The Central Bank of Seychelles (CBS) says it is engaging with Barclays Bank Seychelles to ensure that clients have sufficient time to shift their deposits in their offshore bank accounts, following a recent decision by Barclays to discontinue its banking services for non-residents in foreign currencies.
While Barclays refused to comment on the decision to SNA, the CBS issued a press statement jointly with the Seychelles Ministry of Finance, Trade and the Blue Economy, Financial Services Authority (FSA) and Financial Intelligence Unit (FIU) on Friday last week.
“Following a remediation exercise, Barclays 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, » read the statement. « 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. »
The financial authorities acknowledged the difficulties faced by the clients given Barclays’ decision. According to information provided to SNA by CBS, all of Barclays’ offshore clients were informed about the decision and the date of the service closure is October 31, 2015.
“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,” said the joint statement.
Closure has ‘shaken the industry’
Barclays, which was the first commercial bank to set up operations in Seychelles in 1959, ventured into offshore banking in 2004, and together with the Bank of Muscat International Offshore (BMIO) were until now the main institutions providing offshore banking facilities in the Indian Ocean archipelago.
SNA contacted some companies offering services to offshore clients in Seychelles to find out how the industry is being affected with Barclays’ decision to cancel its offshore banking facilities.
It has not been possible to find out what percentage of offshore bank accounts were registered with Barclays and according to the Financial Services Authority, FSA, it is too early to predict if this will mean a flight of money away from Seychelles.
Concerns were raised in 2013 by the Organisation for Economic Co-operation and Development (OECD) over Seychelles jurisdiction with regards to tax transparency rules which resulted in amendments made to its 1996 International Business Companies Act to bring it in line with international standards.
According to the CBS joint statement, Seychelles has also addressed its non-compliant status through other channels, adding the country has a “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).”
Seychelles authorities say they 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.’