AML Regulations in St. Vincent and the Grenadines: the New Rules for Forex Brokers

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:  

1. Companies wishing to engage in FX in SVG now must provide a certified copy of their license；
2. Companies already engaging in FX in SVG  will be granted a transitional period until March 10, 2023 to provide the FSA with a certified copy of their license 

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. 

Who is affected?

The following sectors must comply with SVG’s existing AML regulations:

• Banking 
• Financial securities 
• Insurance 
• Money Service Businesses (MSBs)
• Credit unions
• Building societies 
• Registered Agents
• Friendly Societies

The new licensing requirements for FX companies affect Business Companies (BCs) and Limited Liability Companies (LLCs) engaging in FX business activity.

What are the main regulations?

• The Financial Services Authority Act, 2011
• The Proceeds of Crime Act, 2013
• Anti-Money Laundering and Terrorist Financing Regulations, 2014
• The Anti-Terrorist Financing and Proliferation Act, 2015
• Anti-Money Laundering and Terrorist Financing Code, 2017
• Money Services Business Act, December 2022

The full list of the AML regulations can be found on the FIU website.

Who is the main regulator?

The key AML regulators in SVG are:

1. The Financial Services Authority (FSA), which is responsible for “ensuring compliance with the FSA Act and other specified enactments, regulations or guidelines. It is also responsible for ensuring that each licensed financial entity is properly managed and remains financially sound. The FSA, therefore, has the powers to intervene in the affairs of a regulated entity to protect customers.” (the FSA)

2. The Financial Intelligence Unit is a supervisory authority for designated non-financial businesses and professions (DNFBPs) and is responsible for:

• “receipt and analysis of suspicious transaction reports that must be made under the Proceeds of Crime Act, 2013 and the Anti-Terrorist Financing and Proliferation Act, 2015
• investigation of relevant offenses
• dissemination of information to Competent Authorities
• international cooperation
• awareness raising and education
• supervision of Non-Regulated Service Providers (NRSPs) (otherwise known as Designated Non-Financial Businesses and Professions (DNFBPs)” (Source).

How to stay compliant

Existing AML regulations in SVG

SVG is part of the Caribbean Financial Action Task Force, one of the FATF’s regional groups, and has therefore adopted the FATF risk-based approach.

As part of this risk-based framework, the FSA demands that companies regulated under the FSA Act conduct the following procedures:

• Customer Due Diligence (CDD)—verifying the identity of a customer on a risk-sensitive basis. The CDD process includes collecting information on both on the identity of the customer and business relationships, such as source of funds, which should be kept for auditing purposes
• Transaction monitoring
• PEP screening
• Reporting of suspicious activities

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.

Fines and penalties

According to SVG’s existing AML regulations, a person who commits the crime of money laundering can face:

• on summary conviction, imprisonment for five years or a fine of $500,000 or both
• on conviction on indictment, imprisonment for twenty years or an unlimited fine or both

A person who fails to disclose knowledge or suspicion, or report a suspicious transaction, faces:

• on summary conviction, imprisonment for three years or a fine of $500,000 or both
• on conviction on indictment, imprisonment for ten years or an unlimited fine or both

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’

and/ or 

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.’

What’s next for FX businesses in St. Vincent and the Grenadines?

• Companies that already have a FX license must provide the FSA with a certified copy of a license obtained in the jurisdiction in which their activities occur upon the submission of the application to be incorporated or formed in SVG.
• Companies that do not have a FX license must obtain an adequate license in order to be incorporated or formed in the SVG, prior to applying for SVG incorporation/formation.
• Companies that already have a FX license are obliged to provide the FSA with a certified copy by March 10, 2023.
• Companies that do not have a FX license may only need to provide the FSA with a certified copy of the license obtained in the jurisdiction in which their activities occur.

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.“

What’s next for companies that can’t comply with SVG’s requirements?

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.