By Ashvin Ramgoolam
Following the publication of the list of high-risk jurisdictions by the Financial Action Task Force (FATF) and the European Commission, Mauritius has, in turn, come with a more or less similar list and it was made possible in accordance with Section 17H(1) of the Financial Intelligence and Anti-Money Laundering Act 2002 (FIAMLA).
Photo – www.coe.int
The Minister of Financial Services and Good Governance (Minister) has, on the recommendation of the National Committee for AML/CFT (Committee), published in the Government Gazette (General Notice 587) on 14th May 2020 the first-ever list of jurisdictions (List) which have been identified by the FATF as having deficiencies in their Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime.
However, the said List was neither communicated ‘immediately’ by the Financial Intelligence Unit (FIU) as mandated and prescribed under Section 17H(5) of the FIAMLA, nor by the members of the Committee which includes the Financial Services Commission (FSC), amongst others. Only the Bank of Mauritius (BoM) has published the information in the subsection AML/CFT on its website.
High-Risk and Sanctioned Jurisdictions
Mauritius has identified Iran and the Democratic People’s Republic of Korea, commonly known as North Korea. Prior to the amendments in the FIAMLA, the said identification process of high-risk jurisdictions was conducted by the regulators, namely the BoM and the FSC. Nevertheless, it is worth highlighting that despite Iran and North Korea being rated as high-risk by the FATF, yet they are also sanctioned countries. For instance, the US Office of Foreign Asset Control (OFAC), the UK HM Treasury, the European Union (EU), amongst others, have included these two jurisdictions in their lists of sanctioned countries. Domestically, the exclusion of Barbados, Myanmar, Pakistan, Syria, Uganda, Yemen, Zimbabwe, just to mention a few, shall inevitably leave many questions to be answered from the stakeholders.
1. Amend the List
To dispel all the confusion and legitimate questions from arising, it is recommended that the Committee reviews the methodology for the identification exercise and it should not restrict itself to the FATF list of high-risk jurisdictions, but should as well consider the FATF list of jurisdictions under increased monitoring and the Basel AML Index issued by the Basel Institute of Governance. The domestic list is worth its weight in gold and it is an important tool especially when it comes to the Risk-Based Approach (RBA). As such, the List is required to be revisited. Substantial changes are then brought so as to avoid confusion between high-risk and sanctioned jurisdictions, because either rating will impact heavily on the risk assessment of financial institutions (banking and non-banking) at various stages, from the initial onboarding stage till the approval of a facility or the ongoing periodic review.
2. Introduce List of Sanctioned Countries
For the benefit of the Financial Services sector, the Committee is also recommended to put in place a dedicated list of sanctioned/prohibited countries. The list of sanctioned countries would comprise jurisdictions that are subject to sanctions imposed by instances like the OFAC, the United Nations, and the EU.
As such, it is advised that the United Nations (Financial Prohibitions, Arms Embargo, and Travel Ban) Sanctions Act 2019 be amended to empower the National Sanctions Secretariat (NSS) to devise and maintain a list of sanctioned countries. The proposed lists were prepared by taking into account of the FATF lists, the internationally recognised Basel AML Index and by assessing the publicly available consolidated table of assessment ratings issued by the FATF which gives a bird’s eye view of the current ratings of the 40 Recommendations and the 11 Immediate Outcomes and also from various sanctions lists.
3. Communicate effectively and efficiently
Communication is an important element when it comes to the dissemination of the List to all the stakeholders. The said List is not a mere list, but it literally ‘dictates’ the RBA. Section 17H(5) stipulates that the FIU must immediately communicate the identified high-risk countries to financial institutions, both banking and non-banking, and also to Designated Non-Financial Businesses and Professions, altogether defined as Reporting Persons. Moreover, it is also the duty for all the members of the Committee to promptly communicate this critical information to all the relevant stakeholders, just as is the case for the communication of the list of designated listed persons in the United Nations Sanctions List by the NSS.
While Mauritius is listing high-risk jurisdictions, ironically the delisting in the FATF and EU lists is of primary concern for all the stakeholders. Mauritius has missed the golden opportunity to be delisted from the FATF list of jurisdictions under increased monitoring. If the Covid-19 pandemic did not crop up and disrupt the ordinary course of life and business, Mauritius would have been subject to FATF post Plenary assessment which is due for June 2020. However, on 28th April 2020, the FATF released a statement to announce that it has temporarily postponed all mutual evaluations and follow-up deadlines, and an additional four-month extension was given to the concerned jurisdictions.
Moreover, two countries, namely Mongolia and Iceland, maintained their deadlines of June 2020. The FATF would issue an updated statement on them in June 2020 after taking cognisance of the progress they have made. In this connection, had Mauritius expressed its intention to stick to the initial deadline, the FATF would have assessed its progress and ultimately issued a statement in June 2020, prior to the European Parliament approving the list of high-risk third countries. As such, Mauritius would have stood a chance to be withdrawn from the FATF list and subsequently from the EU list of high-risk third countries.
It is imperative that the authorities get the various implementations pertaining to the AML/CFT framework right at the very outset, and thus enhancing their effectiveness, especially when the same was criticised by the FATF through the 11 Immediate Outcomes. That said, players evolving in the highly dynamic financial services sector expect to be directed accordingly, particularly when it comes to safeguarding the repute of the jurisdiction.
Moreover, when it comes to delisting Mauritius from the FATF and the European Commission lists, the authorities must not believe that the EU list shall be rejected by the European Parliament. The authorities must avoid the ‘wait-and-see’ or defensive mode; they must be on the ‘work-and-win’ or offensive mode by appropriately channelling resources to keep on working on the implementation of the relevant action plan, and ensure that all the issues have been duly attended.
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 2 June 2020