Seychelles
This report analyses the implementation of the AEOI Standard in the Seychelles with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
The Seychelles’ legal framework implementing the AEOI Standard is in place but needs improvement in order to be fully consistent with the requirements of the AEOI Terms of Reference. While the Seychelles’ international legal framework to exchange the information with all of the Seychelles’ Interested Appropriate Partners (CR2) is consistent with the requirements, the Seychelles’ domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has deficiencies significant to the proper functioning of elements of the AEOI Standard. More specifically, deficiencies have been identified in the Seychelles’ enforcement framework.
Overall determination on the legal framework: In Place But Needs Improvement
Effectiveness of AEOI in practice
The Seychelles’ implementation of the AEOI Standard is not compliant with the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. This is because there are fundamental issues with respect to ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1) and with respect to exchanging the information in an effective and timely manner (CR2).
Overall rating in relation to the effectiveness in practice: Non-Compliant
General context
The Seychelles commenced exchanges under the AEOI Standard in 2017.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, the Seychelles amended its Revenue Administration Act of 2009 and SI 1 of 2015.
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.
Following the initial Global Forum peer review, the Seychelles amended its legislative framework to address issues identified, effective from June 2017.
With respect to the exchange of information under the AEOI Standard, the Seychelles is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017.
Table 1 sets out the number of Financial Institutions in the Seychelles that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially, because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). Information on the number of Financial Accounts that they reported in 2021 is not available. The number of Financial Institutions provides key contextual information to the development and implementation of the Seychelles’ administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by the Seychelles in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to the Seychelles’ exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in the Seychelles:
the Seychelles Revenue Commission (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with the Seychelles’ exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by creating a Portal through which Reporting Financial Institutions upload XML files; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of the Seychelles’ legal frameworks implementing the AEOI Standard concluded with the determination that the Seychelles’ domestic legal framework is In Place But Needs Improvement and its international legal framework is In Place. This has been taken into account when reviewing the effectiveness of the Seychelles’ implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for the Seychelles are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Determination: In Place But Needs Improvement
The Seychelles’ domestic legislative framework is in place and contains most of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures, but it needs improvement in relation to the framework to enforce the requirements (SR 1.4). Most significantly, the Seychelles’ legislative framework does not impose sanctions on Account Holders and Controlling Persons for the provision of a false self-certification and does not include strong measures to ensure that valid self-certifications are always obtained for New Accounts.
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
The Seychelles has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
The Seychelles has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
The Seychelles has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
The Seychelles has a legislative framework in place to enforce the requirements in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. More specifically, the Seychelles’ legislative framework:
does not impose sanctions on Account Holders and Controlling Persons for the provision of a false self-certification; and
permits accounts to be reported as undocumented when self-certifications are not obtained and/or validated in the limited circumstances where they are not obtained on the opening of the account, rather than including measures to ensure that valid self-certifications are always obtained as required.
These are key elements of the required enforcement framework and are therefore material to the proper functioning of the AEOI Standard.
The Seychelles should amend its domestic legislative framework to include sanctions on Account Holders and Controlling Persons for the provision of a false self-certification.
The Seychelles should amend its domestic legislative framework to include strong measures to ensure that valid self-certifications are always obtained for New Accounts, rather than allowing accounts to be reported as undocumented in the limited circumstances a self-certification is permitted to be obtained after the opening of a New Account.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
The Seychelles’ international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of the Seychelles’ Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from the Seychelles and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
The Seychelles has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
The Seychelles put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
The Seychelles’ exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Assessed jurisdiction’s comments on the assessment of its legal frameworks
General context: The Republic of Seychelles is in the process of amending Schedule 4 and 5 of the Revenue Administration (Common Reporting Standards) Regulation of 2015 to include the list of participating and reportable jurisdictions. We are encountering some delays due to the pandemic Covid-19. The Seychelles is also working on a proposal for amending the law to include very strong sanctions/measures so as to ensure that valid self-certifications are always obtained for New Accounts.
SR 1.4: The Republic of Seychelles have not developed their own guidance but we are using the one issued on the OECD’s website.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for the Seychelles are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
The Seychelles’ implementation of the AEOI Standard is non-compliant with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures. More specifically, while the Seychelles is meeting expectations with respect to collaboration with its exchange partners to ensure effectiveness (SR 1.6), there are fundamental issues with respect to ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5). The Seychelles should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, the Seychelles implemented some of the requirements in accordance with expectations. However, fundamental issues were identified. The key findings were as follows:
The Seychelles Revenue Commission (SRC) created the International Tax Unit to carry out the compliance activities with respect to the implementation of the AEOI Standard by Financial Institutions. The Seychelles recently adopted a strategy for ensuring the compliance with the AEOI Standard, but has not yet conducted any activities, including an associated risk assessment. Therefore, the Seychelles has not yet been able to ensure that Reporting Financial Institutions correctly conduct the due diligence procedures and collect and report the required information with respect to each Reportable Account in accordance with the AEOI Standard.
There have been some communication activities with the Financial Institutions either through bilateral phone and email contacts or through the SRC’s website. However, the Seychelles is yet to conduct more systematic and comprehensive communication and outreach activities with Financial Institutions. There also does not appear to be a formalised plan or activity undertaken to ensure that the interaction between the CRS and AML frameworks always results in the identification of Controlling Persons in accordance with the AEOI Standard.
The Seychelles maintains a database of the Seychelles’ Financial Institutions that it updates on a yearly basis according to the Financial Institutions that report information. The recently adopted strategy for compliance with the AEOI Standard includes a methodology that includes activities to further understand its population of Financial Institutions, utilising some relevant information sources, such as the lists of regulated entities provided by financial regulators and the Foreign Financial Institution list for FATCA purposes. The Seychelles should expand the information sources and implement procedures to identify non-regulated entities that are Financial Institutions for the purposes of the AEOI Standard, as well as implement its strategy.
The International Tax Unit of the Seychelles Revenue Commission responsible for implementing the Seychelles’ AEOI compliance strategy includes three staff that have recently received an initial training on the AEOI Standard but that have not yet undertaken compliance activities.
The Seychelles has no procedure in place to verify compliance and enforce the requirements, including through the inspection of records of Reporting Financial Institutions and the application of dissuasive penalties and sanctions for non-compliance. Additionally, the Seychelles does not have any procedures in place to address circumvention of the requirements if such circumvention is detected, to ensure self-certifications are obtained as required and to follow up with Reporting Financial Institutions that report undocumented accounts. With respect to self-certifications, the Seychelles will be constrained by its applicable legal framework in relation to instances where self-certifications are not obtained upon account opening.
The Seychelles does not have a jurisdiction-specific list of Non-Reporting Financial Institutions or Excluded Accounts.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
With respect to the Financial Account information, the Seychelles was not able to confirm that it collects and monitors information on the proportion of Financial Accounts that are reported that include information on the Tax Identification Numbers and/or dates of birth with respect to the individuals associated with them. These data points are key to exchange partners to effectively utilise the information and are important to developing an effective compliance strategy to ensure the AEOI Standard is being effectively implemented. The Seychelles was not able to confirm that it collects and monitors information on the number of undocumented accounts reported by its Reporting Financial Institutions. This information is crucial to implementing the requirement to follow up on undocumented accounts.
Feedback was also received from the Seychelles’ exchange partners indicating that, compared to what they generally experience in relation to the information received from their exchange partners, they achieved a much lower level of success when seeking to match information received from the Seychelles with their taxpayer database. Furthermore, several exchange partners highlighted issues with respect to the information received, notably on the records reported without a valid Tax Identification Number.
Based on these findings it was concluded that the Seychelles is not meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. More specifically, fundamental issues have been identified, including with respect to developing a strategy based on a risk assessment and establishing and implementing procedures to conduct verification and enforcement activities to ensure the effective implementation of the AEOI Standard. The Seychelles should therefore continue its implementation process accordingly, including by addressing the recommendations made.
The Seychelles should implement an overarching compliance strategy to underpin its compliance activities, informed by a risk assessment that takes into account a range of relevant information sources.
The Seychelles should implement effective procedures to identify the population of Reporting Financial Institutions to ensure that they correctly apply the definitions of Reporting Financial Institution and Non-Reporting Financial Institution and report information as required, specifically including non-regulated entities that are Financial Institutions for the purposes of the AEOI Standard.
The Seychelles should develop and implement an appropriate framework, including in-depth reviews, to verify whether Reporting Financial Institutions are effectively implementing the AEOI Standard, including ensuring the interaction between its AML and AEOI frameworks results in the collection and reporting of information in accordance with the AEOI Standard.
The Seychelles should develop and implement effective procedures to monitor and verify whether Reporting Financial Institutions are obtaining valid self-certifications as required, including dedicated communication activities, with a particular focus on self-certifications obtained after the opening of a Financial Account. Reference is made to the recommendation made when assessing the Seychelles’ legal framework implementing the AEOI Standard.
The Seychelles should develop and implement effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions, including the application of dissuasive penalties and sanctions as appropriate, and routinely apply them where non-compliance is identified
The Seychelles should implement systems to collect and monitor information on the number of Financial Accounts reported, the reporting of Tax Identification Numbers, dates of birth and undocumented accounts to inform its compliance strategy.
The Seychelles should develop and implement a clearly defined policy to follow up with Reporting Financial Institutions that report undocumented accounts to ensure that the requirements are being complied with.
The Seychelles should address the issues raised by its exchange partners.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
In order to collaborate on compliance and enforcement, it appears that the Seychelles implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, the Seychelles has the necessary systems and procedures to process them as required. The Seychelles also appears ready to notify its partners effectively of errors or suspected non-compliance it identifies when utilising the information received.
Based on these findings it was concluded that the Seychelles is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. The Seychelles is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
The Seychelles’ implementation of the AEOI Standard is non-compliant with respect to exchanging the information effectively in practice and in a timely manner. More specifically, while the Seychelles is meeting expectations with respect to the transmission methods (SRs 2.5 and 2.7) and providing corrections, amendments or additions (SR 2.9), there are fundamental issues with respect to sorting, preparing and validating the information (SR 2.4) and significant issues in relation to transmitting the information in a timely manner (SR 2.6) and sending status messages in a timely manner (SR 2.8). The Seychelles should continue its implementation process to ensure its effectiveness, including by addressing the recommendations made.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
14 exchange partners highlighted particular issues with respect to preparation and format of the information sent by the Seychelles (representing 20% of its partners). These generally related to the validation of the file and content errors. More generally, eight (or 11%) of the Seychelles’ exchange partners reported rejecting more than 25% of the files received, of which two reported rejecting more than 50% of the files received, due to the technical requirements not being met. This is a relatively high amount when compared to other jurisdictions. It was noted that the Seychelles has still not yet addressed all of the issues.
Based on these findings it was concluded that the Seychelles is not meeting expectations in relation to sorting, preparing and validating the information. More specifically, fundamental issues have been identified, including with respect to the validation of the information. The Seychelles should therefore continue its implementation process accordingly, including by addressing the recommendations made.
The Seychelles should continue to work with its exchange partners to address the issues raised.
The Seychelles should review its procedures for sorting, preparing and validating the information to ensure they meet the requirements of the AEOI Standard.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, the Seychelles linked to the CTS.
Based on these findings it was concluded that the Seychelles is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. The Seychelles is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
10 exchange partners highlighted delays in the sending of information by the Seychelles (representing 14% of its partners). This represents a very high proportion of exchange partners and has not improved over time. The Seychelles wrote to the Competent Authorities of its partners to inform them that a delay in sending the 2021 information would take place due to a change in the internal reporting system. It was noted that the Seychelles successfully addressed all of the issues and sent the information as soon as possible thereafter.
Based on these findings it was concluded that the Seychelles is partially meeting expectations in relation to exchanging the information in a timely manner. More specifically, significant issues have been identified, including with respect to sending of the information to all exchange partners in a timely manner. The Seychelles should continue its implementation process to ensure its effectiveness, including by addressing the recommendation made.
The Seychelles should ensure that it sends information to all of its partners in a timely manner.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from the Seychelles’ exchange partners did not raise any concerns with respect to the Seychelles’ use of the agreed transmission methods and therefore with the Seychelles’ implementation of this requirement.
Based on these findings it was concluded that the Seychelles is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. The Seychelles is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
Nine exchange partners highlighted delays in the sending of status messages by the Seychelles, representing 10% of its partners. This represents a relatively high proportion of partners. It was noted that the Seychelles appears to be addressing the issues to ensure that status messages are sent in accordance with the requirements. However, the Seychelles has still not yet sent some of the status messages due to be sent in 2021.
Based on these findings it was concluded that the Seychelles is partially meeting expectations in relation to the receipt of the information. However, significant issues have been identified, including with respect to the sending of status messages to the sending jurisdictions. The Seychelles should continue its implementation process to ensure its effectiveness, including by addressing the recommendation made.
The Seychelles should ensure it consistently sends status messages to all of its exchange partners in a timely manner.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
The Seychelles appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by the Seychelles’ exchange partners and therefore with respect to the Seychelles’ implementation of these requirements.
Based on these findings it was concluded that the Seychelles appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. The Seychelles is encouraged to continue to ensure the ongoing effectiveness of its implementation.
Assessed jurisdiction’s comments on the assessment of effectiveness in practice
The Seychelles would like to thank the assessment team for their time and dedication in compiling this report.
The Seychelles fully appreciates the importance of ensuring the effectiveness of the AEOI Standard in practice, and acknowledges the recommendations made in the report.
The ITU is in the process of implementing a new technology system, which will strengthen their processes, validation and timeliness in data exchanged. Reviews of administrative penalties and sanctions for non-compliance are also ongoing and intended to reinforce the enforcement mechanisms. The ITU also continues to focus on training, skills, and capacity building.
The Seychelles remains committed to improving the effectiveness of the AEOI Standard in practice.