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FATF Lifts Warning On Seychelles Investment Law

Mandy Robinson, Tax-news.com, London

16 October 2000

The Financial Action Task Force (FATF) has removed a warning it issued against the Seychelles over the jurisdiction's enactment of a law which the organisation condemned as a 'grave threat to efforts to combat money laundering.'

The warning was issued four years ago in response to the Seychelles' enactment of the Economic Development Act (EDA) in February 1995. Under the Act, investors who placed a minimum of $10m into government approved schemes were offered immunity from prosecution of all criminal proceedings and their assets were protected against investigative requests for confiscation, unless they comitted crimes in the Seychelles itself.

At the time, the Seychelles government argued that the act was a vehicle for attracting investment, but the then president of the FATF, Ronald K Noble, US Treasury Under Sectretary for Enforcement, stated: 'the clear design of the Seychelles law is to attract capital by permitting international criminal enterprises to shelter both themselves and their illicitly-gained wealth from pursuit by legal authorities. Drug traffickers and other criminals can enjoy the spoils of their illegal activities secure in the knowledge that the Seychells authorities will protect them. This poses a grave threat to efforts to combat money laundering and maintain the integrity of the world's financial systems.'

Over the past four years, the Seychelles has dug its heels in and refused to back down under international pressure, during which time the FATF urged financial institutions from around the world to think carefully before entering into business relations and scrutinise transactions with 'persons, companies and financial institutions domiciled in the Seychelles.'

But this has now changed due to the Seychelles government's decision, in July this year, to repeal the EDA. In a statement released by the FATF last week, the world's leading anti-money laundering authority said it welcomed the repeal of the EDA 'which took place in the context of the FATF's work on non-cooperative jurisdictions'[and] constitutes a significant step taken by the Seychelles Government to strengthen its anti-money laundering system.'

So things appear to be looking up in the Seychelles. In September the country played host to an interntional conference entitled 'The Future of Offshore Centres in the Cyber Age', in which the Seychelles government promised its support in developing the islands into a world-class financial centre. In alliance with the Seychelles International Business Authority (SIBA), the government has pledged to encourage the growth of the business and finance sectors and plans are afoot to implement the relevant legislation and to strengthen the country's infrastructure.

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