DealMakers AFRICA Q3 2021

Mauritius - the state of AML/CFT compliance

by Rajiv Gujadhur and Sahirun Subadar

Since early 2020, first through the grey listing by the Financial Action Task Force (FATF) and, subsequently, the blacklisting by the European Commission (EC), Mauritius has found itself under intense scrutiny. The prospect of being subjected to enhanced due diligence purely by structuring through Mauritius, despite its proven attractiveness, has understandably been a hurdle that some investors have not been willing to overcome.  The announcement by the FATF on 21 October 2021 of the removal of Mauritius from its grey list restores the reputation of Mauritius as a jurisdiction intent on ensuring the highest standards of compliance with international anti-money laundering norms, and instills renewed confidence in the investor community in the international financial centre. 

In this article, we shed light on the events leading to increased monitoring from the international community, rationalise the situation Mauritius found itself in, and focus on the way forward.

Issues requiring review

 

Whereas several Mutual Evaluation Reports by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) bear testament to how well Mauritius has implemented the technical requirements of the FATF recommendations, and how effective its anti-money laundering and counter-terrorist and proliferation financing (AML/CFT) system is, these did not deter the FATF from placing Mauritius on its grey list for increased monitoring. This, in turn, led to the EC identifying Mauritius as a high-risk third country with strategic deficiencies, in spite of the progress being made to complete the agreed FATF action plan expeditiously.

Amongst the conclusions reached about Mauritius were, inter alia, deficiencies in demonstrating that supervisors of its global business sector and designated non-financial businesses and professions have implemented risk-based supervision, and failure to implement a risk-based approach for the supervision of its non-profit organisation sector to prevent abuse for terrorist financing purposes.

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Rajiv Gujadhur
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Sahirun Subadar

Efforts to get back on track

Given its track record of compliance with international laws and standards, Mauritius redoubled its efforts to demonstrate that not only are laws in place from an AML/CFT perspective, but that it also has the necessary tools for effective enforcement. 

As a result, laws and processes around AML/CFT were further consolidated in 2021, with the following notable changes:

  • Setting up a core group on AML/CFT

 

The core group aims to: (i) supervise the efforts being undertaken to remove Mauritius from the FATF grey list and, consequently, the EU blacklist; and (ii) ensure that Mauritius has a system in place that is compliant with international standards and also adapts to the ever-changing landscape around AML/CFT, bearing in mind that any relapse may result in a review and re-listing by the FATF. 

Members of the core group include some of the highest-ranking officials in Mauritius, including the Financial Secretary at the Ministry of Finance, the Governor of the Bank of Mauritius, and the Director General of the Independent Commission against Corruption (ICAC). 

  • Obliging real estate agents to register with the FIU

 

The FATF has identified real estate agents as being gatekeepers to counter AML/CFT risk. According to the National Risk Assessment report, 2019, the real estate sector has a medium-high risk of being used for money laundering (ML).  


The FA has amended the Real Estate Agent Authority Act, itself enacted in 2020 as part of the efforts to meet FATF requirements, such that a real estate agent is required to register with the Financial Intelligence Unit (FIU) within five working days of being registered with the Real Estate Agent Authority. 

  • Empowering the National Sanctions Secretariat

 

One of the principal amendments made to the United Nations Sanctions Act is that notwithstanding any confidentiality provision in any enactment, any person is obliged to immediately notify the National Sanctions Secretariat where he or she holds, controls or has in his or her custody or possession, any funds or other assets of a designated party or listed party. 

  • Facilitating and speeding up the asset recovery processes

 

Whilst, previously, an attachment order could remain in force for 60 days, relevant laws have been amended to extend the validity period to six months. 


In addition, the ICAC has been empowered, with a view to protecting the value of recovered assets, to realise the sale (with the consent of the owner thereof). The proceeds are then transferred to an account managed by the ICAC itself. 


Separately, the Commissioner of Police has been empowered to apply to a judge for an account monitoring order, thus obtaining access to information pertaining to the account/s held by a person with a financial institution. 

  • Introducing a legal requirement to assess the beneficial owners of charitable organisations 

 

A charitable foundation (Foundation) is now required to confirm the identity, credentials and good standing of each of its beneficiaries and beneficial owners; verify the identity of any of its significant donors and ensure that none of them are involved in terrorist-related activities or making use of the Foundation to support terrorists/terrorist organisations. 


The Foundation is further required to maintain records containing details of all movements of funds over a seven-year period. Moreover, disclosure of basic information to any competent authority, upon request, has become mandatory.

  • Obliging all company service providers to report suspicious transactions 

 

There is an obligation on company service providers registered with the Registrar of Companies, other than secretaries referred to under the Companies Act, and management companies licensed by the Financial Services Commission who were already subject to such obligations, to report to the FIU as soon as practicable, but not later than five working days from the date on which it becomes aware of a suspicious transaction.  

Status update regarding technical compliance

In its latest follow-up report of September 2021 (Report), ESAAMLG analysed the progress made by Mauritius to address technical compliance. Through the technical re-ratings, as detailed in the Report, there is evidence on record that Mauritius has demonstrated sufficient progress. 

With the outstanding issue being, principally, that of effectiveness, the work undertaken by the FATF has been crucial in the determination as to whether or not to de-list Mauritius.

Conclusion

Critically, the FATF observed at its June 2021 Plenary that Mauritius had made key reforms by: (i) conducting outreach to promote understanding of ML and TF risks and obligations; (ii) developing risk-based supervision plans effectively; (iii) ensuring access to accurate basic and beneficial ownership information by competent authorities in a timely manner; and (iv) providing training to law enforcement authorities to ensure that they have the capability to conduct ML investigations. 

The FATF further acknowledged that it had come to an initial determination that Mauritius had substantially completed its action plan; that on-site inspection was warranted to verify that the implementation had begun and was being sustained; and that the necessary political commitment remained in place to sustain implementation in the future. With the outcome of the onsite inspection, which effectively took place between 13 and 15 September 2021, with the de-listing of Mauritius on 21 October 2021, the jurisdiction has demonstrated its capacity to meet its commitment towards the international community. The target for Mauritius should now not only be to achieve sustained compliance with relevant AML/CFT laws, but to further enhance its regulatory and supervisory framework through capacity building. Our own view is that the measures taken, as highlighted in this article, are very much “a step in the right direction”. 

Gujadhur is a Partner and Subadar an Associate | Bowmans Mauritius

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