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The FSC issues consultation paper on the regulatory framework for Robotic and Artificial Intelligence Enabled Advisory Services

The FSC issues consultation paper on the regulatory framework for Robotic and Artificial Intelligence Enabled Advisory Services

The Financial Services Commission (FSC) has issued a Consultation Paper in relation to the introduction of a regulatory framework for Robotic and Artificial Intelligence Enabled Advisory Services (hereinafter RAIEAS). RAIEAS was coined in the National Budget of 2019/2020 and the Finance (Miscellaneous Provisions) Act 2020 added RAIEAS as a financial business activity in Schedule 2 of the Financial Services Act requiring a licence from the FSC. The aim of the Consultation Paper, which is inspired from approaches and models implemented by other jurisdictions, is to invite views and comments from relevant professionals, the industry and the public at large. The said Consultation Paper contains a copy of the draft Financial Services (Robotics and Artificial Intelligence Enabled Advisory Services) Rules which the FSC intends to make under section 14 of the Financial Services Act. RAIAES refers to the provision of digital and personalized (discretionary or non-discretionary) investment and portfolio management and advisory services through a fully automated computer program or artificial intelligence enabled algorithms with minimal human intervention. There is in fact no involvement of any individual in the entire advisory process. There may however be elements of human intervention to assist in the non-advisory services like technical support or information technology. This process can be easily distinguished from a traditional investment advisor who uses technological tools to merely assist its human advisers in providing advisory services to its clients. RAIEAS has the potential of yielding numerous benefits both for the end customers and for the intermediaries. However, it also raises some specific challenges and risks which cannot be disregarded. The proposed regulatory framework should therefore cater for necessary safeguards to ensure the sound conduct of such business and at the same time protecting the end customers’ rights. A licensee for RAIEAS must have a minimum unimpaired stated capital of MUR 600,000 and subscribe to a professional indemnity insurance policy against liability for the sum of at least MUR 2 million for any act, error or omission in respect of the conduct of the advisory services. The licensee should establish an office and relevant infrastructure for the carrying out of its services in Mauritius and it shall employ officers with adequate competence, experience and proficiency to discharge its services. The licensee should be managed by a board of directors consisting of a minimum of three directors, one of whom shall be an independent director and a resident of Mauritius. It should have a code of conduct and ethics which will bind all its officers. Besides the implementation of internal controls, risk management and governance policies and procedures, the licensee is expected to ensure the robustness of its computer programs and its artificial intelligence algorithms. It also has to put in place a business continuity and disaster recovery plan. The licensee is further expected to conduct appropriate due diligence on its clients and is required to preserve the integrity and privacy of clients’ information in conformity with data protection laws. For the protection of the clients, the licensee is required to obtain from its clients a declaration to ensure that the clients understand the scope and nature of the RAIEAS together with the associated risks and limitations. The licensee is also expected to ensure that any investment advice given through the platform is suitable for the client. The licensee has to develop its own internal cyber risk management framework. Under the draft rules, a licensee would be prohibited to outsource the key processes and management of its client-facing tools. There are a number of disclosure requirements to enable the client to make an informed decision. As such the licensee is expected to provide clear, fair and non-misleading information to the client on the nature and scope of the services being offered. The licensee is also expected to explain to the client how it determines that these products being offered are suitable and would meet the investment objective of the client and the risks involved. The licensee is required to enter into a service-level agreement with its client before the provision any services to its clients. Moreover, to protect its clients it is required to display in a prominent place and in a visible manner in the service-level agreement , on its website and its platform a statement to the effect that the FSC does not vouch for the correctness of any information or statements published by the licensee on its robotic and/or artificial intelligence interface or platform and that clients engaging the services of the licensee are not protected by any statutory compensation arrangements in the event of the licensee’s failure. The licensee also has record keeping obligations and reporting obligations as well. In addition to submitting its audited financial statements yearly, it shall also submit an independent evaluation report of its systems and controls mechanism prepared in accordance with the best industry practices and standards, at least once every two years or following a material change to its systems and controls. 

Singapore urges need for international organisations to ‘reform’ in digital age

Singapore’s Foreign Affairs Minister calls for the United Nations and World Trade Organisation to be reformed, so international rules are in line with cybersecurity and other key digital developments. Singapore has called on global organisations such as the United Nations (UN) and World Trade Organisation (WTO) to reform, so international rules are in line with cybersecurity and other key digital developments. The Asian nation also underscores the need for unified cooperation against COVID-19, which it notes has accelerated “self-defeating” sentiments worldwide including protectionism and xenophobia.  Link can be accessed as follows: https://www.zdnet.com/article/singapore-urges-need-for-international-organisations-to-reform-in-digital-age/

FATF to decide about Pakistan status this month

A virtual meeting of the Financial Action Task Force (FATF) plenary scheduled for Oct 21-23 will decide if Pakistan should be excluded from its ‘grey list’, based on a review of Islamabad’s performance to meet global commitments and standards on fight against money laundering and terror financing. The FATF plenary was earlier scheduled in June but Islamabad got an unexpected breather after the global watchdog against financial crimes temporarily postponed all mutual evaluations and follow-up deadlines in the wake of grave health risk following Covid-19 pandemic. The Paris-based agency also put a general pause in the review process, thus giving additional four months to Pakistan to meet the requirements. In February, the FATF had given Pakistan a four-month grace period to complete its 27-point action plan against ML&TF committed with the international community when it noted that Pakistan had delivered on 14 points but missed 13 other targets. On July 28, the government reported to parliament compliance with 14 points of the 27-point action plan and with 10 of the 40 recommendations of the FATF. Islamabad was placed on grey list in June 2018 due to ‘strategic deficiencies’ By Sept 16, however, the joint session of the parliament amended about 15 laws to upgrade its legal system matching international standards as required by the FATF. The government has already submitted its report to the FATF and its affiliated review groups and responded to their comments, detailing compliance with the 13 outstanding action points. Based on upgraded legislation, the authorities expect the ‘virtual meeting’ to describe Pakistan as ‘largely compliant’ on at least 10 action points even if it was not given a formal exit from the grey list though it would now depend on the FATF assessment. The FATF had announced in February that all deadlines given to Pakistan to complete 27-point action plan had expired and yet only 14 items had largely been completed leaving 13 unaccomplished targets. It strongly urged Pakistan to swiftly complete its full action plan by June 2020 or else it would be moved to the list of monitored jurisdiction, commonly known as blacklist. The plenary had formally placed Pakistan in the grey list in June 2018 due to ‘strategic deficiencies’ in its AML/CFT regime after a push from India supported by the US, the UK and some European countries. The Pakistan government then committed at the highest level to a 27-point action plan but failed to meet deadlines. The country’s compliance with the 13 remaining action points will be reviewed in eight key categories. The FATF will examine if the country had demonstrated remedial actions and sanctions applied in cases of AML/CFT violations, relating to terrorist financing (TF) risk management and TFS (terror financing sanctions) obligations. The FATF will also judge if competent authorities were cooperating and taking action to identify and taking enforcement action against illegal money or value transfer services (MVTS) and had proven implementation of cross-border currency and bearer negotiable instruments (BNI) controls at all ports of entry, including applying effective, proportionate and dissuasive sanctions. Pakistan has also to determine if law enforcement agencies (LEAs) were identifying and investigating the widest range of terror financing activity and that TF investigations and prosecution target designated persons and entities, and those acting on behalf or at the direction of the designated persons or entities besides showing TF prosecutions result in effective, proportionate and dissuasive sanctions. The country’s outstanding action areas also include effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1,267 and 1,373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services. Pakistan’s performance will also be under scrutiny at the virtual meetings later this month on enforcement against TFS violations including administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases and whether facilities and services owned or controlled by designated person were deprived of their resources and the usage of the resources.

Syria: 7 new ministers added to the EU sanctions list

Today the Council decided to impose targeted restrictive measures on recently appointed ministers in Syria. Today’s decision brings to 280 the number of persons targeted by a travel ban and an asset freeze. 70 entities are also listed and, as such, are subject to an assets freeze. The sanctions currently in place against the Syrian regime were introduced in 2011, in response to the violent repression of the Syrian civilian population. They also  target companies and prominent business people benefitting from their ties with the regime and the war economy. Restrictive measures also include a ban on the import of oil, restrictions on certain investments, a freeze of the Syrian central bank’s assets that are held in the EU, export restrictions on equipment and technology that could be used for internal repression and on equipment and technology for the monitoring or interception of internet or telephone communications. The Council keeps developments in the Syrian conflict under constant review. Any decision to prolong the sanctions is for the Council to take on an annual basis. The EU remains committed to finding a lasting and credible political solution to the conflict in Syria on the basis of UN Security Council resolution 2254 and the 2012 Geneva Communiqué. The relevant legal acts, including the names of the persons and entities concerned, have been published in the Official Journal. Additional links are included: https://www.consilium.europa.eu/en/press/press-releases/2020/05/28/syria-sanctions-against-the-regime-extended-by-one-year/ https://www.consilium.europa.eu/en/policies/syria/

Seychelles remains committed to tax reforms to comply with the European Union standards

the Government of Seychelles intends to introduce more detailed substance requirements in line with the international best practices whereby it will be ‘taxing the worldwide profits of its resident persons

Following its inclusion on the EU list of non-cooperative tax jurisdictions on 18 February 2020, the Government of Seychelles has issued a press release on 21 February 2020 to explain the rationale of why they have been included in that list and to confirm its commitments for tax reforms to comply with the EU standards as quickly as possible. Seychelles are already in dialogue with representatives from the Conduct Group on Business Taxation (CoCG) of the European Commission to address the concerns of the EU which is to ensure that its territorial tax regime applies only to entities that can demonstrate sufficient “economic substance”. In that respect, the Government of Seychelles intends to introduce more detailed substance requirements in line with the international best practices whereby it will be ‘taxing the worldwide profits of its resident persons, where these persons do not sufficiently demonstrate that they are conducting activities in Seychelles, when compared to the amount of foreign income they are generating.” Seychelles intend to implement these reforms by the end of March 2020 deadline to ensure it adheres to the EU requirements. Kindly refer to the attached article.

New AML/CFT strategy adopted by Seychelles Government

National Anti-Money Laundering and Countering the Financing of Terrorism: It is expected that Seychelles will complete the implementation of its Strategy by the end of 2022.

In July 2020, the government of Seychelles approved its first National Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Strategy (the “Strategy”) which comprises 5 key strategic objectives which ultimately aim at addressing the deficiencies identified by the 2017 National Risk Assessment and the 2018 Mutual Evaluation Report. These are listed as follows: Enhancing Seychelles’ AML/CFT legal framework consistent with international standards of combating Money Laundering (ML), terrorism financing and proliferation financing; Strengthening domestic and international cooperation in the fight against money laundering, terrorism financing and proliferation financing; Developing capacities of relevant public and private sector entities to combat money laundering, terrorism financing and proliferation financing; Implementing effective risk-based supervision and enforcement of AML/CFT and countering proliferation financing; and, Strengthening intelligence, investigations, confiscation and prosecution of money laundering, terrorism financing and proliferation financing. A series of actions have been devised and will be implemented to ensure that the above objectives are met at the earliest. Several laws, aimed at reinforcing the Seychelles AML/CFT framework, have already been enacted while others will be tabled before the National Assembly including the following: the new AML/CFT Act, 2020; the Beneficial Ownership (BO) Act, 2020; the Proceeds of Crime (Civil Confiscation) (Amendment) Bill, will be tabled before the National Assembly for approval. It is expected that Seychelles will complete the implementation of its Strategy by the end of 2022.

France issues updated list of Tax heaven Jurisdictions!

France has now released its new list of tax heaven jurisdictions as initially announced in December 2019 by its Minister of Public Accounts.

France has now released its new list of tax heaven jurisdictions as initially announced in December 2019 by its Minister of Public Accounts, Mr. Gérald Darmanin. Four countries, namely Anguilla, British Virgin Islands, Bahamas and Seychelles, have now been added to the list whilst the following 6 countries have now been removed: Botswana, Brunei, Guatemala, Marshall Islands, Nauru and Niue. The new list consists of the following 13 blacklisted countries: Anguilla, Bahamas, Fiji, Guam, US Virgin Islands, British Virgin Islands, Oman, Panama, American Samoa, Samoan Islands, Seychelles, Trinity-Tobago, Vanuatu. The objective of this blacklist is to identify those jurisdictions that are not compliant to the international taxation norms. Click on the link below to access the full article in French: http://www.leparisien.fr/economie/anguilla-iles-vierges-bahamas-seychelles-la-france-elargie-la-liste-des-paradis-fiscaux-07-01-2020-8230425.php

Accession of The Republic of Mauritius to the Lusaka Agreement

The accession of The Republic of Mauritius to the Lusaka Agreement brings the total number of ARIPO’s Member States to 20.

The Republic of Mauritius deposited its Instrument of Accession to the Lusaka Agreement of December 9, 1976 establishing the African Regional Intellectual Property Organization (ARIPO) with the Director General of ARIPO on September 25, 2020. In accordance with Article XVI (3) of the Lusaka Agreement, the Republic of Mauritius becomes a full member of ARIPO as of this 25th September 2020. The accession of The Republic of Mauritius to the Lusaka Agreement brings the total number of ARIPO’s Member States to 20.

Seychelles to amend financial sector laws that put it on the EU’s taxation blacklist

Seychelles will soon send to the National Assembly for approval amended laws governing the financial sector with the aim to have the island nation removed from the European Union (EU) taxation blacklist

(Seychelles News Agency) – Seychelles will soon send to the National Assembly for approval amended laws governing the financial sector with the aim to have the island nation removed from the European Union (EU) taxation blacklist/ Seychelles anticipated being removed from the taxation blacklist by February. However, a report from the Organisation for Economic Co-operation and Development (OECD) was released in April and it downgraded Seychelles from being largely compliant to partially compliant on four subjects. Seychelles has asked OECD to conduct a supplementary review on the reform done in its financial sector before the end of the year to get a new placement. The archipelago in the western Indian Ocean was included on the EU list of non-cooperative jurisdictions among 12 nations because of concern that its policy environment supports tax fraud or evasion, tax avoidance and money laundering. The list was first established in December 2017 and offers guidance on European investment and funding in other countries. Seychelles has already corrected some of the existing deficiencies following the enactment of the new Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020 and Beneficial Ownership (BO) Act, 2020 in March. The island nation did not have a unit set up specifically within the Seychelles Revenue Commission (SRC) to share the information in a timely manner and since 2016, requests for information by other tax institutions have increased. Subsequently, the Seychelles’ government decided to amend the laws governing the financial sector, which include the Limited Partnership Act, the Foundations Act, the International Business Companies Act and a new Trust Bill. Under the new amendments, the tax information should be kept in Seychelles and should be readily available when requested. Secondly, we have added a provision that will allow the financial service authority to monitor and prevent companies which have been removed or dissolved to operate under the name Seychelles The EU decision follows that of France, which recently added Seychelles to its own list for not providing adequate information on some French offshore entities operating in the island nation’s jurisdiction. That provoked alarm among financial authorities in the island. The inclusion of Seychelles registered companies on the US sanctions list due to links with Iran has also raised alarms. The new regulations will be presented before the Seychelles National Assembly for approval when it resumes after the legislative election in October.

Mauritius Personal Tax: Solidarity Levy

There has been some major changes brought to the personal taxation in Mauritius, as announced in the 2020-2021 budget for Mauritius.

There has been some major changes brought to the personal taxation in Mauritius, as announced in the 2020-2021 budget for Mauritius. Amongst others, the solidarity levy was reviewed and meant to be applicable to Mauritian residents. Reduced threshold for the applicability of the solidarity levy As from the income year 2020-2021, the threshold for the applicability of the solidarity levy is being lowered from MUR 3.5m to MUR 3.0m of the leviable income of Mauritius tax-resident individuals. The leviable income of a taxpayer consists not only of the chargeable income and also includes any Mauritius sourced dividend income including the share of the dividend of an individual in a resident partnership or succession. Increase in the standard rate of the solidarity levy As from the income year 2020-2021, the standard rate of the solidarity levy surges fivefold from 5% to 25%. The solidarity levy payable is however restricted to a maximum of 10% of the total of net income and dividend income. Taxpayers deriving emoluments The solidarity levy is collected under Pay As You Earn where monthly emoluments exceed MUR 230,769 in the income year 2020-2021. For employees not submitting an Employee Declaration Form, the rate of deduction is 25% of the amount above MUR 230,769, limited to 10% of total emoluments. Their payroll system would need to be adjusted accordingly. Tax-residence in Mauritius The solidarity levy is only payable by tax-resident individuals who derive leviable income above the prescribed threshold. Individuals are considered tax resident in Mauritius if they meet any of the following conditions: They are domiciled in Mauritius, unless their permanent place of abode is outside Mauritius. They are present in Mauritius for a total of at least 270 days during the current tax year and the two preceding tax years. They are present in Mauritius for at least 183 days during the tax year.

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