Why are we still on the EU’s blacklist?

Published in l'express of 24 March 2021

In Feb 2020, FATF included Mauritius on its greylist of high-risk money laundering jurisdictions because of identified strategic deficiencies in its AML/CFT regime. As a consequence, EU also added Mauritius on its money laundering blacklist in May 2020, effective October 2020.

Mauritius is thus considered as a FATF non-compliant country, and FATF members are called upon to apply enhanced due diligence measures proportionate to the risks arising from its AML/CFT strategic deficiencies. Foreign regulators like the Reserve Bank of India apply more stringent regulations to investments from FATF non-compliant countries.

All FATF greylisted countries develop an action plan with the FATF to address their AML/CFT strategic deficiencies. Mauritius agreed to implement various measures based on an action plan agreed with the FATF, with a time line up to Sep 2021.

As for EU blacklisted jurisdictions, a number of entities in the EU are legally obliged to apply enhanced customer due diligence measures with respect to business relationships or transactions involving blacklisted countries. These entities include EU banks and other financial institutions, as well as accounting and legal professional, and even real estate agents. Furthermore, the use of EU funded financial instruments and budgetary guarantees is subject to stricter provisions.

For an end to EU blacklisting, Mauritius must first be removed from the FATF greylist. Mauritius had sought to intensify and speed up the implementation the FATF action plan so as not to appear on the FATF greylist in early 2021, but its efforts have proved unsuccessful. Mauritius made submissions to the FATF at end July 2020 and end November 2020.

Iceland and Mongolia are the two countries that were recently taken out of the FATF’s greylist, why didn’t we make it ?

In an assessment of Mauritius dated January 2021, the FATF acknowledged that though a number of action items have been largely addressed, there were far too many action items that remained partially addressed. Details of the strategic deficiencies and the remaining actions that need to be taken to address these deficiencies are detailed below.

New agreed deadlines have now been set for tackling these partially addressed and unaddressed action items. The final timeline of the action plan has been extended from Sep 2021 to Jan 2022. FATF encourages the Mauritian authorities ” to continue their efforts so that the action plan can be fully completed with the agreed timeline”. Mauritius is thus likely to remain on the FATF greylist until Jan 2022, and a FATF delisting would happen at the earliest in Feb 2022. A EU de-blacklisting would follow a few months later.

Two main factors appear to have weighed on the FATF’s decision not to remove Mauritius from its greylist so far. The first is the important need for Mauritius to demonstrate sustained progress in ML reporting, investigations, prosecutions, and convictions. Without significant improvement on these indicators of effectiveness, an AML system serves only a cosmetic purpose. The role of ICAC, which is the law enforcement body responsible for tackling money laundering activities is critical. ICAC must be held responsible for its failure to address money laundering effectively, especially with high profile cases involving the Prime Minister himself not making progress after years of investigation.

The second serious factor holding Mauritius onto the FATF greylist is the insufficient supervision of Designated Non-Financial Businesses and Professions (DNFBPs.) The FIU, which is meant to focus on the analysis of suspicious transactions reports, is now saddled with the heavy and impractical task of regulating DNFBPs. It was already proving difficult for the FIU to take on added responsibilities for asset recovery, let alone the supervision of lawyers, real estate agents, etc.

The role and structure of bodies dealing with ML, including FIU and ICAC, needs to be reviewed to wage a more effective fight against money laundering. Although a token amount has been provided in last year’s budget for the Financial Crimes Commission, not a word has been mentioned in the FATF report in respect of an institutional restructuring to combat financial crime, including ML.

There is no doubt that more than continued rigorous engagement will be required not only by local industry players but by the Government-especially in the overhauling of our law enforcement agencies to ensure effectiveness in the investigations and prosecutions of money laundering and financial crime- to restore the jurisdiction as an international financial centre of sound repute. Meanwhile , investors are seriously rattled, and our global business will be saddled with a paralyzing uncertainty about the status of Mauritius until it can get off the blacklist.

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------------------------------------------------------------------- ------Details of remaining actions to address the five Strategic Deficiencies:

FATF has recommended continued and further actions to address the strategic deficiencies as follows:

On the first Strategic Deficiency- the lack of effective risk-based supervision- FATF considers the supervision of DNFBPs should improve, and Mauritius should demonstrate progress across DNFBPs supervisory authorities to conduct risk-based on-site inspections, along with staff training, and provide indicators that demonstrate that supervision and actions against non-compliance are being implemented effectively. Suspicious Transaction Reporting (STR), especially among higher risk sectors and DNFBPs, should be increased, and indicators for a sustained increase in the diversity of STR should be provided.

On the second Strategic deficiency-the lack of improvement in access to beneficial ownership information- FATF expects Mauritius to demonstrate that the relevant beneficial ownership information is accurate and up to date, through on-site visits and verification by the Registrar of Companies, and by reviews of deficiencies identified at monitoring. FATF also expects Mauritius to reinforce the application of proportionate and dissuasive sanctions, including by the FIU, which regulates most NFBPs.

On the third Strategic deficiency- lack of capability to conduct ML investigations, including parallel ML investigations- FATF believes it is necessary to perceive a long-term trend of the investigative/prosecutive activities, to show that actions are continuous over time. FATF requests Mauritius to provide relevant/complex ML cases, examples of cases before the Financial Crimes Division, and updated statistics on investigations/prosecutions/convictions.

On the fourth Strategic Deficiency- the lack of control and oversight over nonprofit organizations on terrorism financing- FATF recommends that Mauritius continue to monitor the risks, with an effective follow up on instances of non-compliance.

On the fifth Strategic Deficiency- the lack of implementation of targeted financial sanctions related to terrorism and proliferation financing - Mauritius should continue to monitor implementation of targeted financial sanctions in relation to terrorism and proliferation financing, especially in DNFBPs, with follow up on instances of noncompliance.

16Ravind Nithoo, Prakash Neerohoo and 14 others

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