Mauritius has made significant alterations to laws related to anti-money laundering following its Eastern and Southern Africa Anti-Money Laundering Group (“ESAAMLG”) mutual evaluation in 2018 which highlighted the deficiencies in its anti-money laundering (“AML”)/counter financing of terrorism (“CFT”) regime. The recent amendments in AML/CFT laws are intended to enhance the regulatory regime for combating money laundering and terrorism financing in Mauritius, and to bring the legislation in line with the recommendations made in the ESAAMLG Mutual Evaluation Report for Mauritius 2018 (the “Report”). The primary statute governing money laundering offences is the Financial Intelligence and Anti-Money Laundering Act 2002 (“FIAMLA”) which has been amended to broaden the scope of preventive measures to be consistent with the Financial Action Task Force Standards. Also, the FIAMLA Regulations 2003 have been replaced with the Financial Intelligence and Anti-Money Laundering Regulations 2018 (the “Regulations”) which came into force on 1 October 2018. The amendments are focused to address the shortcomings identified in the Report and this article is an attempt to elucidate on the key amendments and provide a brief outline of the same.
A new provision related to risk assessment has been introduced in the FIAMLA which makes it a requirement for a reporting person (which is a bank, financial institution, cash dealer or member of a relevant profession or occupation) to identify, assess and monitor that person’s money laundering and terrorism financing risk at the level of its customers, products/services provided, delivery channels, geographic locations and the third parties involved. This assessment has to be documented and updated and the reporting person must be able to make it available to the competent authorities without any delay.
Policies, controls and procedures
The reporting person must establish, regularly review, and update policies, controls and procedures to mitigate and manage the risks of money laundering and terrorism financing. Furthermore records have to be maintained in relation to these obligations along with steps taken to communicate these policies, procedures and controls or any changes made, internally.
Customer Due Diligence (CDD)
The FIAMLA and the Regulations have been amended to include legal obligations related to more detailed Customer Due Diligence (“CDD”) measures, particularly concerning the identification of legal persons, legal arrangements and beneficial ownership. CDD measures must be taken by means of independent information and reliable source documents, especially before opening accounts or establishing a business relationship with a customer; where a customer who is not an existing customer wishes to carry out a transactions in an amount equal to or above Mauritian Rupees 500,000/- (approximately USD 14,000/-) or an equivalent amount in foreign currency; or where there is doubt in the previously obtained CDD documents or where there is a suspicion of money laundering or terrorism financing involving a customer.
Emphasis is also laid on the application of CDD measures on existing customers. The FIAMLA now mandates application of CDD requirements at appropriate times on existing customers and beneficial owners, depending on the materiality and risk associated with that customer.
The importance of CDD is also reflected in the Regulations which provide for circumstances in which the CDD (simplified and enhanced) should be performed and goes to the extent of obliging a reporting person not to enter into a business relationship or to terminate the business relationship and file a suspicious transaction report with the Mauritius Financial Intelligence Unit where it is unable to comply with the CDD measures under the Regulations.
Reliance on Third Parties
Reporting persons may rely on third parties to introduce business or to perform the CDD measures. When relying on a third party, a reporting person must be able to immediately obtain the identity verification and other relevant documents relating to CDD to be satisfied that they are current and valid and also ensure that all relevant information and documents in the third party’s possession regarding the CDD of an identified customer may be obtained without delay when requested. However, reliance on a third party based in a high risk country is forbidden.
Transactions with Shell Banks
The new Regulations rightly prohibits entering into or continuing any business relationship or occasional transaction with a bank that has no physical presence in the country in which it is incorporated and licensed, and which is unaffiliated with a regulated financial group that is subject to effective consolidated supervision.
Politically Exposed Person (“PEP”)
It is noteworthy that the definition of “PEP” is included in the Regulations and covers a foreign PEP, a domestic PEP and an international organisation PEP. The definition also extends to include inter alia members of senior management, directors and members of the board of an international organisation and family members and close associates. Also, there is no distinction between domestic, foreign and international PEPs when applying enhanced monitoring.
A definition of ‘beneficial owner’ has been introduced in the Regulations as a natural person who ultimately owns or controls a customer or on whose behalf the transaction is being conducted and also includes those natural persons who exercise ultimate control over a legal person or arrangement. A reporting person is required to identify and verify the identity of all beneficial owners of a customer entity. Where there is a doubt as to whether the person with the controlling ownership is the beneficial owner or where no natural person exerts control over the legal person, the identity of the natural person exercising control over a legal person through other means should be verified and where no natural person is identified, the identity of the natural persons who hold the positions of senior managing official should be confirmed.
Overall the amendments have assisted Mauritius in achieving a satisfactory level of compliance with international standards. On the 13th of February 2019, the European Union Commission adopted its list of 23 high-risk third countries with strategic deficiencies in their anti-money laundering and counter-terrorism financing frameworks and Mauritius is no longer on the list of the high-risk third countries.
By Nafiisah Jeehoo (Nafiisah.firstname.lastname@example.org) and Pinki Mahata (Pinki.email@example.com) – BLC Robert & Associates