MAURITIUS LISTED ON THE EU COMMISSION LIST OF HIGH RISK THIRD COUNTRIES

By Theunis Claassen Wednesday, May 13, 2020
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On 7 May 2020 Mauritius was added to the EU list of high-risk third countries.

This follows the adoption of a new delegated regulation (Delegated Regulation) by the EU in relation to third countries which have strategic deficiencies in their ‘anti-money laundering/combat the financing of terrorism’ regimes (AML/CFT) and that pose significant threats to the financial system of the Union.

The Identification of these countries stems from Article 9 of the Directive (EU) 2015/849 (4th Anti-Money Laundering Directive) and is aimed at protecting the EU financial system and the proper functioning of its internal markets.

The addition of Mauritius is understood to be a direct consequence of the listing of Mauritius by the Financial Action Task Force (FATF) on its list of ‘Jurisdictions under Increased Monitoring’ earlier this year.

According to the EU, their assessment methodology for the inclusion of countries on the list, has been revised to take into account information from international organisations and standard setters in the field of AML/CFT, such as FATF public statements, mutual evaluation or detailed assessment reports or published follow-up reports.

The comprehensive working document setting out the revised EU methodology for the identification of high risk third countries can be accessed from the EU website here.

Reasons for the inclusion of Mauritius

In February 2020, the FATF identified Mauritius as a jurisdiction having strategic AML/CFT deficiencies for which Mauritius has developed an action plan with the FATF. The deficiencies include:

  • deficiencies in demonstrating that the supervisors of its global business sector and DNFBPs implement risk-based supervision;
  • failure to ensure access to accurate basic and beneficial ownership information by competent authorities in a timely manner;
  • failure to demonstrate that law enforcement authorities have capacity to conduct money laundering investigations, including parallel financial investigations and complex cases;
  • failure in implementing a risk-based approach for supervision of its non-profit organisation sector to prevent abuse for terrorist financing purposes; and
  • failure to demonstrate adequate implementation of targeted financial sanctions through outreach and supervision.

On this basis, the EU concludes that Mauritius should be considered as a country having strategic deficiencies in its AML/CFT regime under Article 9 of 4th Anti-Money Laundering Directive.

Consequences of being listed

As a direct consequence of the adoption of the Delegated Regulation, obliged entities in all Member States (which include financial services institutions, trusts, company service providers) will be bound to apply enhanced customer due diligence measures according to article 18a of the 4th Anti-Money Laundering Directive with respect to business relationships or transactions involving countries included in the Annex to the Delegated Regulation (i.e. including Mauritius).

Furthermore, Article 155(2) of Regulation (EU) 2018/1046 prohibits persons and entities implementing Union funds or budgetary guarantees from entering into new or renewed operations with entities incorporated or established in countries listed in the Delegated Regulation, except when an action is physically implemented in these countries and subject to the absence of other risk factors.

Effective date

The Delegated Regulation list is not yet 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.

Current situation and Mauritian response

Mauritius is currently 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’, that is, the criminalization of the money laundering offence, the criminalization of the terrorism financing offence, the implementation of a framework for targeted financial sanctions, customer due diligence, record keeping and the reporting of suspicious transactions.

A plan of action had already been initiated to implement the remaining five recommendations within agreed timeframes. In addition, in February 2020, Mauritius made a high-level political commitment to continue to work with the FATF/ Eastern and Southern Africa Anti-Money Laundering Group to swiftly strengthen the effectiveness of its AML/CFT regime through the agreed action plan.

In a communique from the Mauritian Ministry of Financial Services and Good Governance on 9 May this year, Mauritius reiterates its commitment to implementing the FATF Action Plan as soon as possible. In this regard, and despite the lockdown restrictions prevailing in Mauritius since 20 March 2020, the Mauritian Authorities delivered on their commitment and a first progress report has been sent to the FATF. Unfortunately, the progress report as not been assessed yet, given the prevailing COVID restrictions in Europe.

Mauritius has continued to work extensively with various technical assistance providers and in the communique, Mauritius has reiterated its high-level political commitment to implement the action plan of the FATF as soon as possible in order to exit the FATF and the EU lists. It has also given its assurance to the global investment community that it remains a credible and trusted business jurisdiction.