Until recently a forex haven, St. Vincent and the Grenadines announced it will significantly toughen regulations for forex businesses. Let’s explore the current and incoming requirements to understand who must comply with AML rules on the island.
Until January 6th 2023, FX trading brokerage activities were not subject to licensing in St. Vincent and the Grenadines (SVG). Therefore all SVG-registered Business Companies (BCs) or LLCs were able to engage in forex (FX).
However, due to a sharp increase in complaints over FX scams, as well as fraud against SVG-registered BCs and LLCs engaged in FX, SVG has taken a stricter regulatory course to protect its reputation as an international financial center.
According to SVG’s Memorandum on Requirements for BCs and LLCs Engaging in FOREX Business Activity:
The deadline to obtain a license is March 10, 2023. According to the FSA, “Failure to adhere to these requirements will result in the application of sanctions against the companies in accordance with the Financial Services Authority Act”.
So, what should current and future SVG-registered FX brokers do to comply? Let’s dive into SVG’s AML laws and incoming FX regulations.
The following sectors must comply with SVG’s existing AML regulations:
The new licensing requirements for FX companies affect Business Companies (BCs) and Limited Liability Companies (LLCs) engaging in FX business activity.
The full list of the AML regulations can be found on the FIU website.
The key AML regulators in SVG are:
Existing AML regulations in SVG
As part of this risk-based framework, the FSA demands that companies regulated under the FSA Act conduct the following procedures:
The full list of requirements can be found in the SVG Anti-Money Laundering and Terrorist Financing Code.
New regulations for FX companies
FX companies seeking to operate in SVG must show evidence of their approved license from other jurisdictions and authorities when they submit an application to the FSA.
Companies already providing FX trading, or brokerage services in SVG are given a transitional period until March 10, 2023 to either obtain an SVG license or present an approved license from another jurisdiction. This can be presented to the FSA with no filing fees.
According to SVG’s existing AML regulations, a person who commits the crime of money laundering can face:
A person who fails to disclose knowledge or suspicion, or report a suspicious transaction, faces:
Non-compliance with the new licensing requirements for FX businesses:
According to the FSA’s memorandum: “Failure to adhere to these requirements will result in the application of sanctions against the companies in accordance with the Financial Services Authority Act”.
According to the Q&A published by the FSA on January 12, 2023, the applicable sanctions are:
1) cancellation of a company pursuant to Section 37 (1) of the FSA Act
‘Section 37 (1) FSA Act provides that the license of a registered entity may be canceled by the Authority after consultation with the minister where in the Authority’s opinion –
(a) a financial entity or registered entity is not maintaining high standards of financial probity or following sound business practices’
2) being struck off the Register pursuant to Section 172 (1)(a)(ii) of the International Business Companies (Amendment) Act 2018
‘Section 172 (1)(a)(ii) of the IBC (Amendment) Act 2018 provides that
(1) The Registrar may strike a business company off the Register if-
(a) the company
(ii) fails to file any return, notice or document required to be filed under this Act or the Regulations.’
It’s also important to note that the FSA offers a deadline extension:
“Extensions may be granted to a company upon the submission of an application to the FSA prior to the deadline stipulated in the notice. Extensions will be granted on a case-by-case basis.“
AML compliance experts agree that the FSA’s decision may present a challenge for small unlicensed FX companies seeking to obtain a license before March 10th.
A solution would be to apply to the FSA for a deadline extension. It’s also possible to obtain a license or document stating that licensing is not required from an approved jurisdiction:
“If no license is required in a specific jurisdiction in which FOREX Activity is being undertaken, a letter issued by the regulatory/competent authority in the relevant jurisdiction can be furnished to the FSA. This letter must indicate that a license is not required by the named entity to engage in such activity in the jurisdiction.”
As an option, some FX companies have considered relocating their business to Seychelles, Mauritius, Vanuatu or another jurisdiction which does not require FX businesses to be licensed.