Mauritius: registered on its blacklist of the European Union
Mauritius has been included, since Thursday, October 1, 2020, on the blacklist of countries suspected of participating, indirectly, in money laundering and terrorist financing. This sanction endangers its offshore banking services, an essential sector of its economy. Decidedly, this year 2020 will remain engraved in the history of Mauritius, after the covid-19 crisis which generated an unprecedented economic crisis and forced the country to close its borders for 6 months, and has just been placed on the blacklist of countries suspected of participating voluntarily or involuntarily in the financing of terrorism and in the laundering of “dirty” money. The threat had been in the air for months. On June 19, 2020, the Official Journal of the European Union reports that the Mauritius jurisdiction is on its blacklist. In the process, the leaders of Mauritius approached Europe to plead its good faith and ask for a delay in order to meet Europe’s demands. 12 countries on the EU’s blacklist on Thursday 1 st October 2020 Mauritius is not the only country to have taken this step. In fact, almost all of them tried to avoid this blacklisting. The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mongolia, Myanmar (ex-Burma), Nicaragua, Panama and Zimbabwe are included in the list. Certainly, Mauritius is not alone, but this “sanction” will seriously accentuate the crisis in its economy. The banking sector and offshore trade had become the main source of its income and represented an important part of its GDP (Gross Domestic Product) as shown by the World Bank analysis. 35 of the 40 recommendations adopted Mauritius is therefore forced to react and renounce the opacity that surrounded its banking sector. It must be content to be an island paradise, but no longer be a banking paradise. The EU is also ready to help countries on the black list to get out. Europe relied on the reports of the Financial Action Group to establish its listing and therefore proposes solutions.
EU policy on high-risk third countries
EU delegated act on high-risk third countries – October 1 /2 reminder – the following countries have been identified as strategic deficiencies in their AML/CFT regimes that pose significant threats to the financial system of the Union (‘high-risk third countries’). 1 October 2020 : The BahamasBarbadosBotswanaCambodiaGhanaJamaicaMauritiusMongoliaMyanmarNicaraguaPanamaZimbabwe2 October 2018 = Pakistan On 7 May 2020, the European Commission adopted a new delegated regulation in relation to third countries which have strategic deficiencies in their AML/CFT regimes that pose significant threats to the financial system of the Union (‘high-risk third countries’). Identification of such countries is a legal requirement stemming from Article 9 of Directive (EU) 2015/849 (4th Anti-Money Laundering Directive) and aiming at protecting the Union financial system and the proper functioning of the internal market. The delegated regulation amends delegated Regulation (EU) 2016/1675. Jurisdictions identified as having strategic deficiencies in their AML/CFT regimes. High-risk third country Date of entry into force Afghanistan 20 September 2016 The Bahamas 1 October 2020 Barbados 1 October 2020 Botswana 1 October 2020 Cambodia 1 October 2020 Democratic People’s Republic of Korea (DPRK) 20 September 2016 Ghana 1 October 2020 Iran 20 September 2016 Iraq 20 September 2016 Jamaica 1 October 2020 Mauritius 1 October 2020 Mongolia 1 October 2020 Myanmar 1 October 2020 Nicaragua 1 October 2020 Pakistan 2 October 2018 Panama 1 October 2020 Syria 20 September 2016 Trinidad and Tobago 14 February 2018 Uganda 20 September 2016 Vanuatu 20 September 2016 Yemen 20 September 2016 Zimbabwe 1 October 2020 Refer to link below: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-supervision-and-risk-management/anti-money-laundering-and-counter-terrorist-financing/eu-policy-high-risk-third-countries_en
Seychelles to amend financial sector laws that put it on the EU’s 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 Listed on EU High Risk List – Why not to Panic!
News that Mauritius was added to the EU list of high-risk third countries on 7 May 2020 has understandably caused much consternation amongst fund managers who have fund structures and investment holding vehicles domiciled in Mauritius. While this is certainly a cause of concern, the following should be borne in mind: This is not new. The Financial Action Task Force (FATF), the global inter-governmental body responsible for setting best practice standards and enhancing the implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other similar threats to the integrity international financial systems, placed Mauritius on its ‘grey list’ on 21 February 2020 (being ‘Jurisdictions under Increased Monitoring’). FATF “grey listing” is afforded to jurisdictions identified as having strategic deficiencies in their anti-money laundering and combating financing of terrorism (AML/CFT) regimes. The FATF has, as a result, placed Mauritius under increased monitoring. It is the FATF listing that has led to Mauritius being placed on the EU high risk list. The EU listing is not yet in force. The list is not final and needs to be submitted to the European Parliament and the EU Council of Ministers for approval, following which it will then become effective on 1 October 2020. Mauritius is committed to addressing the issue. Following the FATF grey listing, Mauritius immediately made a high-level political commitment to continue to work with the FATF to swiftly strengthen the effectiveness of its AML/CFT regime. It is either compliant or largely compliant with 35 out of the 40 FATF recommendations and it has already met the FAFT expectations in respect of the ‘Big Six Recommendations’. All indications are that Mauritius will address the FATF concerns swiftly in order to be removed from the FATF grey list (and consequently the EU list) as quickly as possible. There is a plan. The FATF Action Plan being implemented by Mauritius includes: (i) demonstrating that the supervisors of its global business sector implement risk-based supervision; (ii) ensuring access to accurate basic and beneficial ownership information by competent authorities in a timely manner; (iii) demonstrating that its law enforcement agencies have capacity to conduct money laundering investigations (including parallel financial investigations and complex cases); (iv) implementing a risk based approach for supervision of its non-profit organisation sector to prevent abuse for Terrorist Financing purposes, and (v) demonstrating the adequate implementation of targeted financial sanctions through outreach and supervision. In a communique from the Mauritian Ministry of Financial Services and Good Governance on 9 May this year, Mauritius reiterated its commitment to implementing the FATF Action Plan as soon as possible and a first progress report has already been sent to the FATF. It does not mean you have to move existing fund structures and companies. Once the list becomes effective, and for as long as the Mauritius is on the list, then, in terms of EU regulations, certain categories of EU financial services institution, credit institutions, banks, insurance companies, investment firms, trust and company service providers and the like will be required to apply enhanced customer due diligence with respect to business relationships or transactions involving Mauritius. Furthermore, persons and entities deploying EU funding or budgetary guarantees shall be prohibited from entering into new or renewed operations with entities incorporated or established in Mauritius, except when an action is physically implemented in Mauritius. Accordingly, while EU development finance institutions should continue to meet existing obligations to Mauritian-domiciled funds, they will avoid investing in any new Mauritian fund structures (or through Mauritian entities) until the AML/CFT compliance issues are resolved. Fund managers looking to raise capital from EU development finance institutions in the short-term may need to house such commitments in parallel funds in other acceptable jurisdictions (such as South Africa). Fund managers should also pay attention to “excuse” provisions inside letters with all investors when investing into or through Mauritian entities (not just EU investors given the FATF listing applies more broadly).
