FINANCIAL INSTITUTIONS ACT, 2004

PART IV - ACCOUNTS, AUDIT, INFORMATION AND INSPECTION

35. (1) At the expiration of each calendar year –

(a) every local financial institution in respect of all business transacted by it in or outside Seychelles; and

(b) every foreign financial institution in respect of all business transacted by or through its branches in Seychelles,

shall prepare, with reference to that year, in accordance with the International Accounting Standards, a balance sheet as of the last working day of that year and a profit and loss account and cash flow statement in respect of that year.

(2) The balance sheet, profit and loss account and cash flow statement of every financial institution shall give a true and fair view of the state of affairs of that institution as at the end of the calendar year to which the accounts relate.

(3) The Central Bank may prescribe accounting rules for the preparation of accounts of financial institutions.

(4) The Central Bank may give directions as to the matters to be shown in the balance sheet, profit and loss account and cash flow statement –

(a) by way of a note;

(b) in a statement or report to be annexed.

36. (1) Every financial institution shall appoint annually an auditor to audit its accounts and such appointment shall be subject to the approval of the Central Bank. The auditor shall be independent, experienced in the audit of financial institutions, a member of a body of accountants (whether established in or outside Seychelles), and have the necessary resources to undertake audits of financial institutions on a consolidated basis as determined by the Central Bank.

(2) No financial institution shall appoint the same auditor continuously for a period of more than 5 years without an exemption granted by the Central Bank.

(3) If a financial institution fails to appoint an auditor satisfactory to the Central Bank, the Central Bank shall have the power to appoint such an auditor.

(4) The remuneration of the auditor, whether appointed by the financial institution or by the Central Bank, shall be paid by the financial institution concerned, and in the case of an auditor appointed by the Central Bank in terms of subsection (3) or (9), shall be of such amount as the Central Bank may determine.

(5) The auditor shall –

(a) in the case of a local financial institution, make a report to its shareholders; or

(b) in the case of a foreign financial institution, make a report to its head office, on the financial statements, annual balance sheet, profit and loss account and accounts.

(6) In the auditor’s report, which shall be completed not more than 3 months after the end of the financial year, the auditor shall state –

(a) whether in the auditor’s opinion the balance sheet, profit and loss account and cash flow statement are complete and fair and properly drawn up;

(b) whether they exhibit a true and fair view of the financial institution’s affairs;

(c) whether fiduciary duties are being administered in accordance with the law; and

(d) if the auditor has called for explanation or information from the administrators, employees or agents of the institution, whether that explanation or information is satisfactory.

(7) The report of the auditor –

(a) in the case of a local financial institution, shall be read, together with the report of the directors of the financial institution, at the annual meeting of shareholders;

(b) in the case of a foreign financial institution, shall be transmitted to the head office.

(8) A copy of the auditor’s report shall be sent to the Central Bank by the financial institution not later than 30 days after it becomes available, and within 5 months after the end of the financial year at the latest.

(9) Where the Central Bank is not satisfied with the auditor’s report it may require the appointment within a specified time of another auditor who shall make a new report.

(10) The Central Bank may impose on an auditor, in addition to any duty specified in subsection (6), a duty to –

(a) submit to the Central Bank such additional information in relation to the audit as the Central Bank considers necessary;

(b) submit a report, carry out any other examination or establish any procedure if required by the Central Bank;

(c) submit to the Central Bank a report on the financial and accounting systems and internal controls of the financial institution.

(11) Where in the course of performing functions under this Act an auditor becomes aware of transactions or conditions in a financial institution that may affect its safe and sound operations and the auditor has reasons to believe that –

(a) there has been a material change in the risks inherent in the business of the financial institution with the potential to affect its ability to continue safe and sound operations;

(b) there has been a serious violation of any of the provisions of this Act, in particular with regard to the protection of depositors’ and creditors’ interests;

(c) a serious criminal offence involving fraud or other dishonesty has been or is likely to be committed;

(d) measures to prevent money laundering or terrorist financing are not being properly implemented; and

(e) the paid-up capital or assigned capital, as the case may be, of the financial institution has been reduced by 50 percent or more,

the auditor shall immediately report the matter in writing to the Central Bank. Such report shall not be construed as a breach of professional confidentiality obligations.

37. (1) Every local financial institution licensed to conduct banking business shall establish an audit committee. The audit committee shall consist of not less than 2 members one of whom shall be a non-executive director of the financial institution. No member of the audit committee shall be a director exercising an executive function or a managing director or manager in the bank. For a foreign financial institution, a similar representative organ may carry out the functions of an audit committee and report to the managing agent in Seychelles.

(2) The audit committee shall report to the directors particularly on the –

(a) review of the auditor’s report and the financial statements before they are approved by the directors;

(b) review and evaluation of the appropriateness of accounting, internal control and financial disclosure procedures;

(c) review of such investments and transactions that could adversely affect the sound financial condition of the bank as brought to the attention of the audit committee;

(d) review of the compliance with applicable laws, regulations and guidelines;

(e) other matters as may be prescribed by the Central Bank.

(3) The officer in charge of internal auditing shall attend meetings of the audit committee. The external auditor shall attend such meetings upon the request of the audit committee.

(4) Every member of the audit committee shall keep confidential and not disclose any information obtained in the course of its functions to third parties, save as otherwise provided for under this Act.

38. (1) Every local financial institution in respect of all of its business and every foreign financial institution in respect of its business transactions by or through its operations in Seychelles shall transmit to the Central Bank its audited financial statements, namely the balance sheet, profit and loss account and cash flow statement, not later than 30 days after becoming available, and within 5 months after the end of the financial year at the latest. In addition, every foreign financial institution shall transmit to the Central Bank its audited annual financial statements in respect of its total business throughout the world on a consolidated basis not later than 30 days after becoming available.

(2) Every financial institution shall publish in the Gazette within 5 months after the end of the calendar year the balance sheet and profit and loss account required to be submitted under subsection (1) and any report made by the auditor under section 36.

(3) Every financial institution shall exhibit throughout the following year, in a public part of each of its places of business, copies of the balance sheets and profit and loss accounts required to be submitted under subsection (1).

39. (1) Every financial institution shall maintain in Seychelles for a period of at least 7 years such records as are necessary to exhibit, clearly and correctly, the state of its business affairs and to explain its transactions and financial position so as to enable the Central Bank to determine whether the financial institution is complying with this Act and in particular:

(a) customer identification records (during and after termination of the customer relationship);

(b) transaction records showing, for each customer, at least on a daily basis, particulars of its transactions with or for the account of that customer, and the balance owing to or by that customer;

(c) application and contract documents pertaining to a transaction, (including credit, guarantee and collateral agreements) and a signed written record of the decision approving the transaction;

(d) financial records concerning counterparties (including borrowers and guarantors) and any other documentary evidence on which the financial institution relied in approving the transaction;

(e) such other documents as the Central Bank may specify by regulation.

(2) Every record shall be kept in written form or kept on microfilm, magnetic tape, optical disk, or any other form of mechanical or electronic data storage and retrieval mechanism as the Central Bank may specify. Records may be kept in electronic form to the extent that adequate data recovery systems and procedures are in place.

40. Every financial institution shall submit to the Central Bank in such form as the Central Bank may determine –

(a) not later than 14 days after the last day of each month a statement showing its assets and liabilities at the close of business on the last business day of the month;

(b) not later than 14 days after the last day of each calendar quarter, an analysis of its deposit liabilities and an analysis of its loans, guarantees, advances and discounts at the close of business of the day of that quarter; and

(c) such other statements or information as the Central Bank may require,

provided that a Bureau de Change is only required to submit a report pursuant to subsection (1)(a) together with a statement on the monthly turnover, broken down for each currency.

41. (1) Each financial institution not being a Bureau de Change shall regularly notify its customers of the terms and conditions associated with transactions and the deposits made and credits received by them, including the annual rate of interest, fees and other costs in clear and easily understood language, and any guidelines the Central Bank may issue in this regard.

(2) Each Bureau de Change shall make such notification to its customers by conspicuously displaying in a public part of the business the terms and conditions associated with its transactions.

42. (1) The Central Bank may, if it considers that an inspection of a financial institution is necessary or desirable to ascertain whether that institution is complying with this Act, cause an inspection of that institution to be made by an officer of the Central Bank or by any other person appointed by the Central Bank for the purpose.

(2) Such inspection may include officers or employees of the authority of another country that is charged with the monetary or prudential supervision of activities of financial institutions in that country if it concerns the inspection of a branch or a subsidiary of a foreign financial institution in Seychelles having its head office in that country, or the inspection of a local financial institution that holds a substantial interest in such foreign financial institution, or the inspection of a financial institution in Seychelles in which such foreign financial institution has a substantial interest.

(3) The Central Bank and any person authorised under this section to inspect a financial institution shall be subject to section 11 (Confidentiality) of the Central Bank of Seychelles Act in respect of information acquired in the course of performing functions under this section and may –

(a) require any administrator, officer, employee or agent of a financial institution to furnish such information as deemed necessary for the purpose of the inspection; or

(b) require any such administrator, officer, employee or agent to produce for inspection any books, records or other documents in his or her possession containing or likely to contain any such information.