Money laundering: changes in the Mauritian legislation to combat this?
Money laundering is a serious issue in several countries across the globe. Whether it is big companies or SMEs, none are safe from this problem. In fact, the problem is not just at company-level, even if this plays a great role. A determining factor also lies in the jurisdiction in which a firm operates. Indeed, a company must operate in a country having strong laws and legislation so that it is well-regulated. The Anti-Money Laundering and Combatting the Financing of Terrorism Act 2020 Mauritius, a country that recognises the severity of this problem for both businesses and its clients, has been working towards making its jurisdiction safer for companies and investors. It has been introducing several changes to enhance the reliability of the jurisdiction. One of them involves the The Anti-Money Laundering and Combatting the Financing of Terrorism Act 2020. This has been enacted in July 2020 and it was to ensure “closer compliance with the recommended international best practices of the Financial Action Task Force” and was published in the Government Gazette a couple of days later. The reforms have been introduced to strengthen the legal and regulatory framework with regards to the fight against money laundering and financing of terrorism. Banking Act 2004 (THE “BA”) Section 64B – Consumer due diligence information Previously, the fine which the Bank of Mauritius had the right to impose to financial institutions and holders of licence not complying with money laundering or terrorism financing guidelines, directives or instructions issued by the Bank of Mauritius was one million rupees. This has been increased to an amount not exceeding ten million rupees. Section 64C – Examination of financial institutions or holders of licence First of all, this section of the BA has been changed to address the frequency and intensity of the examinations of the operations and affairs of financial institutions or holders of licence carried out by the Bank of Mauritius. The tests depend on several factors. The money laundering or terrorism financing risks and the policies, internal controls and procedures associated with the financial institution or holder of a licence or its group, as identified by the Bank of Mauritius’ assessment of the institution’s or group’s risk profiles. the money laundering or terrorism financing risks present in Mauritius; and the characteristics of the financial institution or holder of a licence or its group, in particular the diversity and number of financial institutions or holder of a licence and the degree of discretion allowed to them under the risk-based approach implemented by the Bank of Mauritius. Moreover, now, the Bank of Mauritius will periodically review the assessment of money laundering or terrorism financing risk profile and risks of non-compliance of a financial institution, licence holder or group if there are major events or developments in the management and operations of said financial institution or holder of licence. Companies Act (CA) The changes brought about focus on beneficial ownership information. The provisions have been expanded so that now it is mandatory for companies to obtain, record and disclose information about beneficial ownership as appropriate. Moreover, a new definition of beneficial owner has been introduced. A “beneficial owner” or “ultimate beneficial owner” is “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”. After the amendment, any declaration regarding beneficial ownership information shall be made upfront at the time of making an application for incorporation in order to identify any nominee arrangement. Along the same lines, after an entry or alteration in the share register, the Registrar of Companies has to be notified within 14 days. Moreover, the Registrar has been given the power to remove a company from the register of companies if that company fails to comply with filing of the beneficial ownership information as has been prescribed. The requirements are also applicable to foreign companies registered under the CA and companies registered by way of continuation in Mauritius. Financial Intelligence and Anti Money Laundering Act (the “FIAMLA”) The Financial Intelligence Unit (the “FIU”) will now disseminate disclosure of information to the Counterterrorism Unit and will inform, advise and cooperate with the latter. Additionally, one of the functions of the FIU has been amended to include issuing guidelines to auditors, reporting persons and internal controllers of credit unions with to the manner in which a report under section 14 shall be made. Upon suspicious transactions, additional information may be supplied to FIU. If there are reasons to suspect money laundering, predicate offences or terrorism financing, the Director of the FIU shall disseminate information and the results of the analysis of the FIU to the Counterterrorism Unit. A reporting person or auditor, or any director, employee, agent or legal representative of a reporting person or auditor who does not supply any information as may be requested by the FIU under section 13(2), (3) or (6) by the date specified in the request, or who falsifies, conceals, destroys or otherwise disposes of, or causes or permits the falsification, concealment, destruction or disposal of, any information, document or material which is, or is likely, to be relevant to a request under section 13(2), (3) or (6) will commit an offence and will be liable to a fine not exceeding one million rupees and to imprisonment for a term not exceeding 5 years. Financial Services Act (The “FSA”) Scope of on-site inspectionPreviously, these inspections to verify the compliance with applicable laws and whether the licensee still satisfies the relevant criteria were restricted to the business premises of licensees. Now, it can be done at such other place and at such time as the FSC may determine. Now, there are more factors that determine the frequency of the on-site inspections. These include: the money laundering or terrorism financing risks and policies, internal controls and procedures associated with a licensee, as assessed by the FSC; the money laundering or terrorism financing risks present in Mauritius; and the characteristics of
Money Laundering of Serious Tax Crimes: The IEWG Public Bulletin is now available
Tax fraudsters use increasingly complex, transnational schemes that enable them to launder their crimes’ substantial illicit proceeds. Serious tax crimes have significant negative effects on governments’ abilities to use public finances for the benefit of society. Tax crimes are also sometimes interconnected with other financial crimes, like corruption. Therefore, combatting serious tax crimes is a key issue for tax authorities, FIUs and, more broadly, law enforcement agencies (LEA) and judicial systems. With this situation in mind, the Egmont Group’s IEWG launched the “Money Laundering of Serious Tax Crimes: Enhancing Financial Intelligence Units’ Detection Capacities and Fostering Information Exchange” project at the Egmont Group’s 26th Plenary in the Hague (July 2019). To better understand the issues linked with ML of serious tax crimes, the project team sent questionnaires and case surveys to the Egmont Group’s member FIUs. Overall, the project team analysed 50 responses to the questionnaire and 33 to the case survey. The information gathered provided an overview of national legal frameworks on ML of serious tax crimes, the powers and competencies of the competent authorities, including FIUs, to combat it and the role of the private sector. They drafted a general report which is available to competent authorities and observers of the Egmont Group. The “Money Laundering of Serious Tax Crimes” report intends to enhance FIU knowledge on their powers, capacities, and best practices in the fight against ML of serious tax crimes. Moreover, this report, through a best practices toolkit, seeks to provide opportunities for FIUs to consider improvements to both national and international cooperation in order to strengthen their abilities to respond to these crimes. The tools provided in the report and public bulletin will ideally enable FIUs to have timely access to quality tax-related information to assist them with analysis and, in turn, share this information with the relevant national and international competent authorities. UIF-Argentina and TRACFIN, France jointly led this project, which also included collaboration with the FIUs from: Australia Brazil Germany Guernsey Luxembourg Poland Tanzania Ukraine Kindly refer to the bulletin as per link below: https://egmontgroup.org/sites/default/files/filedepot/2020%2C%20Public%20Bulletin%20Money%20Laundering%20of%20Serious%20Tax%20Crimes.pdf
Mauritius legislative amendments – Prevention of Money Laundering & Terrorist Financing
The Code on the Prevention of Money Laundering & Terrorist Financing issued by the Financial Services Commission (the Commission) in March 2012 (‘Code 2012’) is hereby repealed as of 6 Nov 2020. Further to legislative amendments to the Financial Intelligence and Anti-Money Laundering Act 2002 (FIAMLA) and the enactment of the Financial Intelligence and Anti-Money Laundering Regulations 2018 (FIAML Regulations), whereby the AML/CFT legal framework has been revamped, the Code on the Prevention of Money Laundering & Terrorist Financing issued by the Financial Services Commission (the Commission) in March 2012 (‘Code 2012’) is hereby repealed until the issuance of any additional enforceable AML/CFT requirements. The repeal of the Code 2012 shall not: Affect any obligations or liability incurred under the repealed Code 2012; Affect the previous operations of the repealed Code 2012 or anything duly done or suffered under the repealed Code 2012; Affect any regulatory action already taken as a result of non-compliance with the repealed Code 2012; Affect any investigation carried out under the repealed Code 2012. The FSC clarifies that this shall not affect any obligations or liability incurred, the previous operations or anything duly done or suffered, inter alia, under the repealed Code 2012. *As released by the Mauritius Financial Services Commission
The FATF Recommendations
The FATF Recommendations set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction. Countries have diverse legal, administrative and operational frameworks and different financial systems, and so cannot all take identical measures to counter these threats. Please refer to link below for further information: http://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html
Money Laundering of Serious Tax Crimes
Tax fraudsters use increasingly complex, transnational schemes that enable them to launder their crimes’ substantial illicit proceeds. Serious tax crimes have significant negative effects on governments’ abilities to use public finances for the benefit of society. Tax crimes are also sometimes interconnected with other financial crimes, like corruption. Therefore, combatting serious tax crimes is a key issue for tax authorities, FIUs and, more broadly, law enforcement agencies (LEA) and judicial systems. With this situation in mind, the Egmont Group’s IEWG launched the “Money Laundering of Serious Tax Crimes: Enhancing Financial Intelligence Units’ Detection Capacities and Fostering Information Exchange” project at the Egmont Group’s 26th Plenary in the Hague (July 2019). The information gathered provided an overview of national legal frameworks on ML of serious tax crimes, the powers and competencies of the competent authorities, including FIUs, to combat it and the role of the private sector. They drafted a general report which is available to competent authorities and observers of the Egmont Group. The “Money Laundering of Serious Tax Crimes” report intends to enhance FIU knowledge on their powers, capacities, and best practices in the fight against ML of serious tax crimes. Moreover, this report, through a best practices toolkit, seeks to provide opportunities for FIUs to consider improvements to both national and international cooperation in order to strengthen their abilities to respond to these crimes. The tools provided in the report and public bulletin will ideally enable FIUs to have timely access to quality tax-related information to assist them with analysis and, in turn, share this information with the relevant national and international competent authorities. UIF-Argentina and TRACFIN, France jointly led this project, which also included collaboration with the FIUs from: Australia Brazil Germany Guernsey Luxembourg Poland Tanzania Ukraine The bulletin can be accessed here: https://egmontgroup.org/sites/default/files/filedepot/2020%2C%20Public%20Bulletin%20Money%20Laundering%20of%20Serious%20Tax%20Crimes.pdf
Why PEP Screening Is Important for Business?
Political Exposed Persons (PEPs) are defined as high-risk customers who have greater opportunities than ordinary citizens to acquire assets through illegal means such as taking bribes and money laundering. PEPs have to be identified and screened in financial institutions because of the risks they have. The process of identifying PEPs and determining their risks is generally referred to as PEP Screening and is a very important screening for the best implementation of AML compliance programs, especially in financial institutions. Why Should PEPs be Determined? Bribery and corruption crimes are very important problems globally, and the effects of these crimes are quite negative. Approximately $ 1 trillion in bribes are processed each year, and the amount of corruption is estimated at almost 2.6 trillion. These numbers have serious implications, so financial institutions try to prevent these crimes. PEP Screening is an activity aimed at preventing crimes such as bribery and corruption. PEP Screening allows PEPs to be detected. The most important reason for the detection of PEPs is that they are defined as high-risk people because they have more opportunities to earn illegal income such as money laundering, terrorism financing, corruption, and bribery. Therefore, according to the regulations, businesses have to detect PEPs and control their transactions. Businesses that do not detect PEPs and do not control their transactions are penalized for failing to comply with local or global regulations. PEP Screening Process Unfortunately, there are no universally accepted rules to define people in the PEPs category clearly. When conducting a PEP screening, it is necessary to identify the politically exposed people and their relatives and close associates (RCA). Besides, it cannot be said that every PEP has the same risk because PEPs are separated within themselves; The risk created by domestic PEP, foreign PEP, international organization PEPs, and for example, foreign PEP is much higher than the risk created by domestic PEP. No matter how complex it is to identify PEPs, financial institutions should implement and improve PEP Screening processes. The PEP Screening should be performed in accordance with the risk understanding of a FI applying a risk-based approach. The PEP Screening should be performed during the customers’ initial engagement process while periodically reviewing customers when any triggering event requires a Customer Due Diligence review. In most cases, PEP Screening is not the primary control for identifying PEPs. Responsibility for the definition of PEP remains with the lines of business that are in direct contact with the customer and must be included in the CDD processes. Data quality standards required for PEP Screening Financial institutions have to have complete and accurate electronic customer data records so that the databases used for PEP Screening contain sufficient unique identification data. Without this information, the PEP Screening would be both inefficient and ineffective and yield irrelevant results inconsistent with an RCA. Therefore, the minimum data financial institutions should know for an effective PEP Screening include: Full name Date of birth or year Country of political exposure Gender Politically exposed roles, appointment dates, and years The date PEP left its post Screening Existing Customers Against PEP Lists Periodically The precautions and procedures applied in customer purchases to determine whether a customer is a PEP is the first step, and PEP Screening alone is not enough. After the first screening process, these scans need to be performed at certain periods, but there is no clear definition of this period and these periods vary according to the enterprises. It is scanned periodically because the risks of the customer may change; for example, it may not be PEP when a customer opens an account for the first time, but there may also be ongoing processes. These examples can be reproduced, but as a result, PEP Screening should be carried out periodically to change risk levels and place these people in appropriate risk categories. PEP Risk Management Framework There are a wide variety of controls to define and manage PEP relationships. Financial institutions should also properly perform these controls. Here are some of these controls: New Customer Identification: Financial Institutions must have risk-based procedures to determine whether a customer is a PEP before or shortly after the relationship is established, in accordance with applicable laws. If a new client is designated as a PEP, financial institutions should apply appropriate due diligence measures to the client promptly. Existing Customers Identification: Financial institutions should implement risk-based due diligence and controls if they become aware of their current customers becoming PEP. Customer Risk Assessment: Once a new or existing customer has been identified as a PEP, financial institutions must perform a risk assessment to determine the level of financial crime risk posed by that customer and appropriate levels of due diligence and monitoring. Financial institutions should take into account risk factors such as business type, geography, and product, and make risk assessments accordingly. In determining geographic risks, financial institutions should consider information from reliable and independent sources in the country of political exposure. Approval: Financial institutions should also be approved by senior management, who have PEP relationships, financial crime risk, and responsibilities within the entity’s AML control environment. Enhanced Monitoring: Customers (accounts) with a PEPs relationship should be subject to enhanced proportional monitoring to detect unusual and potentially suspicious activity. These people can generally be called Relatives and Close Associates (RCA). Training: Financial institutions are the first line of defense in preventing and detecting financial crimes such as money laundering. In addition, financial institutions play an important role in identifying PEPs or potential customers. Therefore, it is very important that the risks, policies, procedures, and processes associated with PEPs are communicated to relevant employees and their managers, and form part of the regular AML training program.
Red Flag Indicators for AML-CFT
Money laundering hurts in many ways. Money laundering not only hides the revenues of criminals’ illegal activities, but it can also harm the economy and pose many risks to your business. Allowing money laundering through your business may be prone to difficulties in managing your assets. You may encounter high legal costs if the authorities find that your money laundering operation is taking place or the rules are not followed. As a result, millions of ‘dirty’ dollars are laundered every year. It is important to be aware of the red flag indicators accompanying illegal activity to prevent this situation. What Is the Mean of Red Flag Indicators for AML-CTF? It is important to be aware of and act in accordance with the red flag indications that a transaction may be suspect. In some cases, you may need to inquire more about your customers. If your customer questions do not resolve your doubts, the Money Laundering Reporting Officer (MLRO) should decide whether this should be done for the Suspicious Transaction Report (STR) and, if necessary, be presented to the Financial Intelligence Unit (FIU) Red flag indicators also help financial institutions to apply a risk-based approach to CDD requirements, such as knowing who the beneficiaries are and understanding the source of the funds used. If there is a red flag indicator, regulators may suspect that money laundering (ML) or terrorist financing (TF) has occurred. SRBs and law enforcement officers find these red-flag indicators useful when monitoring or researching the professional behavior of professionals or customers. The Financial Action Task Force FATF Report also highlighted the following Red Flags in the Funding Fund for Money Laundering and Terrorism. Red Flags About the Client Red flag 1: The client is overly secret or evasive about: who the client is what the big picture is where the money is coming from who the beneficial owner is why they are doing this transaction this way Red flag 2: Client: actively avoiding personal contact without goodwill. refuses to provide information, data, and the necessary documents provides fake documents uses an email address that cannot be found on the Internet a partner associated or known or known to a person involved in or suspected of terrorist or terrorist financing activities asks repeated questions about procedures for implementing standards Red flag 3: Parties: Parties or their representatives are located in a high-risk country. The parties to the transaction are tied for no apparent commercial reason. The links between the parties of a family, employment, institution, or any other nature raise doubts about reality. In a short time, the same parties have more than one view of transactions. The transaction is unusual for the processing parties, especially if the age is below the legal age. The person who actually directs the operation is not one of the official parties of the transaction or its representatives. A real person working as a director or representative is not an appropriate representative. Red Flags ın the Source of Funds Red Flag 4: The transaction is especially inconsistent with the individual’s socio-economic profile Red flag 5: If the client or third party contributes a substantial amount of cash as collateral provided by the borrower, without making a logical statement, instead of just using these funds directly. Red flag 6: If the funding source is unusual Red flag 7: If the customer uses more than one bank account or foreign account Red flag 8: If a company, business or government finance private spending Red flag 9: If the choice of payment method has been postponed to a very close time to the notarization time without a logical explanation Red flag 10: If an unusually short payback period is specified without any logical explanation Red flag 11: Mortgages are repaid substantially without a reasonable explanation before the first due date Red Flag 12: If the asset is purchased in cash and then quickly used as a guarantee for the loan Red flag 13: If there is a request to change the previously agreed payment procedures without a reasonable explanation Red Flag 14: Financing is provided by a lender without a logical explanation outside the credit institution Red Flag 15: The collateral provided for the transaction is currently located in a high-risk country Red flag 16: If there has been a significant increase or consecutive contributions to the same company without a logical statement to the same company recently. Red Flag 17: If there is an unrelated or high-risk increase from the capital, company, from a foreign country Red flag 18: If the company has received a fairly high injection of capital or assets Red flag 19: If there is an excessively high or low price for the securities transferred, for any situation showing such an excess Red flag 20: Especially if recently created companies also made large financial transactions without justified rea Red Flags ın the Choıce of Lawyer Red flag 21: Training of a lawyer away from the transaction without a legal or economic reason. Red flag 22: Education of a lawyer who does not have experience in a particular area of expertise. Red Flag 23: The client is ready to pay significantly higher wages than usual without a legitimate reason. Red flag 24: The client changed the consultant several times in a short time, or met with multiple legal counsels without a valid reason. Red flag 25: Required service was denied by another professional. Red Flags ın the Nature of the Retainer Red flag 26: In an illegal operation Red flag 27: Suspicious statements of the customer or his professional or non-commercial activities Red flag 28: Creation of complex ownership structures when there is no legitimate or economic cause. Red flag 29: Participation of the client’s structures with more than one country without a legitimate or economic cause. Red flag 30: Incorporation and purchase of stock or securities of several companies, enterprises, or legal entities within a short period of time with elements in common with no logical explanation. Red flag 31: There are no documents to support the customer’s story, previous transactions, or company activities. Red flag 32: There are a few elements common to a series of transactions within a short time without
Virtual assets: how to detect money laundering and terrorist financing
While virtual assets have revolutionised the financial industry, they have created new opportunities that ‘facilitates’ the process of money laundering, terrorist financing and other criminal activities. Criminals are now able to process cross-border transactions in a rapid way, which means that they can acquire, move and store virtual assets outside a regulated financial institution. Not only is this convenient for them, but it also makes it harder to identity suspicious activities. Nonetheless, developments in technology imply that regulators also are better equipped to fight illegal activities. To this end, and to assist financial firms, non-financial business and reporting entities, the Financial Action Task Force (FATF) has issued a report that highlights red-flag indicators suggesting criminal activities. These indicators, explored below, point to suspicious virtual assets activities or attempts to evade law enforcement detection. Excessive use of software offering anonymity Virtual Assets boasts of the ability to be able to process transactions anonymously. While this is a great safety feature against thefts and data breaches, it means that criminals also have the ability to disguise and store funds. As a financial firm, or any entity, wishing to protect themselves, you must look out for the following: Clients using more than one type of VAs, especially those that offer higher anonymity, when processing transactions, Clients moving a VA from a public and transparent blockchain to a centralised exchange and then trading it for a privacy coin, Clients that function as an unregistered/unlicensed virtual asset service providers on peer-to-peer exchange websites, especially if huge amount of virtual assets of others are involved, Clients having no logical business explanations for abnormal volumes of transactional activities, Clients using mixing and tumbling services with the intention to obscure the flow of funds, Funds from, or saved into, a VA address or a wallet linked to suspicious sources, Clients using decentralised/unhosted wallets to physically transport VAs overseas, Clients using software to suppress or redact the owner of a domain name, Usage of anonymous or encrypted means of communications, A large number of seemingly different virtual assets being controlled by the same IP address, or Use of ATMs and kiosks, especially when transaction fees are higher Geographical risks In many cases, criminals take advantage of jurisdictions that do not have strong regulations/laws or measures related to virtual assets to combat money laundering and other illegal activities. For instance, the countries have not introduced the whole set of preventive measures according to FAFT standards. Thus, firms must be mindful if: The client’s funds comes from, or is sent to, an exchange that is not registered in the country where either the customer or exchange is located. The client uses a Virtual Asset exchange in, or sends funds to, a high-risk jurisdiction that does not have the proper Anti-Money Laundering and Combating the Financing of Terrorism laws. The client sets up offices or moves its offices to countries that have not implemented regulations governing virtual assets or where there is no business rationale to do so. Irregular transaction patterns Irregular, unusual or uncommon transaction patterns might indicate that Virtual assets are being used for money laundering and terrorist financing. The signs can be categorised based on new users or all users New users Depositing a large initial down-payment that is inconsistent with the customer profile. Funding a large deposit on the day the account is opened and a large amount of this, or the totality, is traded on the same day or the day after. Attempting to trade off the entire balance of Virtual Assets or withdrawing and sending it off the platform. All users Using multiple Virtual Assets or accounts without any logical business explanations. Conducting frequent and large transfers, by more than one person and from the same IP address, in a specific period of time to the same VA account. Small amount of funds coming in from many unrelated wallets that are then being transferred to another wallet. Conducting Virtual Assets into fiat currency exchange at a potential loss, without any business explanation and despite transaction fees being high and vice-versa. Size and frequency of financial operations The way transactions are processed and the amount of funds involves might also alert firms as to whether criminal activities are involved. Companies must be suspicious if: Virtual assets transactions are being structured in small amounts, under the limit of record-keeping or reporting thresholds. Making high-value transactions either in short successions, in an irregular pattern or to a newly created or previously inactive account. Immediately transferring Virtual assets to multiple service providers that are located in another jurisdiction that is not related to the customer’s residence or where there is no/weak regulations. Unnecessarily withdrawing virtual assets, converting them to multiple VAs and transferring it to a private wallet immediately after a deposit. Funds suspected as being fraudulent or stolen is being accepted or depositing funds from such suspicious VA addresses. Suspicious senders or recipients Irregularities about a customer’s behaviour or profile might alert you as to whether he/she is the sender or recipients of illicit transactions. Customers’ Profile Red-flag indicators of a customer’s profile are: A client providing credentials/identifications shared by another account. Discrepancies between IP addresses that was used to create the account and that to process transactions. Customers’ VA address on public forums is associated with illegal activities. Customer is known to be previously associated with criminals. Customer frequently changing his/her identification information: such as email/IP address or financial information. Customer using language in VA message fields that suggest illicit transactions. Customer frequently conducting transactions at a loss Irregular behaviour during account creation Creating separate accounts under different names, Initiating transactions from non-trusted IP addresses or those that have previously been flagged as suspiscious, Trying to open an account frequently within the same service provider from the same IP address, Merchants having their Internet domain registrations in a different jurisdiction than that of their establishment. Source of funds or wealth related to criminal activities The misuse of virtual assets is linked to criminal activities like illicit
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).
