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).
Highlights of the Mauritius Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) (Miscellaneous Provisions) Act 2020
To align the Mauritius International Financial Centre to international norms and standards pertaining to AML/CFT and meet the Financial Action Task Force (FATF) requirements, the Anti-Money Laundering and Combatting the Financing of Terrorism (Miscellaneous Provisions) Act 2020 (the “Act”) was approved by the Mauritian Parliament and came into force on 9 July 2020. This highlight sets out the changes to the laws brought by the Act which are relevant to the Global Business sector. Changes to the Companies Act Access to beneficial ownership information – Companies registered in Mauritius were already required to disclose information on their beneficial owners (BO) or ultimate beneficial owners (UBO) to the Registrar of Companies and record same in their share register where the shares were held by a nominee shareholder. The Act has further expanded the definition of the term ‘nominee shareholder’ to put emphasis on those BO/ UBO who exercise their right through the nominee shareholder indirectly through the agency of one or more persons. Beneficial ownership information shall be lodged with the Registrar (i) at the time of incorporation of a company; (ii) at the time of registration of a foreign company; (iii) at the time of registration by way of continuation of a company; (iv) on filing of the annual return of a domestic company; (v) in the case of a foreign company, on filing the financial statements of the company; (vi) upon any change, including transfer, in the shareholding of a company; (vii) at the time of an issue of shares. Upon any change, including transfer, in the shareholding of a company or at the time of an issue of shares, beneficial ownership information shall be filed to the Registrar within 14 days from the date by which any entry or alteration is made in the share register. This obligation will apply where shares of the company are held by a nominee shareholder. The Act also requires designation of an officer (ordinarily resident in Mauritius) to provide, upon request by any competent authority, all basic information and beneficial ownership information of the company. The Registrar shall be notified upon designation or change of the officer, within 14 days. In addition to the name and registered address of a private company holding a Global Business License (GBL) or an Authorised Company, a person may on payment of a prescribed fee have access to the proof of incorporation, legal form and status of the company and its basic regulating powers and list of directors at the Registrar of Companies office. Failure to comply with the requirement to furnish beneficial ownership information to the Registrar of Companies shall amount to an offence and shall, on conviction, be liable to a fine not exceeding MUR 300,000 rupees. The Registrar of Company may further strike off a company if it fails to disclose beneficial ownership information. The terms BO/UBO have been extrapolated under the Companies Act and are extended to the Foundation Act, Limited Liability Act and Limited Partnership Act. Beneficial ownership information pertaining to limited liability partnerships, limited partnerships and foundations, shall be disclosed to the Registrar of Companies upon the incorporation and registration of any such entity, and at the time of making certain mandatory filings. This obligation will apply where shares/beneficial interest of the partnerships/ foundations are held by a nominee. Changes to the Financial Intelligence and Anti-Money Laundering Act The timeline for financial institutions and reporting person for filing a suspicious transaction report to the Financial Intelligence Unit (FIU) has been reduced from 15 days to 5 working days after the suspicion arose. Failure to do so shall be an offence and shall, on conviction, be liable to a fine not exceeding MUR one million rupees (USD 25000) and to imprisonment for a term not exceeding 5 years. The FIU has been empowered to issue guidelines to auditors, reporting persons and internal controllers of credit unions. New provisions have been enacted to facilitate exchange of information among regulatory and supervisory agencies in Mauritius, further regulate sectors such as jewellery, real estate, gambling and cooperative societies for AML/CFT purposes, increase the fines and penalties relating to AML/CFT offences and propounding a risk-based approach to supervision. Changes to the Financial Services Act (FSA) Section 23 of the FSA has been amended to provide that approval of the Commission shall not be required in respect of the issue or transfer of non-voting shares of CIS or CEF and reporting issuers that do not hold a financial services licence but whose securities are listed on a Securities Exchange in Mauritius. The Commission can carry out onsite inspections on the business premises of a licensee or such other place at its discretion and the frequency for the on-site inspections shall be determined but not limited, by the money laundering or terrorism financing risks present.
Mauritius Island’s Anti-Money Laundering and Combatting the Financing of Terrorism (miscellaneous provisions) Act 2020: what’s new?
Financial Intelligence and Anti- Money Laundering Act amended Section 2 “legal person” – (a) means any entity, other than a natural person; and (b) includes a company, a foundation, an association, a limited liability partnership or such other entity as may be prescribed “suspicious transaction”, – (a) gives rise to a reasonable suspicion that it may involve – (i) the laundering of money or the proceeds of any crime; or (ii) funds linked or related to, or to be used for, the financing of terrorism or proliferation financing or, any other activities or transaction related to terrorism as specified in the Prevention of Terrorism Act or under any other enactment, whether or not the funds represent the proceeds of a crime 3. Money Laundering A reporting person who fails to take such measures as are reasonably necessary to ensure that neither he, nor any service offered by him, is capable of being used by a person to commit or to facilitate the commission of a money laundering offence or the financing of terrorism shall commit an offence 19E. Duty to provide information In section 19E, in the heading, by adding the words “for purpose of conducting risk assessment”; Companies Act 2001 Section 2 nominee”, by inserting, after the words “some other person either directly or” and “a person is the nominee of another”, the words “indirectly” and “legal or natural”, respectively “beneficial owner” or “ultimate beneficial owner” – (a) means any natural person who ultimately owns or controls a company or the natural person on whose behalf a transaction or activity is being conducted in relation to a company; and (b) includes – (i) the natural person who ultimately owns or controls a company through : (A) direct or indirect ownership of such shares in such percentage as may be prescribed (B) voting rights; (C) ownership interest; or (D) control by other means; (ii) where no natural person under paragraph (i) is identified, or if there is any doubt that the person identified is the beneficial owner, the natural person who controls the company in the manner one company controls another company under section 5; (iii) where no person under paragraphs (i) and (ii) is identified, the natural person who acts as executive director or has equivalent executive powers; Section 14. Inspection and evidence of registers in subsection (8), by adding the following new paragraphs, the comma at the end of paragraph (b) being deleted and replaced by a semicolon and the word “and” at the end of paragraph (a) being deleted – (c) proof of incorporation; (d) legal form and status; (e) basic regulating powers; and (f) list of directors Section 23: Application for incorporation A declaration regarding beneficial ownership which shall be disclosed in accordance with section 91(3A)(c). the full name and the usual residential address of the beneficial owner or ultimate beneficial owner, if any; (subsection (2), by inserting, after paragraph (d), the following new paragraph) 91. Company to maintain share register The information referred to in subsection (3)(a)(ii) shall be lodged with the Registrar through CBRIS or such other electronic system or in such other manner as the Registrar may approve – (i) at the time of incorporation of a company; (ii) at the time of registration of a foreign company; (iii) at the time of registration by way of continuation of a company; (iv) on filing of the annual return of the company; (v) in the case of a foreign company, on filing the financial statements of the company; (vi) upon any change, including transfer, in the shareholding of a company; (vii) at the time of an issue of shares (d) The information referred to in paragraph (c)(vi) and (vii) shall be filed with the Registrar within 14 days from the date by which any entry or alteration is made in the share register 190. Company records Notwithstanding any other enactment, a company shall authorise at least one officer, who shall be ordinarily resident in Mauritius, to provide, upon request by any competent authority, all basic information and beneficial ownership information of the company (b) A company shall, within 14 days of an authorisation under paragraph (a) or of any change of an officer under paragraph (a), notify the Registrar, in such form as the Registrar may approve, the name and particulars of the officer. (c) In this subsection – “basic information”, in relation to a company means – (a) the company name, proof of incorporation, legal form and status, the address of its registered office, basic regulating powers, a list of its directors; and (b) a register of its shareholders or members, containing the names of the shareholders and members and number of shares held by each shareholder and categories of shares, including the nature of the associated voting rights; “competent authority” – (a) means a public body responsible to combat money laundering or terrorist financing; and (b) includes an investigatory authority; “investigatory authority” has the same meaning as in the Financial Intelligence and Anti-Money Laundering Act 281. Balance Sheet (5A) Any information regarding the beneficial ownership of a foreign company shall be disclosed in accordance with section 91(3A)(c) Financial Services Act 43A. Frequency of on site inspections (1) The frequency of an on site inspection carried out under section 43 shall be determined on the basis of, but not limited to – (a) the money laundering or terrorism financing risks and policies, internal controls and procedures associated with a licensee, as assessed by the Commission; (b) the money laundering or terrorism financing risks present in Mauritius; and (c) the characteristics of the licensee and the degree of discretion allowed to the licensee under the risk-based approach implemented by the Commission. (2) The Commission shall review the assessment of the money laundering or terrorism financing profile of a licensee as and when there are major developments in the management and operations of the licensee. Foundations Act 36. Records to be kept Any information regarding the beneficial owner or ultimate beneficial owner of a
