Over the years, Mauritius has consistently implemented reforms to enhance the island legal and regulatory framework and uphold its reputation as an International Financial Centre (IFC).
Responding effectively to international demands in the areas of anti-money laundering and combatting the financing of terrorism (AML/CFT) is an integral part of building the resilience of the Mauritius IFC and ensuring that Mauritius remains a viable investment destination.
Accordingly, Mauritius, as a founder nation of the Eastern and Southern African Anti-Money Laundering Group (ESAAMLG) – which is an associate member of the Financial Action Task Force (FATF) – participates in a self-assessment process to review its progress in implementing the FATF 40 recommendations on AML/CFT.
Where Mauritius stands on the international AML/CFT front1
In September 2018, the publication of the Mutual Evaluation Report for Mauritius by the ESAAMLG resulted in the jurisdiction being declared compliant or largely compliant with only 14 of 40 FATF Recommendations.
Following this setback, Mauritius brought numerous amendments to its AML/CFT framework. In particular, the Financial Intelligence and Anti Money Laundering Regulations were promulgated as from 01 October 2018 to address FATF requirements regarding Customer Due Diligence, Politically Exposed Persons, Correspondent Banking, Money or Value Transfer Services, New Technologies, Wire Transfers, Reliance on Third Parties, and Internal Control, Foreign Branches and Subsidiaries, amongst others.
Consequent on this extensive regulatory exercise, Mauritius submitted two follow up reports as well as two applications for technical compliance re-rating to the ESAAMLG, which were considered at its April 2019 and September 2019 meetings. In the light of these two re-rating exercises, focusing on the ‘Technical’ pillar, Mauritius was rated compliant or largely compliant on 35 of 40 Recommendations, including the “Big Six” Recommendations.
It is also worth noting that even in terms of the ‘Effectiveness’ pillar of the FATF’s Recommendations, Mauritius had only 5 remaining outstanding actions, having achieved 53 of the 58 Recommended Actions within one single year.
Why was Mauritius included on FATF and EU lists?2
Despite significant progress made since its initial review in September 2018, Mauritius found itself in the FATF list of jurisdictions under increased monitoring in February 2020. This was due to FATF’s continued perception of 5 strategic deficiencies in the Effectiveness of Mauritius’ AML/CFT regime, which were outlined as failures on the part of the jurisdiction in:
(1) Demonstrating that the supervisors of its global business sector and DNFBPs (Designated Non-Financial Businesses and Professions) implemented risk-based supervision; (2) Ensuring access to accurate basic and beneficial ownership information by competent authorities in a timely manner; (3) Demonstrating that law enforcement authorities have the capacity to conduct money laundering investigations, including parallel financial investigations and complex cases; (4) Implementing a risk-based approach for supervision of its non-profit sector to prevent abuse for terrorist financing purposes; and (5) Demonstrating adequate implementation of targeted financial sanctions through outreach and supervision.
Thereafter, in May 2020, Mauritius was placed on the European Commission’s new list of high-risk third countries (the blacklist). Notwithstanding that the new methodology to identify such countries was published on the same day as the list, and that Mauritius was not given an opportunity to provide an explanation or make representations, the European Commission relied solely on the findings of the FATF.
Faraz Rojid’s article: The 2020-21 Budget: Connecting the dots for the Mauritius IFC
How Mauritius has responded to the FATF assessment3
Following the inclusion of Mauritius in the FATF grey-list and thereafter in the European Commission’s blacklist, the government has redoubled its efforts in the AML/CFT area. At the outset, despite being given time till September 2022 by the FATF, the government of Mauritius preponed the timetable for meeting the five pending FATF Recommendations to August 2020.
Moreover, Mauritius proactively proposed the setting up of a technical platform between the Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) of the European Commission and the Mauritius delegation to provide an update on the progress made by Mauritius. On 30 June 2020, the FATF requested the Mauritian Authorities to submit a progress report along with all supportive documents to substantiate the progress made so far by 31 July 2020.
On 07 July 2020, the first meeting of the technical platform was held and it was brought to the attention of the Mauritian Authorities that the European Commission will base itself on the assessment which will be conducted by the FATF and that once Mauritius is removed from the FATF list, the European Commission will take around 6 weeks to remove the jurisdiction from the blacklist.
In July 2020, the AML and CFT (Miscellaneous Provisions) Act 2020 was adopted by the National Assembly of Mauritius to strengthen the legal framework for AML/CFT enforcement, amendments were brought to the Financial Intelligence and Anti-Money Laundering Act 2002 to fine-tune the supervisory legal framework, and the Prevention of Corruption Act 2002 was also bolstered to provide a stronger deterrent to corruption offences in the financial services sector.
Hon Mahen Kumar Seeruttun’s interview as Minister of Financial Services and Good Governance
How the FATF has responded to Mauritius’ efforts4
During the subsequent virtual face-to-face meeting and plenary meeting in September 2020 and October 2020 respectively, the FATF commended the tremendous progress made by Mauritius in implementing the Action Plan, despite the COVID-19 pandemic. During the meeting, the assessors also complimented the sustained progress made by Mauritius. Followingo that, Mauritius submitted its Second Progress Report to the FATF on 27 November 2020 which described all the updated actions taken to implement the Action Plan and underlined the significant overall progress undertaken by Mauritius.
Since then, on 22 January 2021, a meeting was held between the FATF/Middle East Joint Group and the Mauritian delegation (headed by the Governor of the Bank of Mauritius), whereby Mauritius had the opportunity to provide clarifications to the FATF on queries raised by the assessors. Following the meeting, the ESAAMLG issued its 3rd Follow-up Report (FUR) for Mauritius on 25 January 2021. It conducted a re-rating exercise on the compliance status of Mauritius with regards to the FATF 40 Recommendations where it noted that Mauritius is overall compliant, largely compliant and partially compliant on 39 Recommendations.
At the latest FATF plenary session held from 22 to 25 February 2021 in Paris, the Second Progress Report of Mauritius was considered along with the 3rd FUR, and the report of the assessors. In the course of this meeting, the list of jurisdictions under increased monitoring was revised, and the progress made by various jurisdictions was reviewed. While Mauritius has been maintained on the list, the FATF noted a number of achievements in the fields of outreach and training. Most crucially, the FATF does not call for the application of enhanced due diligence measures to be applied to Mauritius, but encourages it to keep up its efforts on the 5 action points needed to ensure its removal from the grey-list, in a strong signal that the jurisdiction is proceeding in the right direction.5
- Source: https://www.blc.mu/blc.mu1/documents/news/Communique_MFSGG_27_Jan_21.jpg
- Source: http://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/increased-monitoring-february-2021.html
The way forward: a public-private partnership
For its part, the government of Mauritius has noted that the jurisdiction remains focused on proving its adherence to the international best practice norms for the fight against money laundering, terrorist financing and proliferation financing, and reiterates its unflinching commitment to exit the FATF list at the earliest.
At Rogers Capital, we believe that this situation calls for a strong partnership between the public and private sectors wherein our team has been playing its part by supporting the government’s actions in building an effective AML/CFT regime and redoubling training efforts in the AML/CFT arena with a view to addressing the five remaining outstanding actions.
As financial centres across the world review their financial offerings and accelerate technological adoption in the light of COVID-19, we believe that Mauritius offers a stable and secure environment for investors who are seeking to leverage the vast, untapped potential of the African mainland. By leveraging Mauritius as an investment hub for Africa, investors can also avail of the vast network of Investor Protection and Promotion Agreements held with 23 African countries, as well as the Double Tax Avoidance Agreements that the island economy has in place with 21 African countries.*
With financial inclusion in Africa standing at 42.6%** compared to the global average of 69%***, while mobile money transactions are well above the 2% global average at 10% of the continent’s GDP****, it is evident that investments in Africa in general represent a viable opportunity for investors. It is equally clear then that Mauritius, with its stable political environment, sound regulatory framework and robust strides in AML/CFT compliance, is well poised to act as a regional financial centre that investors can use to channel their investments and build the Africa of tomorrow.