets and A media article7 reported that in 2013 a domestic users. These loosely organised Seychellois woman was caught with 60kg of criminal networks are often based on family hawksbill turtle shells, with an estimated value ties”. of USD$8,300, in her luggage by Singapore The main markets, according to the OC Index, customs authorities. Wildlife trafficking is not with highest criminality scores were illegal included in the the NRA. drugs, with heroin (6.5/10) and environmental 5.5.2 Environmental Crimes: Illegal crimes the most important, Illegal wildlife and Logging: According to the Food and Illegal fishing (6/10), human trafficking and Agriculture Foundation of the United Nations

Seychelles - Threat Assessment - 2020 Page 10 of 34 Seychelles - Threat Assessment - 2020 Page 11 of 34 (FAO)8, “The main challenges facing the deplete fish stocks. Local people are forced to forestry sector are poaching of protected fish illegally to make a living.” palms, illegal felling of protected trees, social Seychelles scores 2.13/5 overall on the 2018 housing development, invasive species, bush IUU Fishing Index10, measured against fires, climate change and management of vulnerability, prevalence and response (1 = protected areas. good/strong; 5 = bad/weak). Seychelles has a The main challenges facing the forestry high vulnerability score (3.12) but a high sector are poaching of protected response score (1.64). palms, illegal felling of protected trees, Seychelles has a vast Exclusive Economic Zone social housing development, invasive of 1.4 million square kilometres, and has been species, bush fires, climate change and been plagued by Sri Lankan fishing vessels11 management of protected areas OC Index 2019 that have allegedly been illegally fishing in Seychelles waters.12 The main contributing factors are deforestation and forest degradation, limited land for social Illegal fishing in Seychelles poses a housing development, and natural disasters significant problem and is costly to the such as bush fires and landslides. The coco-de- economy and environment OC Index 2019 mer serves as an example – on account of its economic value both locally and on the Seychelles is piloting a project using new international market, there have been recent approaches to reduce fisheries crime using increases in poaching incidents which are now “analytical capacity-building in combination threatening the coco-de-mer trees in the Vallée with drones equipped with artificial de Mai. The coco-de-mer has been listed as intelligence (AI)” to detect illegal fishing13. In critically endangered by the IUCN”. According 2019, the Ministry of Fisheries and Agriculture to the World Bank in 2016, Seychelles was the also published a “Fisheries Comprehensive 4th greenest country in the world with 88.4% Plan”14 to “guide the future actions and 9 of the land area as forests . spearhead the development for the fisheries sector for the next three years…..This 5.5.2 Environmental Crimes: Illegal Fishing: Comprehensive Plan covers a wide spectrum of The 2019 OC Index reports that “illegal fishing activities overlapping those of other Ministries poses a significant problem and is costly to the and institutions not necessarily affiliated with economy and environment. Seychelles ranks the Ministry of Fisheries and Agriculture. As 21st in the IUU Fishing Index on the prevalence such, it requires great collaboration, but most of illegal fishing. The primary driver of illegal importantly, financial resources to implement fishing in the country is extreme overfishing, the policy. While the responsibility to finance predominantly by Chinese trawlers, which the implementation generally rests with the

Seychelles - Threat Assessment - 2020 Page 12 of 34 Government, most of the interventions could According to the NRA, drug trafficking also be materialised with support of our generated USD$1.5 million of the value of stakeholders.” the proceeds between 2014 - 2015. This figure is considered to be a conservative figure as Seychelles has embarked on a Blue Economy other information obtained suggests that “a Strategic Roadmap, which is “an integrated large number of investments being financed approach to ocean-based sustainable from proceeds of drug trafficking are invested development which brings together economy, overseas in neighbouring countries and locally environment and society, consistent with the using domestic companies and legitimate Sustainable Development Agenda 2030 businesses”. (SDG’s)”. One of the expected outcomes of this initiative is “Improved prevention of ocean/ OC Index - Drug Trafficking - Importance - � blue economy risks including illegal, (Scores out of 10 - lower scores are better) unreported and unregulated (IUU) fishing, marine pollution and climate change through integrated approaches to effective regional 6.5

15 4.0 cooperation on maritime security” . 2.5 3.0

According to Defenceweb16, “The Seychelles Cocaine Synthetics Cannabis Heroin has a fishing traceability policy that allows The NRA rated drug trafficking as “Medium global consumers to see the origination of tuna High”. caught by Seychellois fishing boats. This market transparency adds value to legal catches and Drug trafficking “Medium High” NRA 2017 discourages illegal fishing.” Drugs from Kenya and Dubai are smuggled 5.6 Drug Trafficking: According to the 2019 into Seychelles using trade mechanisms and OC Index, “The most pervasive criminal market couriers. The importation of heroin is in Seychelles is the heroin trade, which scores reportedly “monopolised by different clusters 6.5/10 in the Index, due to high domestic use of groups of people, mostly constituting of the drug. The island nation is a destination families”. Increased maritime patrols in the country for heroin trafficked from East Africa Indian Ocean have led to the increased use of and the Asian subcontinent. Seychelles is also Seychelles waters “being used as a transit route an important maritime trans-shipment point for for the drug trade from North to South”. The heroin from Afghanistan destined for East drugs are thought not to be intended for Africa, Madagascar, Mozambique and South Seychelles consumption. According to Africa. Its role is growing as maritime routes investigations performed, proceeds from drug shift in response to military interdictions at sea.” trafficking are laundered in the Seychelles through the “use of the banks, the BDCs, the Seychelles - Threat Assessment - 2020 Page 13 of 34 real estate sector and the motor vehicle sector”. Seychelles to increase drug trafficking security It was also reported that “apart from incidences measures, reduce the demand for drugs, and of piracy, the only recorded illegal activity on enact prison reform. Among the reforms some of the ‘outer’ islands is poaching and enacted is consideration of drug addiction as a drop offs for drug traffickers”. disease rather than a crime, allowing greater possibilities for treatment and rehabilitation Seychelles has an estimated 772.06 people17 among drug abusers”. with illegal drug use disorders (2017), representing 0.79% of the population. In 2018, a media article on illegal fishing in Seychelles reported that one of the resource A BBC media article claims that Seychelles has challenges for the fishing sector was the world’s worst heroin problem, with highlighted as “getting local manpower and “between 5,000 and 6,000 people out of a total this is largely related to drug abuse, which is population of 94,000 - the equivalent of nearly especially affecting the younger population”20. 10% of the working population - are addicted to heroin, according to the Agency for the 5.7 Modern Slavery: The 2020 US Trafficking Prevention of Drug Abuse and Rehabilitation in Persons (TIP) report21 rates Seychelles as a (APDAR) in the Seychelles”18. The drugs from Tier 2 country, upgraded from the 2018 Tier 2 Afghanistan are reportedly smuggled to the Watchlist rating. The 2019 Trafficking in Person island via East Africa taking advantage of Report22 advised that “human traffickers exploit porous borders. domestic and foreign victims in Seychelles. Traffickers exploit some Seychellois girls and, According to the US Government (OSAC19), according to some sources, boys in child sex Seychelles suffers from the highest rate of trafficking, particularly on the main island of heroin abuse in the world where nearly 10% of Mahe; peers, family members, and pimps the working population is addicted to heroin, exploit them in bars, guest houses, hotels, according to the APDR. “Importation of Afghan brothels, private homes, and on the street. heroin is difficult to stop, given the porous Young drug addicts are vulnerable to sex nature of national borders in a country trafficking, and sex traffickers have exploited comprising more than 100 islands. The Eastern European women in hotels. In 2017, popularity of synthetic drugs is also on the rise. there were reports of possible high-level Police have increased enforcement of drug corruption, which allowed wealthy citizens from trafficking and drug abuse since 2016. Gulf countries to coordinate the travel of young Authorities strictly enforce drug possession women aboard private planes, some of whom laws. Penalties for possession of any amount may have been trafficking victims. Traffickers include fines and possible jail time.The UN may subject Malagasy women who transit the Office on Drugs and Crime announced in 2018 Seychelles to forced labor in the Middle East. its intent to reestablish a presence in However, the government still does not Seychelles - Threat Assessment - 2020 Page 14 of 34 acknowledge the occurrence of sex trafficking of the country. This smuggling activity is in Seychelles. Migrant workers—including from directed mainly to the countries of the Gulf Bangladesh, India, China, Kenya, Madagascar, Cooperation Council, as well as to other and countries in South Asia—make up 20 countries in the Middle East. This smuggling percent (21,000) of the working population in flow makes use of the Comoros, Seychelles or Seychelles and are primarily employed in Mauritius as transits to the final destinations.” fishing, farming, and construction; credible 5.8 Goods Piracy: According to the Trends in reports indicate traffickers subject migrant Trade & Pirated Goods Report 201924 by the workers to forced labor in these sectors. NGOs EUIPO & OECD, 3.3% of world trade in 2016 report migrant workers also face exploitative was made up from trade in counterfeit goods. conditions in fish processing plants, and Seychelles is estimated as having a low fishermen aboard foreign-flagged fishing propensity to export counterfeit products with vessels in Seychelles’ territorial waters and a score of 0.000/1 (2016) with export trade to ports are subjected to abuses indicative of the rest of the world & for export trade with the forced labor, including nonpayment of wages EU at 0.000/1. and physical abuse. Labor recruitment agents based in Seychelles will exploit migrant According to a local media agency25 in 2018, workers in labor trafficking, oftentimes with the the Cabinet of Ministers in Seychelles assistance of a local Seychellois accomplice. “approved procedural guidelines for border Migrant workers often sign their employment measures to deal with infringement and contracts upon arrival in the Seychelles and counterfeit goods entering the country”. There frequently cannot read the language, which is acknowledgement on the part of the increases their vulnerability to fraudulent government that there is “an element of recruitment tactics. There were reports of importation of counterfeit and infringing employers routinely retaining migrant workers’ goods, and as such, it is important that we take passports to prevent them from changing jobs necessary steps to facilitate its control”. The prior to the expiration of their two-year director general at the Trade Division in the contracts, increasing their vulnerability to Ministry of Finance has further advised that “It forced labor”. needs to be noted that the provisional law only applies to marks and brands that have been There was insufficient statistical records and registered in Seychelles and to importation that systematic data collection to include the are being done on a commercial basis. If predicate offence of human trafficking in the somebody is coming with it in their baggage NRA. allowance, that will not be covered”. According to the 2018 Global Study on 5.9 Theft /Stolen Goods and Smuggling: Smuggling of Migrants23, “The authorities of According to the NRA, smuggling is rated Madagascar report smuggling of migrants out Seychelles - Threat Assessment - 2020 Page 15 of 34 “Medium” and was one of the predicate case of the Seychelles and Madagascar, offences that generating the most proceeds of cigarettes are smuggled using containerized crime. Unfortunately, due to a lack of statistics, sea freight and air cargo”. The Seychelles case no granular information was provided. The studies in the report highlighted the following NRA documents the recommendation that techniques used to smuggle the cigarettes: “checks and controls are strengthened at the • Cigarettes were contained in large items different points of entry to detect, investigate such as speaker casings and air and take enforcement actions against conditioning units delivered through air individuals involved in smuggling of goods”. cargo. The total amount of cigarettes The NRA further highlights that due to seized by Customs totalled 59,200 sticks. resource and technology restraints that An aircraft engineer was involved; customs officials are unable to screen for cash • A frequent traveler attempted to smuggle at Seychelles entry points. 7,400 sticks of cigarettes in his luggage Theft and smuggling rated “Low” through the airport; and NRA 2017 • A traveler attempted to smuggle 2,400 Theft was rated as “Low” in the NRA, saying sticks of cigarettes in chocolate and that “From statistics provided by LEAs, petty cornflakes boxes in his luggage through theft is prevalent in Seychelles but this offence the airport. does not generate substantial proceeds of crime in comparison to other predicate The value of cigarettes smuggled/laundered offence”. was US$384,299.

This view is echoed in the 2019 OSAC Report26 5.10 Financial Fraud: The NRA links fraud, which advised of “a decrease in incidents of counterfeit and forgery into a single category. petty theft, burglary, robbery, and other crime Using statistics provided in relation to financial of opportunity. In 2018, robbery and burglary services, fraud risk was rated as “Low”. “From cases decreased by 45% and 17% respectively reported cases on fraud, it was indicated by the compared to 2017”, according to police Police that the types of fraud perpetrated in statistics. Theft from vehicles was also noted in Seychelles that generate substantial proceeds areas frequented by foreigners. of crime are perpetrated by foreigners who operate in groups. Recently there has been an In the 2018 Eastern and Southern African Anti increase in such groups coming into Seychelles Money Laundering Group (ESAAMLG) focusing on ATM or skimming related fraud, 27 Report on Smuggling of Cigarettes and fraud over the internet and cyber-crime. Associated Money Laundering in the According to the Police, these represent 90% of ESAAMLG Region, they highlighted that “In the cases reported over the period under review. It

Seychelles - Threat Assessment - 2020 Page 16 of 34 is seen that 95 % of those cases, with fraud which makes it a very desirable country to cases over the internet, the fraud is initiated in register companies in and funnel profits countries such as South Africa, Ghana, Guinea through. This makes it very appealing to and Nigeria and the funds are transferred to syndicates and groups involved in organised those countries though Money Services crime, especially those based relatively close in Bureaus. East Africa and on the Asian subcontinent.

Fraud is perpetrated by foreigners who The EU lists Seychelles as one of the top 30 operate in groups non- cooperative tax jurisdictions, though the NRA 2017 country has committed to reforms to become

According to the NRA, “the predicate offence tax-compliant. The formal labour market is not representing the most proceeds of crime is fully established, which allows exploitative company fraud with a total value of US$2.4 practices – particularly involving foreign, often million. This figure was obtained from the smuggled, labourers – to persist.” Police and the elements of company fraud “Partially compliant” were not broken down further”. For the 2014 to OECD Peer Review Report 2020 2015 period, the NRA documents 19 cases The OECD Global Forum on Transparency and reported under the category of “Fraud / Exchange of Information for Tax Purposes Forgery”, and 5 cases under “Company Fraud”. published a Peer Review Report for Seychelles In a media release28 in February 2020, the in April 202029, and rated Seychelles as Central Bank of Seychelles and the Seychelles “Partially Compliant”. Seychelles had previously Bankers Association warned of an increase in been rated “Non-Compliant” in 2013 “because in the number of scams and people falling of serious gaps in the enforcement of victims to them through social media provisions on the availability of ownership and platforms. These included phishing, spoofing, accounting information in the offshore sector”, takeover scams, Ponzi schemes, romance as well as difficulties in entering into exchange schemes, lottery scams, pyramid schemes and agreements Seychelles - as reported by Global fake loan scams. “Individuals and local Forum members. In 2015, the Seychelles business persons have also been impacted by improved significantly enough to secure a the scams, most of which are thought to “Largely Compliant” rating. originate from the Western Africa region, The drop in rating to “Partially Compliant” in namely, Ivory Coast, Benin as well as South 2020 was attributed to failure to reply to 88% Africa and Nigeria, as the majority of payments of requests for accounting information and are remitted to such countries” . 62% of the requests for beneficial information 5.11 Tax Evasion: According to the 2019 OC over a three year period. The main concerns Index, “Seychelles is a well-known tax haven, were highlighted as “the overall effectiveness

Seychelles - Threat Assessment - 2020 Page 17 of 34 of supervision and enforcement activities to • Other custom related offences. ensure the availability and access to information in practice. Of particular concern is Tax evasions “Medium High” NRA 2017 the fact that while more than half of the approximately 200 000 international business In the 2014 - 2015 period, the ESAAMLG companies are currently struck off, the Mutual Evaluation Report (MER) noted only effectiveness of this procedure remains four reported cases of tax evasion valued at uncertain, since struck off companies maintain US$32,000. According to the MER, tax their legal personality and can be restored for a evasion is not recognised as a predicate period of up to 12 years.” offence under the Seychelles laws, however banks have being identifying business Tax Evasion - Medium High NRA - 2017 transactions routed through personal accounts to avoid taxes due. Seychelles has information The NRA rates tax evasion as “Medium High”, exchange agreements with multiple countries and stated that “The statistics provided by SRC and is also a party to the Multilateral in respect of reporting, investigating and Convention on Mutual Administrative prosecuting of tax evasion cases is insufficient Assistance in Tax Matters. “The Tax and to determine whether this is a real issue for Customs Department liaise with the World Seychelles”. The NRA refers to suspicious Customs Organization and through Double transaction report statistics that highlighted the Taxation Agreements (DTAs) in relation to tax “prevalence of personal accounts being used matters, which may be predicate offences to for business purposes potentially as a ML and TF”. mechanism to evade tax and large out of the norm cash transactions being paid by owners According to the US Government (OSAC30), of legitimate businesses for purchase of other Seychellois enjoy a lower tax rate due to the assets in Seychelles including land”. offshore financial services industry’s significant Mechanisms used for tax evasion are: economic contributions to the country, which has the second highest per capita income in • Non-registration or non-remittance of tax Africa. The flexibility of the international tax due to the State; system, and the lack of legislation concerning

• Understatements of income, and/or high-value transactions, have enabled overstatement of deductible expenditure; international crime organisations to engage in money laundering using these offshore • An element of forgery where records are industries. falsified; 5.12 Emerging Threats: Cybercrime: • Transfer pricing; and According to the 2018 Global Cybersecurity

Seychelles - Threat Assessment - 2020 Page 18 of 34 Index (GCI)31, Seychelles scored 0.259/10 and capacity to operate so far east. In 2010, in the is described as having a “Low” level of last reported incident, six Seychellois were commitment rated 110th globally out of 175, captured by pirates southeast of the island of and 20th out of 44 in Africa in terms of Mahé, but the government has since cybersecurity. implemented a military strategy with EU and US support, and improved its legal framework Low level of commitment to dealing with piracy offenders”33. Seychelles is cybersecurity considered have “some of the world’s leading Global Cybersecurity Index 2018 expertise at this point in terms of the According to the NRA, the Department of mechanics of actually taking a piracy case from Information & Communications Technology wherever — anywhere on the high seas — to trial (DICT), has started to put in place the and all the way through to prosecution, Government of Seychelles Cyber Emergency conviction, appeal and the eventual Readiness Team (GOS CERT) (with equipment / imprisonment”34 training obtained from a COMESA project). It is 5.14 Other Crime Threats: According to the envisaged that in the near future dedicated US Government (OSAC35), there is “minimal people will be placed to man the GOS CERT. risk from crime in Seychelles,” and according However, the 2019 OSAC Report32 states that to official police figures, “there continues to be “Seychelles does not have an officially a decrease in violent crime, but there has been approved national cybersecurity roadmap or a slight increase in incidents of petty theft. internationally recognised Computer Incident Burglary, robbery, and other crimes of Response Team. The government has created opportunity have also decreased.” several legal measures in recent years (e.g. 5.15 FCN Overall Country Threat Ratings: Computer Misuse Act, the Electronic Seychelles is rated the 4/40 in SSA and 2/10 in Transactions Act, and the Data Protection Act) East Africa, with an overall “Very Low” Threats in an effort to address cybersecurity issues. The score of 83/100. country signed agreements with India and Cyprus in 2018 to bolster cybersecurity, but has not implemented wider security measures on public systems”.

5.13 Maritime Piracy: Seychelles is probably one of the most secure countries in Africa and conflict and terrorism risks are low. Somali pirates pushing out across the Indian Ocean present a low risk to Seychelles fishing lanes and tourism, as they no longer have the

Seychelles - Threat Assessment - 2020 Page 19 of 34 Section 6 - Sanctions & Terrorism

In this Section 6, the focus is on Sanctions and According to the NRA, “the potential threat Terrorism threats. level in respect of TF risk is rated as “Low” as there are no reported cases to date of TF in 6.1 Sanctions: Seychelles is not subject to Seychelles “other than the alleged case of the international sanctions. The 2019 Peddling graphite shipment to Iran”, where an individual Peril Index36 (PPI), focussed on proliferation, was prosecuted and found guilty in prepared by the Institute for Science and Germany41. International Security, which classifies Seychelles as a Tier 3 country (lowest threat), There are no known cases of funds and a country with a “Moderate” controls score generated in Seychelles being used to of 426 out of 1,300 points, and ranked 106th finance terrorism domestically or among 200 countries. abroad, and no known cases of Seychellois foreign terrorist fighters. Tier 3 Country - Moderate level of NRA - 2017 Controls PPI - 2019 The NRA further advises that “there are no known cases of funds generated in Seychelles Seychelles has an embassy in Cuba, but does being used to finance terrorism domestically or not have embassies for North Korea, Syria, Iran abroad, and no known cases of Seychellois or Cuba in Seychelles37. According to North foreign terrorist fighters. Internationally, Korea in the world38, Seychelles does not have Seychelles is also perceived as a low-risk any bilateral relations with North Korea. jurisdiction in the terrorist financing context. There are 8 entries, all entities, listed by US From a geographical perspective, the main TF OFAC with addresses in the Seychelles39. threat, if any, would most probably emanate from Somalia, Madagascar and Yemen where 6.2 Terrorism / Extremism: Seychelles is not there is evidence of terrorism and deficiencies included in the 2019 Global Terrorism Index40 in AML/CFT emanating from a lack of robust 2019 or in the 2019 US Department of State institutional control. Controls are in place in Country Reports on Terrorism. Seychelles to mitigate these risks”.

No terrorism and TF cases in According to the 2018 FATF Mutual Evaluation Seychelles, nor has there been any TF Report42, “Seychelles has demonstrated a good cases in which a Seychellois was understanding of the country’s low TF risk involved profile. FATF MER 2018

Seychelles - Threat Assessment - 2020 Page 20 of 34 Seychelles Higher (Inherent) Risk Factors

Customer Sector Geography Risks Risks Risks

Customers with elevated Banks (in particular retail and Major export / import partner exposures to criminal activities corespondent banks) countries (trade mispricing via such as: IFFs). drug trafficking,,illegal fishing, Boat and yacht dealers, money human trafficking remitters, casinos, dealers in Piracy in waters with threats & people smuggling, fraud, precious metals & stones, forex from Somalia finance & along with corruption dealers, real estate & lawyers, (e.g PEPs) which also help test and company service E Africa and Asia (source facilitate these crimes & tax providers, country drugs), Afghanistan, E evasion as a high risk concern Africa, Madagascar, also & Mozambique and South Africa (Seychelles used as trans- to Higher Risk Sectors and/or Motor vehicle dealers (very shipment point for drugs), Geography Risks high) A Sri Lanka (illegal fishing, ).

Bangladesh, India, China, Kenya & Madagascar (modern slavery)

Seychelles - Threat Assessment - 2020 Page 21 of 34 Section 7 - Money Laundering

In this Section 7, the focus is on Seychelles’s • Commercial banks with operations in the vulnerability to money laundering. international financial centre space;

7.1 Higher Risk Areas: Higher risk areas • Luxury real estate; (including from the NRA) are set out below. In • Dealers in motors vehicles, yachts and many cases a single risk factor may not be boats; evidence of actual higher risks. • TCSPs in the international financial centre Seychelles Higher (Inherent) Risk Factors activities; and

Customer Sector Geography Risks Risks Risks • Bureaux de change

Customers with elevated Banks (in particular commercial Major export / import partners exposures to criminal activities banks with international (trade mispricing via IFFs) such as: business - offshore links In 2017, the MER documented that “Banking drug trafficking, and Drug Trafficking Threat from - smuggling, company fraud, Luxury real estate; Afghanistan Pakistan, SE Asia and Western Europe, as source dominates the financial sector in Seychelles, fraud/forgery, theft & robbery Dealers in motors vehicles, and destination countries. Also along with corruption (e.g yacht’s and boats; trans-shipment point for heroin PEPs) which also help facilitate for East Africa including Kenya and, as a result, the majority of transactions are these crimes & tax evasion as a TCPS - international / offshore Madagascar, Mozambique and business South Africa and from Dubai to high risk concern also to Higher conducted through it. In 2016, banking Seychelles - (heroin). Risk Sectors and/or Geography Bureaux de change. Risks Migrant workers—including comprised nine (9) commercial banks, of which from Bangladesh, India, China, Kenya, Madagascar, and countries in South Asia - some seven (7) were either owned or controlled by have working conditions akin to forced labour international financial groups. Only two (2) of Illegal Fishing - China the seven (7) commercial banks engage in TF Threat from - Somalia, Madagascar and Yemen international business activities. This means According to the NRA, there was “missing” that the risks of ML/TF in the international information that was not available for the NRA business sector appear to be concentrated in exercise, but nonetheless highlighted that the the two commercial banks. The total assets cash intensive economy, rapid advances in value of the banking sector in 2015 was information technology, reputation as an estimated at USD1.13 billion. The total profit for offshore haven, improper use of Trust and banking in the same period amounted to US 33 Company Service Providers (CSPs), and million. In the foreign currency market, money deficiencies noted within the law enforcement business services providers (bureaux de agencies were all concerning areas. change) transactions were valued at SCR 1.23 billion compared to SCR0.33 billion conducted The MER highlights inherent ML/TF threats by banks in 2015. It represents about 78 “emanating from being an international percent and signals its importance to the financial centre, most notably in relation to economy of Seychelles”. The NRA rated the drug offences”. Sectors identified as being financial sector an overall rating of “Medium”. vulnerable to ML/TF risks are:

Seychelles - Threat Assessment - 2020 Page 22 of 34 7.2 Cash Based Money Laundering: 7.5 Cryptocurrency risks: According to the According to the NRA, Seychelles is a “cash 2019 Financial Intelligence Unit’s Annual intensive economy”. Using data from 2015, the Report44, “in recent years, the country has NRA estimates that that the total proceeds of attracted financial companies in the business crime from undetected sources combined for line of virtual asset. According to the website all the predicate offences identified was SCR coinlore listing, there are currently four 230,351,730 (USD$18,428,138). The buying Seychelles registered IBCs in the top 10 list in and selling of forex as well as remittances are the crypto exchange by 24-hours volume, with considered to be a “Medium High" risk, due to BITFOREX topping number one in terms of the cash intensive nature of their activities. In volume.…The Seychelles offshore sector has relation to tax evasions “large out of the norm also experienced a rise in the registration of cash transactions being paid by owners of Crypto IBCs”. legitimate businesses for purchase of other assets in Seychelles including land”. “The 2020-Crypto crime report by Chainalysis indicates that in 2019, 24.7% of illicit bitcoin 7.3 Trade Based Money Laundering: Whilst exchange transaction was done through cash based money laundering is a popular Seychelles registered IBC. In 2019, the method for laundering funds, trade based Seychelles FIU received crypto related STRs on money laundering is likely to be prevalent due a regular basis and analysis are being to use of offshore companies and international conducted.The primary areas of criminal shipment routes. Seychelles is positioning itself activities in cryptocurrency of concern to to benefit from enhanced regional trade as Seychelles are tax evasion, money laundering, Africa is moving toward the creation of the ICO scam, contraband transactions Terrorism, African Continental Free Trade Area. A multi- theft and extortion.In view of the inherent risk million dollar expansion and modernisation of associated with crypto currency, the Seychelles Port Victoria is expected to create a regional FIU is working towards building its capacity to transshipment and trading hub, according to better regulate and strengthen its internal the CEO of the Seychelles Port Authority43. system to detect and deter financial crimes 7.4 Mobile Money Risks: Although mobile through the use of new technologies”. payment services are designated as reporting 7.6 Other Money Laundering: Securities and institutions, very little information could be transaction laundering are also important found in relation to risks identified in methods, however laundering through the Seychelles, other than the input of cash at securities is considered to be “Low” in agents. Seychelles.

Seychelles - Threat Assessment - 2020 Page 23 of 34 Section 8 - Illicit Funds including Estimated Criminal Proceeds

In this Section 8, the focus is on Malawi’s The risks increase in trade with so-called vulnerability to Illicit Financial Flows and illegal advanced economies. Whilst not all IFFs are Proceeds and to the laundering of criminal and made up of criminal activity, a significant other illicit funds. proportion will be.

According to the African Union45 based on According to the sources and analysis carried work and data provided by GFI, it is estimated out in this Threat Assessment, estimates for that Seychelles suffered from illicit financial criminal proceeds, laundered funds and funds flows from 2004-201346, averaging US$36 generated by corruption and organised crime, million a year, and US$72 million47 in 2017, amongst others, are estimated in the following according to Global ranges:

48 Financial Integrity (GFI), Total Criminal Proceeds in Sub Saharan •Total estimates for criminal to have left the country. Africa in US$ Billions - FCN 2020 (not including fraud and corruption and tax proceeds combined of 4.5 evasion) Seychelles has a Tax to to 7.5%68 of GDP and with GDP ratio of 29.2%49, 5 - 10%69 of this estimated Mining which is the 2nd highest in Fishing 10 2.5 as costs of corruption. Africa, and above the Wildlife 2 Goods Piracy average African figure of 9 •Total estimates for monies 16.2%, and rated across Logging 12.5 available for laundering Africa as a “High” Tax Modern Slavery 8.3 through the formal sector is Collection country. Drugs 70 - 76%70 of criminal 3 Theft According to GFI, the most 15 proceeds and 24 - 26%71 common method for involving organised crime, transferring illicit financial with most significant funds, is through trade mis-pricing. GFI believe criminal actors being “Foreign Actors” this method or series of techniques may followed by “Criminal Networks” ,“State represent up to 80%50 of illicit financial flows, Embedded Actors”, and “Mafia Style Groups”. and can involve abusive and or aggressive The largest criminal markets in Seychelles will transfer pricing, trade mis-pricing and mis- include drug trafficking, tax evasion, invoicing, for example intentionally overpaying smuggling, corruption, company fraud, fraud/ for imports of goods or services (or forgery, theft & robbery and those crimes underpaying for exports or services) is a identified as the largest markets across Sub- straightforward way of illegally transferring Saharan Africa (see Pie Chart above). monies out of a country.

Seychelles - Threat Assessment - 2020 Page 24 of 34 Section 9 - Resilience & Response

In this Section 9, the focus is on the Outcomes. The MER advised that “Seychelles" Seychelles level of resilience and response. has experienced a relatively good implementation of the preventative measures 9.1 FATF: The last Mutual Evaluation Report in the financial sector” however, “the relating to the implementation of anti-money Designated Non-Financial Businesses and laundering and counter-terrorist financing Professions(DNFBP) sector, with the exception standards in Seychelles was undertaken by the of the ICSPs, is generally lagging in relation to Financial Action Task Force (FATF) in 2018. implementation of the AML/CFT requirements”. According to that evaluation, Seychelles was deemed “Compliant” for 10 Recommendations 9.2 Resilience to Organised Crime:According and “Largely Compliant” for 10, 16 were to the 2019 OC Index, Seychelles is rated as “Partially Compliant” having high & 4 “Non- resilience, and Compliant” with the scoring 5.38/10 FATF 40 (11/45 African Recommendations. countries and 4/13 The 4 Non- Southern African Compliant ratings countries). were: R7 - Seychelles scores Proliferation high in Law Sanctions, R8 - Enforcement (7/10) NPOs, R15 - New and International Technologies, & R38 Cooperation (6/10) - Mutual Legal and lower in Assistance - Freezing Economic & Confiscation. The Seychelles had no “Highly Regulatory Environment (3.5/10) and Anti Effective” or “Substantially Effective” ratings, 1 Money Laundering (3.5/10). for “Moderately Effective”, and 10 for “Low The OCI states that “although the judicial Effectiveness”. Based on a simple scoring system is often slow, the country’s law model, the Seychelles is rated at 55/100 for enforcement bodies are effective in arresting Technical Compliance against 40 perpetrators of organised crime, most notably Recommendations, 50/100 for 10 Core drug traffickers and illegal fishers. Where Recommendations, 3/100 for Effectiveness Seychelles falls short is with respect to its anti- against 11 Immediate Outcomes and 8/100 for money laundering capacity and the economic Effectiveness against 4 core Immediate regulatory environment in the country.” Seychelles - Threat Assessment - 2020 Page 25 of 34 In the 2018 MER, the assessors noted the with an “Increasing Improvement” “improved the powers and functions of the law governance trend”54. enforcement agencies (LEAs)” as a notable 9.6 Asset Seizures: According to the NRA “the positive change, including new specialised existence of a strong civil confiscation regime units, conferred powers to investigate ML/TF which targets illicit proceeds without cases, the asset forfeiture function at the FIU necessitating a criminal conviction, however, that has been transferred to the police, and the has a balancing effect on this with a large establishment of a Commercial Crimes Unit. number of proceeds of crime being targeted 9.3. Freedom: Beyond the definitions through civil confiscation”. For the years 2014 ascribed to Human Trafficking and or Modern to 2015, “the total value prejudiced through Slavery, a broader concept of freedom is the various predicate offences is USD described by Freedom House’s, Freedom in 7,948,000 and value seized and recovered by the World Index, which ranks countries and LEAs represented an amount of USD their citizens as either, “free” “partly free” or 452,500”, based on statistics obtained from “not free.” the LEAs.

“Partly Free” 9.7 Law Enforcement: According to the NRA, Freedom in the World Index - 2019 “Overall deficiencies noted within the Law Enforcement Agencies (LEAs) are that their Seychelles scored 72/100, and is rated “partly investigative focuses are more on investigation 51 free ”. of predicate offences and not ML”. Other areas

According to the Heritage Foundation’s 2019 highlighted in the 2018 MER were inadequate Index of Economic Freedom52, the Seychelles operational capacity and resources, restrictions economic freedom score is 64.3/100 making in obtaining some information relating to its economy one described as “moderately certain predicate offences (such as information unfree”. in possession of a trustee), and insufficient application of conducting parallel financial “Moderately Unfree” investigations. Notwithstanding this, Heritage Foundation - 2019 Seychelles met all the criteria and received Compliant ratings for Recommendations 30 9.4 Basel AML Index: According to the 2016 and 31. At the time of the assessment, findings, Seychelles scored 6/1053, but wasn’t Seychelles was only in the early stages of covered in the 2017, 2018 & 2019 Indices. In focusing on money laundering cases and the 2020 it was rated 5.6/10. assessors were not able to determine the level 9.5 Governance: Mo Ibrahim Foundation of effectiveness resulting in a Low level of Governance scores, Seychelles at 73 /100 effectives for Immediate Outcome (IO) 7. (African average is 49.9) and second in Africa,

Seychelles - Threat Assessment - 2020 Page 26 of 34 9.8 Financial Intelligence Unit: Seychelles According to the NRA, ML/TF risk remained FIU has been a member of the Egmont Group evident in many sectors of the business since July 2013. In 2019, the FIU received 115 environment due to: STRs,18 more than the previous year. The reports were from banks (40), Bureau de • A general lack of knowledge of AML/CFT Change (14), non-bank credit institutions (8), issues on the part of the supervisors and ICSPs (40) and competent authorities (13). accountable institutions;

STR Reports made to FIU by Reporting Entities - � • Ineffective enforcement of laws by the regulators and supervisors; and

Not Available • Lack of inter-agency collaboration among 115.0 97.0 the relevant authorities or agencies.

2015 2016 2018 2019

The crime types identified from STR reports include adverse media (11), digital currency (11), cybercrime (1), numerous cash deposits (25), money laundering (51), tax evasion (2), fraud and forgery (7), criminal investigations (4), narcotics (1), and theft (2). Interestingly, 72 of the 138 requests from foreign counterparts were related to money laundering, 26 for fraud and forgery, and 5 for child pornography55.

STR Reports - Crime Types - �

51.0

2.0 1.0 7.0 2.0

Tax ML Drugs Fraud Theft

The FIU is the sole competent authority in Seychelles responsible for supervising and monitoring AML/CFT compliance by the FIs and DNFBPs but a “lack of enforcement capacity” was highlighted in the NRA.

Seychelles - Threat Assessment - 2020 Page 27 of 34 Section 9 - Resilience & Response Continued

Based on the FCN Sub-Saharan Africa Risk Rating Model, Seychelles is rated overall at “High” for its response at 60/100. Ranges for individual components are summarised below, with Low Response - RED, Moderate Response - Amber & Higher Response - Green, (see Section 4 for actual ratings). Key component ratings over showing the progress for FATF MER ratings and for OC Index for Resilience, and over time in the Mo Ibrahim African Governance Index and the Basel AML index are also shown.

Seychelles - Threat Assessment - 2020 Page 28 of 34 Section 10 - Observations & Recommendations (O&Rs)

Based on this Threat Assessment, the following on main criminal markets and those activities O&Rs are made as follows: that pose the greatest threats and harms.

Overall O&Rs: • Stakeholders should consider how to further enhance the response of the private sector, • The National Seychelles AML Risk and in so doing, incentivise an improvement Assessment published in 2017 should be in “preventative measures” by moving refreshed using more comprehensive data beyond current FI / DNFPB assessments and statistics. based on technical compliance to one based • The Seychelles FIU should continue to more broadly on testing effectiveness. provide meaningful feedback to reporting O & R for Seychelles Financial Institutions: entities and should consider establishing a FIs to consider whether their AML/CTF Seychelles Financial Information Sharing programmes reflect the threats identified Partnership. here, &/or if changes are needed. • Seychelles should continue working on O & R for Foreign Financial Institutions: technical compliance issues identified in the Foreign FIs that have exposure to Seychelles MER, as well as the Immediate Outcomes to from outside the country, may want to achieve improve effectiveness ratings. consider: • The agencies responsible for asset recovery • Seychelles can be considered “Low” FC risk should target greater asset recoveries than from a foreign FI perspective, relative to those reported in the past, which represent other countries. significantly less than 1% of estimated criminal proceeds generated. • According to the 2017 MER, “Seychelles has experienced a relatively good • The country should improve its processes, implementation of the preventative measures oversight and transparency regarding the in the financial sector” however, “the awarding of contracts, tenders, and Designated Non-Financial Businesses and operations of companies fully owned by the Professions(DNFBP) sector, with the exception government to fully understand and manage of the ICSPs, is generally lagging in relation to any corruption risks that are identified. implementation of the AML/CFT • The country should increase resources to requirements.” Recommendation 8 on NPOs levels commensurate with meeting fighting was rated NC. Foreign FIs should consider financial crime expectations, as well as these findings in dealings with Seychelles. reviewing current priorities to ensure a focus NPOs and DNFPBs.

Seychelles - Threat Assessment - 2020 Page 29 of 34 Appendix 1 - Range Matrices by FCN

In Section In Section 8, Illicit funds including “Criminal Proceeds”, estimates for criminal funds in percentage terms and for “Costs of Corruption”, as well as estimates for “Laundering” and “Organised Crime” are set out, based on the inputs and calculations explained below.

1. Criminal Proceeds and Corruption: Table A1 below illustrates how the final estimates for “Criminal Proceeds” and “Costs of Corruption” are estimated. By taking the level of “Criminality” in the OC Index 2019, and the score from TI’s Corruption Index 2019, FCN’s overall Country Risk Rating, and based on the aggregate of these 3 sources, a final range estimate for criminal proceeds can be established. For corruption, the three sources are used, but ranges then depend on the level of corruption based on TI’s Corruption Perception Index 2019 score.

Table A1. Range Matrix for Estimating Criminal Proceeds & Corruption by FCN - 2020 - (Very High Rating is 4, High Rating is 3, Moderate Rating is 2 & Low Rating is 1 - with all scores aggregated for OCI Criminality, TI CPI & FCN Country Score-1-1

Bottom of the Range % of Top of the Range % of GDP Corruption % of Proceeds If Corruption % of Proceeds If Corruption % of GDP If Score GDP Very High Levels (CPI) High Levels (CPI) Moderate Levels (CPI)

12 10.5% 12.5% 15-20% 10-15% 5%-10%

11 10% 12% 15-20% 10-15% 5%-10%

10 9.5% 11.5 15-20% 10-15% 5%-10%

9 9% 11% 15-20% 10-15% 5%-10% (Includes a V High)

9 8.5% 11.5% 15-20% 10-15% 5%-10% (No V Highs)

8 8% 11% 15-20% 10-15% 5%-10%

7 7.5% 10.5% 15-20% 10-15% 5%-10%

6 7% 10% 15-20% 10-15% 5%-10% (Includes a High)

6 6.5% 9.5% 15-20% 10-15% 5%-10% (No Highs)

5 6% 9% 15-20% 10-15% 5%-10%

4 5.5% 8.5% 15-20% 10-15% 5%-10%

3 5% 8% 15-20% 10-15% 5%-10% (Includes a Moderate)

3 4.5% 7.5% 15-20% 10-15% 5%-10% (no Moderates)

2 4% 7% 15-20% 10-15% 5%-10%

1 3.5% 6.5% 15-20% 10-15% 5%-10%

Note: TI CPI Scores below 50 are rated: 40-49 Moderate to High, 30 to 39, High, below 30 Very High; OCI Criminality Scores are rated: 6 or above at Very High, 5 - 5.9 at High, 4 - 4.9 Moderate and below 4 as Low; FCN Scores are rated: 1-19 - Extremely High, 20 - 29 Very High, 30 - 39 High, 40 - 49 Moderate - High, 50 - 59 Moderate, 60 - 69 Low- Mod, 70 - 79 Low, & 80 - 100. For Costs of Corruption, ranges then depend on the level of corruption based on TI’s Corruption Perception Index 2019 score. For more details on source information for the OC Index, see HERE56, for TI CPI Index see HERE57 and for the results for Seychelles for criminality for corruption and the FCN Country Risk Rating Score see Section 3 above.

Seychelles - Threat Assessment - 2020 Page 30 of 34 2. Monies available for Laundering: Table A2 below illustrates how the final estimates for the range for “Monies available for Laundering” was established. The top of the estimated range is 76% of “Criminal Proceeds”, based on the findings of the UNODC 2011 Study, which found that of US$2.1 trillion estimated global proceeds, that US$1.6 trillion was available for laundering or 76%, and that most of this this was expected to be available to be laundered via the formal financial sector. Based on the relatively low levels of financial inclusion in most Sub-Saharan African countries compared with the rest of the world, and the size of the shadow and informal economies, as well as the ongoing dominance of cash within Sub-Saharan economies, the estimates available for laundering through the formal financial sector have been assessed with these factors in mind, based on the range estimates set out below, from sources estimating bank account and mobile money penetration. Seychelles is rated “Higher.” For more details on information on financial access, see HERE58.

Table A2. Ratings Range Matrix for Laundering by FCN - 2020

Financial Access Range % for Laundering Financial Access Range % for Laundering Criminal Proceeds Criminal Proceeds

V Low Access Levels 40-50 Moderate Access Levels 60-70 < 30% bank accounts AND >40% - 50% bank accounts <30% mobile money OR >40% - 50% mobile money OR vice versa

Lower Access Levels 50-60 Higher Access Levels 70-76 >30% - 40% bank accounts > 50% bank accounts OR OR >30% - 40% mobile money > 50% mobile money

3. Criminal Proceeds Involving Organised Crime: Table A3 below illustrates how the final estimates for the range for “Criminal Proceeds” involving organised crime was established. The top of the estimated range is 46% of “Criminal Proceeds”, based on the findings of the UNODC 2011 Study, which found that of US$2.1 trillion organised crime were involved in US$960 million or approx 46%. Table A3 takes the different scores for organised crime in Sub-Saharan African countries reported by the OC Index and presents an estimate, or range as a % of "Criminal Proceeds”, established as set out in Appendix 1 Section 1 above. Seychelles is rated “Moderate”. For more details on OC information, see HERE59.

Table A3. Ratings Range Matrix for Involvement by Organised Crime by FCN - 2020

Criminal Actors Score in OC Index Range % for OC Financial Criminal Actors Score in OC Index Range % for OC Involvement Involvement

Below 4 /10 in OC Index 2019 22-24 Rated 6 - 6.5/10 in OC Index 2019 32-34

Rated 4 - 4.5/10 in OC Index 2019 24-26 Rated 6.5 -7/10 in OC Index 2019 34-36

Rated 4.5-5/10 in OC Index 2019 26-28 Rated 7-7.5/10 in OC Index 2019 36-38

Rated 5-5.5/10 in OC Index 2019 28-30 Rated 7.5-8/10 in OC Index 2019 38-40

Rated 5.5-6/10 in OC Index 2019 30-32 Rated 8/10 in OC Index 2019 or above 40-46

Seychelles - Threat Assessment - 2020 Page 31 of 34 Endnotes: 1 See: https://www.seychellesfiu.sc/FIU/Publications/NRA_Report/NRA_Report_2017.pdf 2 See: https://www.transparency.org/en/news/cpi-2019-sub-saharan-africa 3 See: https://www.traceinternational.org/trace-matrix 4 See: https://freedomhouse.org/countries/freedom-world/scores 5 See: http://iiag.online 6 See: https://www.traffic.org/site/assets/files/7234/focac-briefing-paper.pdf 7 See: http://www.natureseychelles.org/~naturese/knowledge-centre/news-and-stories/latest-news/515-woman-jailed-for-turtle-shell-smuggling 8 See: http://www.fao.org/3/a-i4894e.pdf 9 See: http://www.nation.sc//articles/1567/seychelles-4th-greenest-country-in-the-world 10 See: http://iuufishingindex.net/profile/seychelles 11 See: https://fcwc-fish.org/other-news/seven-sri-lankans-remanded-in-seychelles-for-illegal-fishing 12 See: http://www.nation.sc/articles/5452/illegal-unreported-and-unregulated-iuu-fishing 13 See: https://www.unenvironment.org/nairobiconvention/index.php/node/4 14 See: https://echebastar.com/wp-content/uploads/2019/11/Seychelles-Fisheries-Comprehensive-Plan-Nov-2019.pdf 15 See: https://thecommonwealth.org/project/seychelles-blue-economy-strategic-roadmap-and-implementation 16 See: https://www.defenceweb.co.za/featured/maritime-security-the-seychelles-way/ 17 See: https://ourworldindata.org/illicit-drug-use 18 See: https://www.bbc.com/news/world-africa-50488877 19 See: https://www.osac.gov/Content/Report/b5f67e47-4683-4174-9242-198c76f1c1f0 20 See: https://stopillegalfishing.com/press-links/challenges-for-fishing-sector-in-seychelles-lack-of-manpower-illegal-fishing-old-technology/ 21 See: https://www.state.gov/wp-content/uploads/2020/06/2020-TIP-Report-Complete-062420-FINAL.pdf 22 See: https://www.state.gov/reports/2019-trafficking-in-persons-report/seychelles/ 23 See: https://www.unodc.org/documents/data-and-analysis/glosom/GLOSOM_2018_web_small.pdf 24 See: https://www.oecd-ilibrary.org/trade/trends-in-trade-in-counterfeit-and-pirated-goods_g2g9f533-en 25 See: http://www.seychellesnewsagency.com/articles/9253/Fake+or+real+Nikes+Seychelles+steps+up+monitoring+for+counterfeit+goods 26 See: https://www.osac.gov/Content/Report/8af5a248-d1d6-455f-8680-15f4aed317a1 27 See: https://esaamlg.org/index.php/methods_trends/readmore_methods_trends/1 28 See: http://www.nation.sc//articles/3379/internet-fraud-and-scams-on-the-rise 29 See: https://www.oecd.org/tax/transparency/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-seychelles-2020-second-round-688fc4f9-en.htm 30 See: https://www.osac.gov/Content/Report/b5f67e47-4683-4174-9242-198c76f1c1f0 31 See: https://www.itu.int/dms_pub/itu-d/opb/str/D-STR-GCI.01-2018-PDF-E.pdf 32 See: https://www.osac.gov/Content/Report/8af5a248-d1d6-455f-8680-15f4aed317a1 33 See: https://www.garda.com/crisis24/country-reports/seychelles 34 See: https://www.defenceweb.co.za/featured/maritime-security-the-seychelles-way/ 35 See: https://www.osac.gov/Content/Report/b5f67e47-4683-4174-9242-198c76f1c1f0 36 See: https://isis-online.org/uploads/isis-reports/documents/ThePeddlingPerilIndex2019_POD.pdf 37 Are: https://embassy-finder.com 38 See: https://www.northkoreaintheworld.org 39 See: https://sanctionssearch.ofac.treas.gov 40 See: http://visionofhumanity.org/app/uploads/2019/11/GTI-2019web.pdf 41 See: https://seylii.org/sc/judgment/court-appeal/2012/17-0 42 See: http://www.fatf-gafi.org/media/fatf/documents/reports/mer-fsrb/MER-Seychelles-September-2018.pdf 43 See: https://seychelles.the-report.com/trade-seychelles/ 44 See: https://www.seychellesfiu.sc/FIU/?page_id=239 45 See: https://au.int/sites/default/files/documents/37326-doc-k-15353_au_illicit_financial_flows_devv10_electronic.pdf 46 See: https://www.gfintegrity.org/wp-content/uploads/2015/12/IFF-Update_2015-Final-1.pdf 47 See: https://secureservercdn.net/45.40.149.159/34n.8bd.myftpupload.com/wp-content/uploads/2020/03/GFI-Trade-IFF-Report-2020-Final.pdf?time=1583530239 48 See: https://secureservercdn.net/45.40.149.159/34n.8bd.myftpupload.com/wp-content/uploads/2020/03/GFI-Trade-IFF-Report-2020-Final.pdf?time=1583530239 49 See: https://au.int/sites/default/files/documents/37326-doc-k-15353_au_illicit_financial_flows_devv10_electronic.pdf 50 See: https://gfintegrity.org/gftrade/ 51 See: https://freedomhouse.org/report/countries-world-freedom-2019 52 See: https://www.heritage.org/index/ranking 53 See: https://baselgovernance.org/sites/default/files/2020-06/2016_report.pdf 54 See: http://iiag.online 55 See: https://www.seychellesfiu.sc/FIU/ 56 See: https://ocindex.net 57 See: https://www.transparency.org/cpi2019?/news/feature/cpi-2019 58 See: https://datareportal.com/library 59 See: https://ocindex.net

Seychelles - Threat Assessment - 2020 Page 32 of 34 Message from the Editor - FCN

This Country Threat Assessment focuses on the financial crime threats and responses and is both a stand-alone publication, but can also be read in conjunction with the Global Threat Assessment, published in 2019 and the Sub-Saharan Threat Assessment published in 2020. The Sub-Saharan Threat Assessment has been supplemented by this country threat assessment, as well as for other countries in Sub-Saharan Africa. The individual threat assessments have been co-created with dedicated financial crime fighters from the countries covered, and/or with the help of professionals familiar with the country and the region, based on a consistent approach researching available open source information. Judgement has been applied in deciding what to include and what to emphasise. Each threat assessment follows the same structure and includes the same main sources, usually over 60 sources from important and credible agencies, in the form of reports, papers and or ratings. The threat assessments include the results from the FCN Sub-Saharan Africa 2020 Risk Rating Scorecard which includes a significant number of these sources to aggregate the threats and the responses to derive a final rating and a final ranking

More Financial Crime Materials from FCN

Global Threat Phase 1 - 19 Country Sub Saharan Africa Sub Saharan Africa Assessment by FCN - Threat Assessments Country Risk Ratings Threat Assessment by 2019 by FCN - 2020 FCN - 2020

Available at: https://thefinancialcrimenews.com For Subscription for Commercial Businesses / Free to NGO’s and Policy Makers Or Contact the Editor: [email protected]

Author(s) & Editor The Co Authors of this work are John Cusack and Ursula M’Crystal. The Editor is John Cusack, the publisher is Financial Crime News / Metriqa Limited. All rights remain with FCN/ Metriqa Limited.

John Cusack is a leading financial crime fighter, Editor of the Financial Crime News, former Global MLRO at UBS and Standard Chartered Bank, Two time Co Chair of the Wolfsberg Group (to end 2019), and adviser to a number of financial institutions, Regtech Providers, and engaged with NGO’s combatting wildlife and human trafficking. Ursula M’Crystal is a leading financial crime fighter, specialising in Sub-Saharan Africa and in financial intelligence and investigation, with prior leadership experience with both Standard Bank and Standard Chartered Bank.

Acknowledgements: Thanks and appreciation to a number of colleagues and collaborators who freely gave their time, to research, comment and provide advice in connection with this Country Threat Assessment, including: Hans Peter Bauer, Victoria Meyer & Andrew Williams. Hannah?

Information to Note: The information, provided in this Country Threat Assessment is designed to help those involved in combating financial crime. The Editor (John Cusack) takes responsibility for the contents of this document, including any opinions, observations or recommendations, but does not take responsibility for referenced materials, that are the responsibility of the authors and as appropriate. References are provided for information purposes and do not constitute endorsement of any information. readers should be aware that website references listed may change. More Financial Crime Materials from FCN

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