The Financial Services Authority of Saint Vincent and the Grenadines (SVG) has asked existing forex brokers registered in the Island country to produce a certified copy of the requisite licenses from the jurisdictions or authorities from which their business activities are conducted.
Presently, the non-bank financial services regulator requires prospective forex brokers that want to be incorporated or formed in the Caribbean country to provide the same license from regulators of the jurisdictions where their business activities will be conducted.
The SVG markets supervisor disclosed these conditions in a notice sent to registered agents and trustees. The notice is named, “Requirements for Business Companies (BCs) and Limited Liability Companies (LLCs) Engaging in FOREX Business Activity.” The notice was signed by the regulator’s Registrar of BCs and LLCs.
Saint Vincent Reacts to Surge in Fraud Claims against FX Brokers
The financial watchdog said the new policy is its response to the sharp increase in the frequency and number of complaints and allegations of fraud against forex trading firms and offshore brokers in the country. In addition, the regulator decried the “potential detrimental effects” of the trend on SVG’s reputation as an international financial centre.
“Failure to adhere to these requirements will result in the application of sanctions against the companies in accordance with the Financial Services Authority Act,” the regulator explained.
Furthermore, the authority urged registered agents and trustees to “continue to apply sound Anti-Money Laundering/Counter-Financing of Terrorism practices in ensuring that adequate screening measures and appropriate due dilligence measures are utilized, on a risk-sensitive basis, when onboarding clients (Directors, Shareholders and Beneficial Owners) who wish to incorporate/form companies in St. Vincent and the Grenadines.”
How Will the New Policy Affect FX Trading in Saint Vincent?
Over the years, St. Vincent and the Grenadines' Financial Services Authority has been laying the groundwork to implement its own set of regulations to rein in bad actors tarnishing the Island country's image with unscrupulous business practices. Is the new policy going in that direction?
"[the new policy] is a clear message from the regulator that they only want forex businesses that are already regulated in stricter jurisdictions to apply for a license. The question going forward is: How many of these regulators will follow suit?" Chris Rowe, a UK-based fintech consultant, told Finance Magnates.
Tom Higgins, the Founder and CEO of Gold-i also believes SVG is going in the right direction as "nobody wants fraudulent FX brokers."
"It is always bad for any global industry to have very varied regulatory requirements across different regions of the world, so it was just a matter of time before SVG took this action," Higgins said.
On implementation of the policy, Rowe believes that while adapting with the policy will be "more of a paperwork exercise" for large brokers that are already regulated in multiple jurisdictions, it is now paramount for brokers with only a St. Vincent license to get regulated elsewhere. "Jurisdictions such as Mauritius and Seychelles will take over from St. Vincent as the offshore license [destination] of choice," he added.
However, both experts criticized the time frame provided by the SVG regulator, with Higgins noting that "even legitimate brokers may find it hard to provide all of the documentation by March 10th."
"It is unlikely that any broker with only a St Vincent license would apply for an FCA, CySEC or ASIC license as an alternative because the capital requirements and timescales to set these up will be prohibitive. There is no way that you would be able to apply for these licenses from scratch and have them in place by 10th March 2023!" Rowe added.
