Mauritius FATF and EC Listing
By Ashvin Ramgoolam
Mauritius was placed in the Financial Action Task Force (FATF) list of increased monitoring and subsequently in the European Commission (EC) High-Risk countries that have deficiencies in their Anti-Money Laundering and Combating of Financing of Terrorism (AML/CFT) framework. On 19th June 2020, the European Council and Parliament approved the aforementioned list which was adopted on 7th May 2020. These lists are considered as a ‘soft sanction’ for countries which have either failed to be compliant with the FATF 40 recommendations which are international AML/CFT norms and standards, or are unable to demonstrate effectiveness with the 11 FATF Immediate Outcomes, which rate the effectiveness of the AML/CFT regime of an assessed jurisdiction.
To understand the unfair situation which Mauritius and other jurisdictions are facing, a comparative analysis has been undertaken by having recourse to a comparative table. The data which are used are publicly available in the FATF consolidated table of assessment ratings, while for countries that do not appear in the abovementioned table, information has been extracted individually from their latest Mutual Evaluation Reports and Follow-Up Reports. The data give an bird’s eye view of the level of compliance and effectiveness of the AML/CFT framework of 20 countries which are linked to this situation.
The methodology is not scientific though, yet is statistically simple. The compliance and effectiveness status of some of the jurisdictions which have recently been listed, delisted or not listed in the FATF and the EC Lists have been compared and analysed. Also, their ranking for the last three (2017, 2018, and 2019) in the Basel AML Index (Index) was included. This Index independently ranks the AML/CFT framework of countries around the world based on their latest FATF ratings.
Referring to the comparative table, Mauritius is the second most compliant jurisdiction with 26 fully compliant FATF recommendations, just after Spain, which scored 28. The Basel AML ranking for both Cyprus and Luxembourg further adds to the confusion. While Cyprus has on record some 16 fully compliant and 21 largely compliant recommendations, Luxembourg, on the other hand, is fully and largely compliant in 1 and 9 recommendations respectively, yet the latter has a much better ranking of 85th than the former which is ranked 74th.
Moreover, there is an interesting fact with respect to five other European countries, namely Netherlands, Poland, Czech Republic, Slovakia, and Luxembourg. In the event that both the number of fully and largely compliant recommendations are added, the total does not equal to the number of recommendations to which Mauritius is fully compliant, except for the Czech Republic which is fully compliant with respect to 27 recommendations. Another aspect that the Czech Republic has inherited is the fact that the level of effectiveness for its AML/CFT regime is transparent and publicly available.
Additionally, these abovementioned five countries are highly AML/CFT compliant jurisdictions and three of the five countries are ranked above 100 in the Index, while Luxembourg is ranked 85th in 2019. In 2018, Mauritius was ranked 85th, but in 2019, the country does not appear in the Index due to lack of data, as stated in the Basel AML Index Report 2019. At some point in time, these ratings and rankings start to give rise to questions about the methodology of these international institutions.
Furthermore, Iceland and Albania seem to be playing in the same league as Mauritius, particularly when their level of compliance and effectiveness is compared. These two jurisdictions have escaped through the big net of the EC. Iceland is a European country and Albania is a candidate for membership to the European Union. Both Iceland and Albania are on the FATF list of jurisdictions under increased monitoring, but the EC appears to be contradicting its own methodology by not including these two countries in its list.
To further add to the contradiction, there are the cases of Iraq and Afghanistan, which surprisingly are not listed in any of the FATF lists, yet they are in the EU list. What makes it incomprehensible is that the sum of the number of the fully, largely and partially compliant recommendations for each of these countries does not equal the number of fully compliant recommendations for Mauritius. Meanwhile, Trinidad and Tobago, which has been delisted by the FATF is still in the EC list.
Furthermore, there are six countries namely Ethiopia, Tunisia, Sri Lanka, Bosnia-Herzegovina, Guyana, and Laos that have benefited from a delisting. If the first three countries have won the battle with regard to the number of compliant recommendations, however these jurisdictions scored a draw against Mauritius when it came to their level of effectiveness. Moreover, it can be observed that these countries have more or less the same level of effectiveness just like Mauritius, whereas for the last three countries, not only their level of compliance is insignificant, but their level of effectiveness is not even publicly available.
In light of the above findings, the methodology which the FATF and the EC use in updating their respective lists is questionable. It is of utmost importance to clear all the inconsistencies which have cropped up after going through the analysis. Moreover, the ranking of the Basel AML Index is also difficult to understand, given that the ranking and the score do not reflect the latest FATF ratings. With all these incoherences, a small island state like Mauritius cannot but continue working to prove that it does not play in the same league as Syria, Iran, Iraq, and North Korea.
Ashvin Ramgoolam is a Compliance professional with extensive experience in the financial services sector. He is the co-author of the first-ever Financial Crime Threat Assessment Report for Mauritius and he is specialised in financial crime compliance, data protection (GDPR), governance, FATCA and CRS.
* Published in print edition on 23 June 2020
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