FINANCIAL INTELLIGENCE UNIT P. O. Box 701, Victoria, Seychelles Of?ce of the Director Telephone: [+248] 4282100 Ref: Reg! Ean Mosfon/ Report! 01?2017 Fax: [+248] 4225 002 Date: January 27, 2017 E-mail phillip@gov.sc CONFIDENTIAL Mrs. Mayka Villarreal Compliance and Reporting Officer Mossack Fonseca Co (Seychelles) Ltd. Suite 13, Floor Oliaji Trade Centre Francis Rachel Str. Victoria Dear Madam, Examination of Mossack Fonseca Co (Seychelles) - We refer to the limited examination conducted by the and FSA at your office in Victoria in the third quarter 2017. We wish to make the following comments/observations: 1. CDD measures The examiners noted that CDD measure as stated in section 4 of the AML Act, 2006 (2011) as detailed under Regulation 3 and 8 of the AML Regulations, 2012 are not being applied by Mossack Fonseca Seychelles in respect of the IBCs, Trusts and Foundations it administers. The CDD documents such as copies of identi?cation and veri?cation documents and other checks carried out including copies of passports and proof of addresses are obtained and retained by Head Of?ce in Panama. Instructions for and related payments for lntemational Business Company incorporation and other services provided are made by clients directly to Panama. Panama then sends instructions to the Seychelles office in order to effect renewals and incorporations. As part of the CDD measures Mossack Fonseca Seychelles does not ascertain the business activities of the IBCs. The information is also maintained by the head office in Panama. The discrepancies were observed on the following ?les: NAME. No. CORPORATION LTD 2. MELROSE STREET LTD 26323 3. SANDON DEVELOPMENT LTD 4. CERMN GROUP LTD 67284 5. DAVMO LTD 99040 6. EXAL ENTERPRISES LTD 54399 EXCELLE MEDIA INTERNATIONAL LTD 8. FALSON CO 9. GIBSON MANOR 10. KENNETH WONG 151876 CONSULTING LTD 11. LENOX HOLDINGS LTD 16684 12. LYNX SHIPPING LTD 22566 13. MAXIMA MIDDLE EAST 116857 TRADING CO. 14. MORGAN ADDITIVES 106515 15. MRS OIL 8; GAS CO. LTD 16. OVLAS S.A PETROWEST S.A 18606 17. PASEO TRADING LTD 16616 18. ROSELLE LTD 31129 19. SANDON DEVELOPMENT LTD 20. SEFON MARKETING INC 5 149201 21. SUMEX DEVELOPMENT CO. 147220 LTD 22. UNIVERSE INVESTMENT 36837 LTD 23. WESTERN SERVICES TRADE 67232 8: COMMERCE SA As a reporting entity under the AML Act, Mossack Fonseca Seychelles must apply CDD measures in respect of its customers, business relationships and transactions. 2. On-going monitoring The examiners noted that on?going monitoring as stated in Section 4 of the AML Act, 2006 (Amended in 2011) as detailed under Regulation 9 of the AML Regulations, 2012 is also being carried out by Head Office in Panama and not by Mossack Fonseca Seychelles. According to the interviewee, business relationships with customers are being managed by Head office in Panama who also maintains the customer pro?les. Furthermore, there is no agreement between Mossack Fonseca Panama, for Mossack Fonseca Seychelles to rely on Mossack Fonseca Panama. In addition, the Compliance Manual of Mossack Fonseca Seychelles states at provision 3.5 that Mossack Fonseca Seychelles shall monitor all of its Professional Intermediaries on an on-going basis and may subject these persons to an audit at least once per year to ensure that they are complying with the Service Agreement. This is not being implemented by Mossack Fonseca Seychelles. As a reporting entity under the AML Act, Mossack Fonseca Seychelles should conduct on-going monitoring of its business relationships. 3. Availability of Information and record keeping During the interview Mossack Fonseca Seychelles could not provide the number of Seychelles? and other legal arrangements that are end-user clients who are under their management. The interviewee stated that they would have to obtain the information from Panama but in any event it is less than the number of P15 they have relationships with. Similar responses were provided for legal entities and arrangements that were being managed through Pl relationships. It is to be noted that according to the interviewee, the majority of IBCs are incorporated through PIs. Online access to details of CDD information is strictly controlled by Head Office and Mossack Fonseca Seychelles relies solely on Head office in Panama to make available information upon request. Mossack Fonseca Seychelles does not consider the arrangement in place as high risk. Notwithstanding, Mossack Fonseca Seychelles was requested to provide a list of customers who have been categorized as PEPs and other high risk customers as categorized by Head Office in Panama. The list was not immediately available as the examiners were informed that Mossack Fonseca Seychelles is required to request the information ?'om Panama. It also transpired that on- going monitoring of high risk customers are not being carried out by Mossack Fonseca Seychelles and the interviewee did not see the immediate unavailability and restricted access to the information particularly on high risk customers including PEPs as concerning and as a high risk practice for its operations. Mossack Fonseca Seychelles does not maintain a back-up of documents in relation to the customers and other relevant persons and may not be in a position to provide same to the authorities in Seychelles to comply with a request for information or for evidential purposes where there is an on-going investigation. As a reporting entity under the AML Act, Mossack Fonseca Seychelles should maintain accurate and updated records as detailed under section 6 of the AML Act, 2006 (2011). 4. 3rd Party Reliance As detailed under Regulations 12 of the AML Regulations, 2012, a reporting entity may rely on a regulated person to apply CDD measures in respect of the regulated person?s customer. More than 50% of the IBCs and other entities registered by Mossack Fonseca are incorporated through intermediary agreements. The underlying agreements entered into by Mossack Fonseca Seychelles were not made available on?site. Mossack Fonseca Seychelles could not state the number of PI agreements they had entered into and con?rmed that such information was to be requested from Head Office in Panama. It was also confirmed that no independent checks were undertaken by Mossack Fonseca Seychelles in respect of PI relationships approved on their behalf by Head Office. As such Mossack Fonseca Seychelles is not aware of the jurisdictional base of those P15 and the nature of the relationships maintained. They also do not review those relationships subsequent to entering into a PI agreement. The examiners conclude that none of the PI agreements upon which Mossack Fonseca Seychelles seeks to rely on are undertaken by Mossack Fonseca Seychelles. This is a critical de?ciency which must be addressed immediately. 5. Suspicious Transactions or Activities Suspicious transactions or activities are reported if a member of staff comes across anything they deem as suspicious and Mossack Fonseca Seychelles carries out further investigation. At the time of the on-site examination no suspicious transactions were reported by Mossack Fonseca to the FIU. The ?nal decision for reporting of suspicious transactions remains with the Head Of?ce in Panama who will prepare the documents and input on the prescribed form and send it to Mossack Fonseca Seychelles already completed for submission. Mossack Fonseca is reminded of its obligations to report suspicious transactions to the IU. Conclusion Overall, the examiners found signi?cant de?ciencies in Mossack Fonseca Seychelles? operations and determines that Mossack Fonseca Seychelles is not complying with section 4 and section 6 of the AML Act 2006 as amended and Regulations 8, 9, 10 and 12 of the AML Regulations 2012. The examiners deems that the current arrangements of Mossack Fonseca Seychelles in relying entirely on Panama to ensure compliance with all of its obligations under the AML Act, 2006 as amended is inadequate in its entirety. The 1U will communicate enforcement actions, if any, it will be taking against Mossack Fonseca in respect of the de?ciencies identi?ed. Once again, we thank you for the co-operation extended to us during our examination at your of?ce. Yours faithfully, Mr. Phillip Moustache Director