FATF or the Financial Action Task Force, the global body responsible for setting anti money laundering standards, has included Mauritius on a list of countries under increased monitoring, commonly known as the grey list. Grey listed countries are assessed to have deficiencies in their anti-money laundering regimes with regard to compliance with FATF standards, but are cooperating with FATF to address these deficiencies. Another FATF list – a black list, comprises countries that are not committing to address their deficiencies.
FATF determined that Mauritius has not made positive and tangible progress on several effectiveness issues, including the lack of effective risk based supervision, the lack of improvement in access to beneficial ownership information, the lack of capability to conduct money laundering investigations, including parallel investigations, the lack of control and oversight over non-profit organizations on terrorism financing, and the lack of implementation of targeted financial sanctions related to terrorism and proliferation financing.
The announced reorganization of the CCID this week is a late effort to address the incapacity, as pointed by FATF, of law enforcement agencies in Mauritius to conduct parallel investigations, i.e., investigations of both the money laundering offence and the predicate offence, whether arising from drug crime, tax evasion, corruption or other serious offences. In failing to ensure an effective AML/CFT system by conducting parallel investigations, Government has missed a key opportunity to wage a winning battle against drug crime and trafficking.
The FATF also highlights the non-existence of supervision of the non-financial sectors, especially of casinos, bookmakers and gambling activities, to combat money laundering. This only confirms the symbiotic relationship of this Government with the gambling industry. It is for reflection whether a complete review and overhaul of ICAC and other law enforcement agencies is not warranted to boost the country’s effectiveness in tackling drug and financial crime.
The FATF does not call for the application of enhanced due diligence to be applied to these jurisdictions, but encourages its members to take into account the information on the country in their risk analysis. In other words, financial intermediaries and other foreign investors dealing with Mauritius will consider whether its deficiencies in complying with FATF standards do not put them at higher risk.
The FATF greylisting is already impacting negatively on the global business sector. Operators in global business are experiencing difficulties with international banks in transferring their clients’ funds. New funds are postponing or dropping Mauritius as a potential choice for domiciliation, while large Mauritius based funds are exploring the option of relocating to Singapore. It is also reported that custodians are applying a higher monitoring threshold on beneficial ownership disclosure.
While SEBI, India’s securities market regulator, has reassured foreign investors from Mauritius of continued access to India, Mauritian foreign portfolio investors continue to be classified in an inferior category because Mauritius is not an FATF member, which disadvantages Mauritius vis à vis its competitors. Mauritius on the FATF greylist undermines our case for a review of SEBI classification.
EU also establishes every year a list of high risk third countries with strategic deficiencies in their anti money laundering regimes, complementary to the EU blacklist of tax havens. The February 2019 EU blacklist comprised 23 countries, including 12, or almost all, countries from the FATF black and greylists, but this blacklist was rejected by the EU member states. A new EU list will be drawn by the EU in 2020 based on a revised methodology that goes beyond FATF criteria.
A possible blacklisting of Mauritius by the EU in 2020 should be avoided at all costs as it would further undermine our image and reputation, and damage the growth prospects of our economy. For example, EU-listed countries face enhanced due diligence measures, which would seriously hamper the smooth running of business and trade.
Government must intensify efforts to correct deficiencies and fully strengthen the effectiveness of our regime to counter money laundering and the financing of terrorism. Without trying to shift the blame to a previous Government, or to avoid or distort the truth about the negative consequences of FATF greylisting.
It is certainly of no comfort to note that former Chairman and Chief Executive of the Financial Services Commission are now in a position of greater policy-making responsibility. The FSC is the institution most taken to task by the FATF for lack of adequate supervision. To recall just one instance, the FSC granted Sobrinho an investment banking licence, which the Bank of Mauritius had objected to.
What is really needed is a frank and open discussion of our money laundering weaknesses, the rallying of a national endeavour to keep our country safe from dirty money, and invigorating the relevant institutions with adequate skills and resources to reinforce their credibility and effectiveness.