Insight

GUEST POST: Mauritius responding and emerging stronger: where do we stand?

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Since its grey-listing by the Financial Action Task Force (“FATF”) in February 2020, Mauritius has been positioning itself to emerge stronger. Stakeholders have been working hard to strengthen the effectiveness of the country’s Anti-Money Laundering/Combating the Financing of Terrorism (“AML/CFT”) regime.

With reforms in legislative and regulatory measures being pushed (following a high-level political commitment made to the FATF and ESAAMLG) there has been increased pressure on all stakeholders, both in the public and private sector, to ensure implementation. The financial services sector, and especially global businesses in Mauritius, have been experiencing higher levels of scrutiny. This includes onsite inspection from regulators and mandated independent reviews, an exercise which the global business market was hardly acquainted with in the past.

In the recent Budget Speech, additional measures by the Mauritian Government were highlighted. The measures announced continue the trend of previous years with the overall purpose of implementing FATF recommendations, which have a direct bearing on our status as an international financial centre of good repute.

It is worth noting that during the plenary session held at the end of June 2021, the FATF acknowledged that Mauritius has substantially completed its Action Plan aimed at strengthening the effectiveness of its AML/CFT regime. This is a significant step for Mauritius in its endeavour to exit the FATF list of jurisdictions under increased monitoring.

Through its public statement published on 25 June 2021, the FATF has complimented Mauritius on the key reforms undertaken including:

(1) conducting outreach to promote understanding of ML and TF risks and obligations

(2) developing risk-based supervision plans effectively for the Financial Services Commission

(3) ensuring access to accurate beneficial ownership information by competent authorities in a timely manner

(4) providing training for law enforcement authorities to ensure that they have the capability to conduct money laundering investigations

The journey encompassing major reforms in the legislative and regulatory space

The country has witnessed major developments in legislation and regulation over the last couple of years, brought forward mainly to address the shortcomings identified in the ESAAMLG Mutual Evaluation Report for Mauritius (issued in 2018). The following key legislations and regulations have been implemented to align the country’s AML/CFT framework to the FATF standards:

  • Financial Intelligence and Anti-Money Laundering Act 2002
  • Financial Intelligence and Anti-Money Laundering Regulations 2018
  • The Financial Services Commission (“FSC”) Handbook 2020
  • the United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act

In a short space of time, Mauritius has worked towards the implementation of an enhanced AML/CFT regime and realised the importance of protecting the integrity of its market. The headlines have now begun to turn, with Mauritius being painted as an example to Malta, as the latter country enters the FATF grey list.

Paving the way to boost alternative investment funds

Mauritius is known for its attractive business framework, which includes numerous incentives, from capital gains tax and free repatriation of profits to capital and interest. There has been a surge in interest within the alternative investment sector in Mauritius over the years and it comes as no surprise that the grey listing by the FATF, in addition to the blacklisting by the European Union, has significantly impacted the sector’s activities.

A lot of emphasis has been laid on the effective implementation of AML/CFT controls across the global financial framework. As Mauritius completes the FATF action plans at a technical level, the onus now comes down to the licensed fund entities to demonstrate to the FATF that the regime is effective.

As rightly pointed out by a statement from the International Monetary Fund, AML/CFT controls, when implemented effectively, mitigate the adverse effects of criminal economic activity and promote integrity and stability in financial markets.

It has to be recognised that the licensed entities have experienced shockwaves, as the changes brought forward have had a direct impact on them. While the implementation of the additional measures for an enhanced and effective AML/CFT framework within the alternative investment segment continues to be a challenge, it is worth pointing out that a higher scrutiny allows them to not only better comply but also implement the best practice norms for good governance and the fight against money laundering, terrorist financing and proliferation financing.

It has often been advocated that a good governance system allows entities to deliver positive corporate performance and a sustainable business. With focus being put by all stakeholders to implement these changes effectively, we foresee major developments in the alternative investment funds sector, as Mauritius positions itself as a jurisdiction where transparency, good governance and adherence to internationally recognised standards and best practices are being observed.

 

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