Mauritius is no longer part of the ‘Grey List’ by FATF!
If you are a firm looking to conduct business in a foreign country, you must be sure about the reliability of the jurisdiction in which you are operating. This is because this would guarantee that your operations are being conducted smoothly in a trusted environment. It is also important that you work in a country that is constantly trying to improve itself as a site where businesses operate. One such example is Mauritius. For instance, it is strengthening its AML regulations and introducing new security measures protecting businesses. Just recently, on the 21st of October the Financial Action Task Force (FATF) held its Planetary meeting, during which it announced that Mauritius is no longer part of its ‘grey list’. This is a list of jurisdictions that have strategic deficiencies in their approach to anti-money laundering and combatting terrorism financing (AML/CFT). Therefore, they have to introduce more ways to monitor firms with suspicious transactions. What measures did Mauritius take to get out of the list? In February 2020, Mauritius was first placed on the ‘grey list’, a decision by the EU that became applicable on the 1st of October 2020. The country, being dedicated to constantly improving itself and to becoming a fintech of excellence in the Indian Ocean, did not take things lightly. Following this listing, it made a high-level political commitment to the FATF to address the strategic deficiencies identified. To do so, a committee was created. It was headed by the Prime Minister and its aim was to accelerate implementation of its FATF Action Plan so that the country is no longer part of the list by the next year. Several measures were introduced. As the FATF advanced, certain key reforms played a huge role. These are: Conducting outreach to promote understanding of Money Laundering and Terrorism financing risks and obligations, Developing risk-based supervision plans effectively for the Financial Services Commission, Ensuring access to accurate basic and beneficial ownership information by competent authorities in a timely manner, and Providing training for law enforcement authorities to ensure that they have the capability to conduct money laundering investigations. Moreover, Mauritius is constantly collaborating with Eastern & Southern Africa Anti-Money Laundering Group to strengthen its AML/CFT regime. More recently, it has circulated a draft Virtual Assets Business Bill for consultation to obtain feedback and comments from stakeholders. How did FATF make its decision? These measures have been enforced all throughout the year. This year, from the 13th till the 15th of September ATF’s Africa/Middle East Joint Group (AME JG) conducted an onsite assessment of Mauritius’s AML-CFT Framework. This was to verify that implementation of the AML/CFT reforms had begun and was being sustained in the island. It also ensured that the necessary political commitment remained in place to sustain implementation in the future. To take a decision, a delegation from the FAFT held different meetings with relevant ministries and authorities. They also visited several institutions to oversee first-hand the way operations are being carried out. It was found out that the country had substantially completed its action plan. Moreover, it was commended to for its considerable progress in addressing the strategic deficiencies identified, especially since the coronavirus pandemic has disrupted several economies. Following the assessment and in light of the efforts being made by the country, the FAFT decided to remove Mauritius from its grey list. Its president, Dr. Marcus Pleyer advanced, “Mauritius has strengthened the effectiveness of its AML/CFT regime and addressed related technical deficiencies to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in February 2020. Mauritius is therefore no longer subject to the FATF’s increased monitoring process”. The European Commission will review the information by the FAFT and will remove Mauritius from the blacklist at the earliest opportunity. This removal shows that Mauritius is a trusted jurisdiction of substance. Mauritius, ‘compliant’ or ‘largely compliant’ with FAFT recommendations The FAFT recommendations are global standards against money laundering and terrorist financing that allow countries to successfully take actions against any form of fraud or illegal operations carried out within their financial sector. To put things in perspective, they set out a comprehensive and consistent framework of measures that countries have to adhere to combat money laundering and terrorist financing. They set an international standard. While introducing measures to address the deficiencies, Mauritius applied for an upgrading against FATF Recommendations 8, 24 and 33. There were reviewed at the 21st Council of Ministers Meeting and 42nd Task Force of Senior Officials’ Meeting of the Eastern & Southern Africa Anti-Money Laundering Group and it led to the country obtaining another rating. It became: ‘largely compliant’ for Recommendation 8- which is related to Non-Profit Organisations, ‘Largely Compliant’ for Recommendation 24 (Transparency and Beneficial Ownership of Legal Persons) Compliant’ for Recommendation 33 (Statistics). These changes imply that Mauritius is now ‘Compliant’ or ‘Largely Compliant’ with 39 out of the 40 FATF Recommendations. It is only lacking when it comes to Recommendation 15 (New Technologies), for which it is rated as ‘Partially Compliant”. A leading investment destination, the island is perfect for structuring cross border investment into Africa and Asia.
PROLIFERATION FINANCING (PF) RISK ASSESSMENT
At its last virtual plenary meeting in October 2020, the Financial Action Task Force (FATF) adopted amendments to Recommendation 1 which now require countries and the private sector (financial institutions and DNFBPs) to identify, and assess the risks of potential breaches, non-implementation or evasion of the targeted financial sanctions related to proliferation financing and to take action to mitigate these risks. This document provides an overview of these amendments to Recommendation 1 of the FATF and suggestion on conducting a PF Risk Assessment.
European Commission List of High Risk Third Countries – Ministry of Financial Services and Good Governance
On 7 May 2020, Mauritius was informed of the European Commission (EC) decision to list all the 11 third countries listed by Financial Action Task Force (FATF) including Mauritius as High Risk Third Country. The list is effective as from today, 01 October 2020. Mauritius had already agreed to implement a detailed Action Plan within an agreed timeline with the FATF, to be removed from the FATF list and subsequently from the EU list. Amongst the measures initiated, a technical platform was set up between the Directorate General for Financial Services of the EC [DG FISMA] and the Mauritian authorities to apprise the EC of the substantive and tangible progress made by Mauritius. Accordingly, on 17 July 2020, the EC confirmed that there will be no top up requirements for the delisting of Mauritius. The local and multinational financial institutions present locally have been kept abreast of the progress made in respect to the implementation of the action plan. Mauritius submitted: an initial progress report in March 2020 which FATF could not consider due to the COVID19 Pandemic, a revised progress report to the FATF on 31 July 2020 and (iii) an updated progress report on 31 August 2020. At the request of Mauritius, a virtual face to face meeting was also held between the FATF and the implementing authorities on 08 September 2020. During the virtual meeting, the Joint Group (JG) underlined the efforts and steps undertaken by Mauritius, in particular under difficult circumstances caused by the COVID-19 pandemic, and has commended Mauritius on progress made as at date. The JG has noted that the Government of Mauritius considers the Action Plan seriously, and prioritises necessary actions to complete the Action Plan ahead of the agreed timeline. Furthermore, it also encouraged the authorities to continue their actions further in that direction. The JG has already submitted their findings to the FATF Plenary which will be held in October 2020. In addition, the competent authorities, have also provided necessary clarifications to the foreign and correspondent banks to facilitate cross border transactions as from 01 October 2020. This approach has largely contributed to provide the necessary comfort in so far as compliance standards are concerned and maintain the trust in the jurisdiction. The Government seeks to reassure the local and international investment community that Mauritius remains actively engaged in the implementation of the FATF Action Plan. The Government of Mauritius reiterates its commitment to continue in its endeavour to fully implement the FATF action plan at the earliest.
Mauritius determined to promptly get off EU Blacklist
Mauritius has set in motion an action plan for it to be removed from the EU blacklist within the briefest possible delay. The regulatory framework of the jurisdiction is being reinforced to ensure that all recommendations of the Financial Action Task Force (FATF) to combat money laundering are strictly adhered to. A Financial Offences Court is being set up amongst other measures included in the action plan. Mauritius is known for its high legal and ethical standards and is determined to restore its reputation as a jurisdiction.
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).
Mauritius, a safe haven monitored by the Financial Action Task Force
The Financial Action Task Force (FATF), also known by its French name Groupe d’action financière is an intergovernmental organization that was founded in 1989. It was established to implement international standards, to develop and promote policies at national and international levels and to combat money laundering and the financing of terrorism. On the 21st of February 2020, Mauritius was placed on the institution’s “Jurisdictions under Increased Monitoring” list. Following this, the FATF has recognized that the island has taken several measures to improve the transparency of legal persons by amending the legal framework to require them to disclose beneficial ownership information and improve the processes for identifying and confiscating proceeds of crimes. Security measures undertaken by Mauritius Throughout the years, Mauritius has made significant efforts to increase the efficiency level of its AntiMoney Laundering and Countering the Financing of Terrorism (AML/CFT) system. Some of these are: completing its National Risk Assessment, enhancing domestic coordination and international cooperation, developing and implementing an AML/CFT risk-based supervision framework for financial institutions, the implementation of the United Nations targeted financial sanctions related to terrorism and proliferation. Mauritius has been fully committed the implementation of its Action Plan. As the time of writing, it has been able to address 53 out of the 58 Recommended Actions identified in the Mutual Evaluation Report (MER) to improve the efficiency level of its AML/CFT system. While the island is in its ‘increased monitoring’ phase, the FSC is continuously and actively working with the government, industry stakeholders and the FATF to address the remaining action items. It is committed to resolve these issues swiftly within or before the agreed timelines. While the FATF does not call for the application of enhanced due diligence to be applied to jurisdictions such as Mauritius, even if they are placed on the “Jurisdictions under Increased Monitoring” list, it encourages its members to take into account the information presented on that jurisdiction in their risk analysis. Should you be worried about the FATF’s “Jurisdictions under Increased Monitoring” list? After the publication of the list by the Financial Action Task Force, there have been some apprehensions amongst market participant regarding whether the inclusion of Mauritius would have any repercussions. However, they have no reason to worry since the country has already addressed the necessary issues. Moreover, the FSC is prioritizing its work to address all the action points recommended for the Global Business sector ahead of the set timeline. This work is focused on demonstrating the implementation of risk-based supervision of the global business sector by way of a comprehensive onsite inspection schedule and taking enforcement action against non-compliance. As such, Mauritius remains completely committed to uphold the integrity of the domestic and international financial system. If you wish to have more information on the finance sector of Mauritius or the benefits of establishing a company in the country, feel free to contact us. Our team is available to answer your questions and to help you establish, manage and administer companies, trusts, foundations and funds according to your needs.
