By Ashvin Ramgoolam
The Minister of Finance, Economic Planning and Development, Hon Renganaden Padayachy, has presented his first-ever Budget on 4thJune 2020. Despite being a socio-economic and accounting exercise, the national Budget 2020-2021comprises a number of measures… that are really not. Focusing on the financial services sector, the five main ‘measures’ that were enumerated to enable Mauritius to be withdrawn from the Financial Action Task Force (FATF) and the European Commission list of high-risk countries are actually action points recommended by the FATF that, Budget or not, the authorities ought to have already worked on.
Compliance with the FATF Recommendations
The Government is, more than ever, committed to work on the action plan and to make Mauritius a fully compliant and effective jurisdiction. As such, the Government should prioritise on the following, against anything else:
1. Risk-based supervisions in accordance with the recommendations of the FATF
The Bank of Mauritius (BoM) and the Financial Services Commission (FSC) have already put in place an AML/CFT Risk-Based Supervision (RBS) framework by setting up a dedicated AML/CFT team within its Supervision Department. This framework was established when the aforementioned current Minister was the then first Governor of the BoM. As such, with regard to the RBS, Mauritius is practically compliant and the private sector is playing a crucial role by complying with the instructions from the regulators.
2. Targeted outreach programmes to promote clear understanding of Money Laundering and Terrorist Financing risks
The Government must come forward with a detailed plan in view of disseminating knowledge on ML and TF risks to a larger audience. As such, the Financial Services Institute may develop and deliver a foundation course or introductory certification on the financial crimes to fresh graduates, as well as to civil servants, amongst others. The Mauritius Bankers Association, the Association of Trustees and Management Companies, Global Finance Mauritius, amongst other stakeholders may also work in collaboration with the Government for a dedicated annual one-week awareness campaign on Ml and TF risks.
3. Increasing the reporting of suspicious transactions
A mismatch in the number of suspicious transaction reports filed to the Financial Intelligence Unit (FIU) between the banking and the non-banking institutions has been noted. Despite a regulatory requirement that training be provided to all the staff of a regulated body annually, the latter must ensure that the staff have developed the skill to identify suspicious transaction thanks to warning signs. The FIU may also organise trainings targeting the Money Laundering Reporting Officers (MLRO), Deputy MLRO, and Compliance Officers on a regular basis.
4. Targeted financial sanctions in cases of terrorist financing
Mauritius has come forward with the United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act 2019. This legislation provides a framework to implement targeted sanctions, including financial sanctions, arms embargo, and travel ban, and other measures imposed by the United Nations Security Council. Having said that, Mauritius has addressed the issue of the targeted financial sanctions in cases of TF thanks to actions taken well before the Budget.
5. The timely access to beneficial ownership information
Mauritius must take a call as to whether the beneficial ownership information should be made available to the public, for instance by inserting a dedicated ‘Beneficial Owner Information’ section in reports which are generated by the Corporate and Business Registration Department online company search platform, while the aspect of confidentiality and data protection is be taken into account.
Introduce an AML/CFT (Miscellaneous Provisions) Bill
The Government will come up with a new AML/CFT (Miscellaneous Provisions) Bill to complement the existing legislations and shall ensure that Mauritius is a compliant jurisdiction at all levels. However, it is of paramount importance that the aforementioned Bill is introduced, voted, assented and gazetted prior to September 2020 so that the regulators and the regulated entities have ample time to incorporate the amendments in their Guidelines, Code or Manual, and Policies before the October 2020 FATF assessment.
Financial Offences Court
Additionally, a dedicated and specialised Financial Offences Court shall be set up to hear cases related to financial crime within a reasonable timeframe. Hence, delays would be avoided in prosecuting criminals and where applicable, assets could be ordered to be frozen by the Asset Recovery Unit.
Introduce New Financial Products
As a diversification strategy, the following products shall be made available to the market to further enhance competitiveness as an International Financial Centre:
1. Central Bank Digital Currency
Central Bank Digital Currency (CBDC), a widely accessible digital form of fiat money that could be used as legal tender. CBDC takes crypto currency form as a new form of money, with the difference that the power of money issuance and monetary policies are still in the hands of the central bank.
2. An Insurance Wrapper
The Insurance Wrapper is referred to as a life insurance policy ‘wrapped’ around the policy owner’s (the investor) investment portfolio made up of investment funds, securities, shares, bonds, listed and non-listed investments.
3. Variable Capital Companies
Variable Capital Companies (VCC) may serve as a structure for both open and closed-ended investment funds. It is a combination of a legal entity as well as a fund structure and may be used for all types of investment funds, including mutual funds, hedge funds, private equity, and real estate funds.
4. An inaugural Sukuk issuance by the Bank of Mauritius
Sukuk, also known as Islamic bond, is a Sharia-compliant, fixed-income capital markets instrument that represents a portion of ownership in a portfolio of eligible existing or future assets. Unlike traditional bonds, Sukuk does not represent a debt obligation. The investors are also entitled to part of the profits generated by the asset.
5. Green and Blue Bond frameworks by the Bank of Mauritius
Green bonds or Climate Bonds are specifically linked to climate change-change mitigation, adaptation, and resilience and they are financing climate change solutions, whereas Blue Bonds or Ocean Bonds are an innovative ocean financing instrument whereby funds raised are earmarked exclusively for ocean-friendly projects which are devised to enhance ocean and coastal resilience.
- The Central Know Your Customer (CKYC) project has once again surfaced after 2 years. The centralised database will comprise KYC documents (Passport, National Identity Card, Proof of Address, amongst other) of customers engaged in various financial market segments. This shall ensure that once a person completes his KYC process with a financial institution, he will need not be required to go through the KYC process again.
- The BoM shall also come up with new frameworks for digital banking, private banking, and wealth management by banks, and these frameworks are expected to be in the form of guidelines and shall also upgrade the Mauritius Credit Information Bureau (MCIB) to provide credit score of potential borrowers.
- As part of the fund-leveraging mechanism, a dedicated Venture Capital Market will be set up at the Stock Exchange of Mauritius for start-ups and Small and Medium Enterprises.
Amendments to Existing Laws
A number of amendments in the existing laws governing the financial services sector was proposed and the laws which shall be impacted are Banking Act 2004, Financial Services Act 2007, Insurance Act 2005, Mauritius Deposit Insurance Scheme Act 2019, Private Pensions Scheme Act 2012, and Securities Act 2005.
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 for Mauritius and he is specialised in financial crime compliance, data protection (GDPR), governance, FATCA and CRS.
* Published in print edition on 12 June 2020