Wake up calls from the FATF & EU

Corruption on major contracts are crimes that are inevitably and intimately linked with money-laundering as the FATF and G20 have expressed: ‘Money laundering is the process of concealing illicit gains that were generated from criminal activity’

By S. Callikan

The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)/Financial Action Task Force (FATF) assessment conducted in 2017 was a wake-up call for our Mauritian administration, including the Bank of Mauritius, the Financial Services Commission, the Financial Intelligence Unit, the Ministry of Financial Services, the Ministry of Finance and the Attorney General’s office. They surely worked overtime and amendments to some 19 pieces of legislation were put forward in the Anti-Money Laundering and Combatting the Financing of Terrorism and Proliferation (Miscellaneous Provisions) Bill tabled in 2019 by then PM and Minister of Finance Hon Pravind Kumar Jugnauth. They were unfortunately not sufficient to prevent Mauritius being placed in the list of countries with “strategic deficiencies” and under “increased monitoring” at the FATF plenary of February 2020.

Nicolas Sarkozy & Francois Fillon 1. Photo – www.gala.fr

That grey-listing has had costly repercussions as government found out with dismay at the subsequent European Union blacklisting in May-June this year. The EU, OECD and most international institutions and lending banks have observer status at the FATF. The EU not surprisingly bases itself largely but not solely on the FATF yardstick; whether it accepts government’s plea to conduct its “own assessment” and whether such assessment will pull us out of the blacklist remains more of a forlorn hope.

The incoming Minister of Finance may be entirely right that the international financial community to which we have aspired and struggled to belong, is continuously evolving its mandatory and desirable requirements, passing from 40 at one stage to 58 nowadays. He added that we are progressing since we met 35 then and 53 of these requirements now; unfortunately it seems that the same five strategic deficiencies are dogging us, sticking out like a sore set of fingers for all international observers to watch under their scanners.

At its third and final plenary held virtually on 30 June 2020, FATF reassessed the progress of Iceland and Mongolia and delisted both countries from the grey list. Sadly, it is understood that Mauritius was either not ready or chose not to present its case for review of our inglorious greylisting at that assessment window. A new set of amendments to another 19 pieces of legislation is being brought in by government this week in Parliament. This renewed but late effort may go some way to ease international financial community concerns with our jurisdiction. Some recent Central Bank agitation about its regulatory oversight of private banks may go in that direction. But whether these will be enough to satisfy that we pass muster on all five strategic deficiencies highlighted since 2017 remains uncertain. We may have the best panoply of laws and regulations, but if applied sparingly, sporadically or with high-level political discretion, they may not earn us the waiver we seek.

The next plenary rounds are expected in early September at ESAMLAG level with the critical FATF meeting scheduled for October this year. Failure at those junctures and staying on the FATF grey list with some notorious comrades (like Myanmar, Syria, Yemen, Pakistan, Cambodia…) would be most awkward for us with respect to our competitors and international community watchers. It would certainly make exit from the EU blacklist extremely dicey, but what should be equally worrying for our administration is that we may have to face at the next assessment rounds the continuous upward drive in mandatory requirements which have been already announced under the new German chair over the next two years.

From the FATF website, these will most notably include a stiffening of measures on bitcoins and cryptocurrencies, but the following advance notice should be digested: “These (reviews) will ensure that evaluations will remain comprehensive… but will be more timely, have greater emphasis on effectiveness and will strengthen the risk-based elements of the assessment process. The FATF expects to complete this strategic review, including the revisions to the Methodology for assessments, in 2021.” In other words more stringent demands where we have been found most lacking is not good news. It should certainly be another wake up call to be treated more seriously through collective, concerted and planned action rather than playing catch-up and spin-politics.

In this very limited sense therefore, the recent high-profile financial scandals which have splashed headlines, including the most important corruption scandal known as the St Louis-CEB affair, are an opportunity to restore some badly needed credibility of our enforcement and investigation agencies. It is after all a case where the corrupter (Danish firm Burmeister & Wain Scandinavian Contractor), the mechanisms, the agents, the intermediaries and the purpose of the bribery to make a tailor-fit submission by the company at Rs 700 m more than its previous failed bid for the same project, have all been acknowledged by the latter’s own commissioned investigation, the results of which have been submitted to the African Development Bank. Much depends therefore on the expeditiousness and effectiveness of our investigation authorities to book the corrupt on our side of the shady deal and enforce appropriate legal sanction.

The EU and the FATF will have noted that this high-profile affair closely involving the two political partners in government has been disclosed fortuitously by an anonymous whistle-blower rather than by our intrinsic vigilance capabilities. The EU will also be aware that a Danish company has cleaned up its act, accepting a serious 21-month ban from all international tenders. It will also be aware of the unprecedented anti-fraud and corruption charges that have led French former PM Francois Fillon condemned to jail and financial sanction, pending his judicial appeal. Not to mention financial misdemeanor charges expected to be heard against former French President Nicolas Sarkozy as from October. These are not times when the collective European psyche may feel kindly towards corruption and financial scam tolerance in an island-state so dependent on western controlled financial instruments. 

Corruption on major contracts are crimes that are inevitably and intimately linked with money-laundering as the FATF and G20 have expressed: “The FATF attaches a great importance to the fight against corruption: corruption has the potential to bring catastrophic harm to economic development, the fight against organized crime, and respect for the law and effective governance. Corruption offenses, such as bribery or theft of public funds, are generally committed for the purpose of obtaining private gain. Money laundering is the process of concealing illicit gains that were generated from criminal activity.”

We have every reason therefore to expect that the Independent Commission Against Corruption (ICAC) can break the mold and demonstrate some effectiveness at such a difficult juncture for the reputation of our jurisdiction, our banks, our financial operators and the thousands of skilled employees who work in the sector. Anything else would be too abysmal to even contemplate.

* Published in print edition on 10 July 2020

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