Enforcement or Liability
Mauritius completed a first mutual evaluation in 2008, under the Eastern and Southern African Anti-Money Laundering Group (ESAAMLG), a FATF regional body. The second ESAAMLG mutual evaluation of Mauritius was completed last year and its draft report has run into controversy. The new methodology of AMF/FT mutual evaluation does not just assess technical compliance, i.e. the existence of laws, regulations, etc, in force, but also the effectiveness of the legal and other AML/FT measures.
It does appear that this is at the heart of the current controversy. The weaknesses in the implementation of our AML/FT are most probably being highlighted in the ESAAMLG draft report, and could lead us to be blacklisted by the FATF in a list of High Risk and other Monitored Jurisdictions. Instead of blaming other ESAAMLG member countries and questioning their intentions, Mauritius should accept that important measures are needed to ensure the effectiveness of its AML/FT legislative arsenal.
Effectiveness of Legislation
The National Anti-Money Laundering should urgently develop performance measures of effectiveness of the AML/FT regime, which should be reviewed annually. The poor level of Suspicious Transaction Reports by the banking system is one indication of a weakly functional AML/FT system. The weak number of successful prosecutions under the AML/FT legislation is another shortcoming. The overall institutional regulatory and enforcement framework, comprising the BOM, the FSC, the Financial Intelligence Unit (FIU), the Asset Recovery Unit, the ICAC, the MRA, and the police, may need to be reviewed for greater consistency and cooperation and effectiveness in Anti-Money Laundering/Financing of Terrorism.
The Role of the FIU
The role of the FIU is completely distorted. It is, as per its name, an intelligence agency, not an investigatory agency for AMF/FT, which, by law, is the responsibility of the ICAC. The Asset Recovery Unit has been removed from the DPP’s office to the FIU, without sensible justification. The FIU is not delivering in terms of effectiveness of AML/FT efforts, and yet, it wants greater powers and legal resources, even from third parties, whereas the ICAC is pushing for the same powers in its design for a Financial Crimes Commission.
Clearly, Mauritius is not in a position to resist international pressures, and cannot but accept the changes required in our company, tax and financial legislation to comply with the OECD/G20 BEPS framework, the EU Code of Conduct approach to tax havens, and the FATF standards and mutual evaluation methodology.
However, while we cannot question the intent behind many of the legislative changes in the Finance Bill to comply with international pressures, we must criticize Government for failing to inspire greater confidence in the future of the financial sector. The proposed legal changes will no doubt adversely affect the prospects for expanding business and employment creation in the financial sector. The negative consequences of the revision in the India-Mauritius tax treaty will become more clearly visible as from April next year, as the transitional window for capital gains exemptions will close. A Responsible Government should have commissioned a study on post transition period.
Under The Previous Government
Government should have already developed and implemented an appropriate financial sector strategy, with accompanying measures, to boost future value-added creation and employment opportunities. Government has long delayed the preparation of a strategy to counteract the negative impact of international pressures on the development of our financial business.
Between 2013-14, the FSC had worked actively on a new strategy for Mauritius to develop as an international financial centre, with the help of renowned international consultants, Percy Mistry and Nikhil Treebohun. Numerous meetings and discussions, led by the FSC, were held with the global business sector and other financial sector operators.
Not many countries have a good framework like Mauritius, an emerging International Financial Centre. According to J.C. Shaman, author of Despot’s Guide to Wealth Management, Britain maintains a network of opaque offshore satellites, including British Virgin Islands. Contrary to the latter Mauritius is not a tax haven and the Minister of Finance gave firm commitments to the European Union to comply with scoreboard criteria. There is nothing however that stops us from taking things at a stride. Mauritius, unlike the US, does not have anonymous shell companies, which are dubbed the gateway cars of financial crimes.
Since the Deputy Prime Minister has used his discerning eyes to scan the DNA of potential investors to issue a Certificate of Character, a pessimistic mood has been prevailing in the financial sector.
It is a major contributor to GDP growth, for high value job creation, an important driver of the economy including the real estate sector which is hoping for continued demand for office space arising from the expansion of financial service sector business. Scandals in the financial sector abound, including the granting of an investment banking licence by the FSC to a doubtful investor like Sobrinho. Confidence is at rock bottom.
The Regime Never Learns
International and Domestic pressures are intensifying and the veil of secrecy will inevitably be lifted by the court. There is no high risk high reward in a sector which owes its legitimacy to substance and to a lesser extent to confidentiality.
Where is the scheme to offer Foreigners the opportunity to obtain Mauritian Citizenship provided a non refundable contribution of $ 1,000,000 is made? The two schemes have been swept under the carpet.
This is the joy of being under the constant gaze of Effective Regulatory bodies. The Standards have to be raised. This Government will never learn and it wants to make hay even if the sun is setting.
Despite commitment to comply with INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS, the Regime continues to go on a spending spree. By 2022 all debts incurred by Government will be computed. Total public debt as a % of GDP will be published. By then they will have to be held accountable in the name of transparency and fair justice.