MAURITIUS STRENGTHENS ITS ANTI-MONEY LAUNDERING/ COMBATING THE FINANCING OF TERRORISM (AML/ CFT) FRAMEWORK
In February 2020, the Financial Action Task Force (FATF) identified Mauritius as a jurisdiction having strategic AML/ CFT deficiencies and placed the country on the list of ‘Jurisdictions under Increased Monitoring’.
On this basis, the European Union (EU) also concluded that Mauritius should be considered as a country having strategic deficiencies in its AML/ CFT regime under Article 9 of its 4th Anti-Money Laundering Directive and added Mauritius to its list of high-risk third countries.
In response Mauritius has made a high-level political commitment to continue working with the FATF/ Eastern and Southern Africa Anti-Money Laundering Group to swiftly strengthen the effectiveness of its AML/ CFT regime through an agreed action plan.
In the same vein, the Parliament of Mauritius has recently enacted the Anti-Money Laundering and Combating of the Financing of Terrorism (Miscellaneous Provisions) Act 2020 (Act). The objective of the Act is to bring further reforms in the financial services sector in order to comply with the recommended international best practices and norms of the FATF.
The Act amends 19 enactments with a view to reinforcing the existing legal provisions to further combat money laundering and the financing of terrorism, and to provide for matters related thereto. Some of the key points that have been covered by the Act are set out below:
Information on beneficial owner
The Act introduces a legal obligation on applicants for incorporation or registration of companies, limited partnerships, limited liability partnerships and foundations, to provide information about beneficial owners to the respective registrars upon incorporation or registration of such entities.
Furthermore, companies now have the obligation to provide all basis information and beneficial ownership information to a competent authority (which has been defined as a public body responsible to combat money laundering or terrorist financing and includes an investigatory authority) upon request.
One of the deficiencies identified by the FATF is the failure to ensure access to accurate basic and beneficial ownership information by competent authorities in a timely manner. These new measures aim to give enforcement authorities prompt access to updated beneficial ownership information and to address this shortcoming.
Regulators of banking and non-banking financial institutions
Another deficiency highlighted by the FATF is the shortcomings in demonstrating that the supervisors of the Mauritius global business sector implement risk-based supervision.
The Act gives the regulators of both banking and non-banking financial institutions increased powers to carry out on-site inspections and examinations. When determining the frequency and intensity of an inspection or examination, the regulators must consider several factors including:
- money-laundering risks and policies;
- internal controls and procedures associated with a licensee;
- money laundering or terrorism financing risks present in Mauritius; and
- the characteristics of a licensee and the degree of discretion allowed to the licensee under the risk-based approach implemented by the regulators.
The regulators have also been mandated to review the assessment of the money laundering or terrorism financing risk profile of a licensee (or its group for an institution licensed by the Bank of Mauritius) when there are major events or developments in the management and operations of the licensee (or its group).
The Act has amended various pieces of legislations including the Banking Act, 2004, the Financial Intelligence and Anti-Money Laundering Act, 2002 (FIAMLA), and the Prevention of Corruption Act, 2002 (POCA), to provide for more severe or new penalties for non-compliance and breaches of AML/ CFT laws, which include the following:
- Any financial institution or licensee of the Bank of Mauritius that fails to comply with any guideline, directive or instructions issued by the Bank of Mauritius in relation to customer due diligence (CDD) measures and record-keeping of the CDD documents may, on conviction, be liable for a fine of MUR 10 million (increased from MUR 1 million).
- The FIAMLA has also been amended to include a new obligation of any member of a relevant profession or occupation to provide information to any regulatory body. Such member may, on conviction for non-compliance of the obligation, be liable to a fine not exceeding
MUR 1 million and to imprisonment for a term not exceeding five years.
- A fine of up to MUR10 million may be imposed upon a legal person (other than a natural person) found to have committed a corruption offence under the POCA.
The above changes, coupled with a number of measures being taken by the regulatory bodies in Mauritius, demonstrate the strong determination of Mauritius to meet the FATF recommendations and are in line with the high-level political commitment made by the country to improve its AML/ CFT regime.
It is important to highlight that Mauritius is currently either compliant or largely compliant with 35 out of the 40 FATF recommendations and it has already met the FATF expectations in respect of the ‘Big Six Recommendations’.
The Minister of Financial Services and Good Governance is hopeful that the EU will remove Mauritius from its list of high-risk countries within a timeline of six weeks once the country has adhered to the five pending recommendations of the FATF and it is removed from the FATF list.