Mauritius
Report on the Observance of Standards and Codes: FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism

This report discusses Mauritius’s Observance of Standards and Codes for the Financial Action Task Force Recommendations for Anti-Money Laundering and special recommendations on Combating the Financing of Terrorism. Mauritius is pursuing a national strategy to diversify its economy into the provision of global financial services by taking advantage of its linkages with both African and Asian economies. Additionally, Mauritius intends to offer new products in Islamic financial services and wealth management.

Abstract

This report discusses Mauritius’s Observance of Standards and Codes for the Financial Action Task Force Recommendations for Anti-Money Laundering and special recommendations on Combating the Financing of Terrorism. Mauritius is pursuing a national strategy to diversify its economy into the provision of global financial services by taking advantage of its linkages with both African and Asian economies. Additionally, Mauritius intends to offer new products in Islamic financial services and wealth management.

A. Introduction

1. This Report on the Observance of Standards and Codes for the FATF 40 Recommendations for Anti-Money Laundering (AML) and 9 Special Recommendations on Combating the Financing of Terrorism (CFT) were prepared by the IMF Legal Department.1 The report provides a summary of the AML/CFT measures in place in Mauritius and of the level of compliance with the FATF 40+9 Recommendations, and contains recommendations on how the AML/CFT system can be strengthened. The assessment is based on the information available at the time of the mission from September 24 to October 9, 2007 and was conducted using the 2004 Assessment Methodology. The Detailed Assessment Report (DAR), on which this document is based was adopted by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) plenary on March 18, 2008. The views expressed here, as well as in the full assessment report, are those of the staff team and do not necessarily reflect the views of the government of Mauritius or the Executive Board of the IMF.

B. Key Findings

2. Significant steps have been taken by the Mauritian authorities in recent years to enhance the AML/CFT framework: A National Committee for Anti-Money Laundering and Combating the Financing of Terrorism has been formed to ensure coordination amongst relevant authorities; the Financial Intelligence Unit’s (FIU) structure was revised, in particular by converting the previous role of the External Review Committee to a board structure; the Bank of Mauritius (BOM) functions have been enhanced to include the authority to issue guidelines and revoke banking licenses where a bank has been convicted by a court of an offence relating to AML/CFT; and the Financial Services Commission (FSC)–the regulator the securities, insurance and trust and company service provider sectors–and the Independent Commission Against Corruption (ICAC) have been established. Now that the legislative and institutional framework is largely in place, it will be important for these and other main stakeholders to focus on implementing the framework. This will require greater coordination and cooperation among the various national authorities, in particular, a more effective exchange of information between intelligence, evidence gathering, and prosecution services. The recently established BOM and FSC Coordination Committee is one example of an effective integrated approach to AML/CFT supervision. Extensive and targeted training will assist in achieving a more integrated national system.

3. Mauritius is pursuing a national strategy to diversify its economy into the provision of global financial services by taking advantage of its linkages with both African and Asian economies. Additionally, Mauritius intends to offer new products in Islamic financial services and wealth management. In this dynamic environment, it will be important for the authorities to conduct a review of the money laundering and financing of terrorism (ML/FT) risks in order to ensure that the AML/CFT framework adequately mitigates the ML/FT risks that may arise from the diversification of the local economy.

4. ML and FT both constitute crimes under Mauritian law: ML was criminalized in 1995 (with respect to the proceeds of drug offenses) and 2000 (with respect to the proceeds generated by other crimes) but in a way which only partially meets the standard. The scope of the ML offenses, and in particular the range of predicate offenses, is too narrow to enable the authorities to fight ML in an effective way. FT was criminalized in 2003 but suffers from minor shortcomings in its coverage.

5. The majority of, but not all, financial institutions operating in Mauritius is subject to basic AML/CFT requirements, including customer verification and record keeping, and supervision. Cooperative credit unions are not yet included in the AML/CFT framework. The Guidance Notes issued by the BOM and the FSC provide detailed provisions on the AML/CFT procedures required to be followed by financial institutions, with some minor omissions. The BOM and the FSC have conducted a large number of onsite inspections; the BOM has sanctioned for AML/CFT deficiencies and the FSC’s powers to sanction were considerably enhanced due to legislative changes which occurred during the onsite visit.

6. The regulatory and supervisory framework applicable to designated financial businesses and professions (DNFBPs) is deficient. While most of the DNFBPs are subject to general requirements on customer identification and reporting of suspicious transactions, only trust and company service providers were effectively monitored for compliance with AML/CFT measures at the time of the assessment.

C. Legal Systems and Related Institutional Measures

7. Over the last few years, Mauritius has taken a number of important legislative steps to fight money laundering and terrorist financing. It adopted its first AML measures in 1995 with the adoption of the Dangerous Drugs Act (DDA) which criminalized money laundering where the predicate offense relates to drug offenses. It then adopted a threshold approach with the money laundering offense applying to crimes in the Economic Crimes and Anti-Money Laundering Act of 2000 (ECAMLA), which was subsequently replaced by the Financial Intelligence and Anti-Money Laundering Act of 2002 (FIAMLA). The range of ML offenses under the DDA and the FIAMLA is not fully in line with the standard as only about half of the designated categories of offenses are covered. Mauritius has also addressed terrorist financing (TF) with the adoption of the Prevention of Terrorism Act (POTA), the Convention for the Suppression of the Financing of Terrorism Act, and the promulgation of implementing regulations, but the TF offense does not cover the funding of individual terrorists and a link with a specific terrorist act appears to be necessary to secure a conviction for TF.

8. Several authorities play a key role in the AML/CFT framework: the FIU, the ICAC, which is the primary authority for the investigation and prosecution of corruption and ML cases, the police (Central Crime Investigation Division, CID, and the Anti-Drugs and Smuggling Unit), the Attorney General’s Office, the Drugs Assets Forfeiture Office and the Courts. The Ministry of Finance and Economic Development also provides direction on policy parameters that underpin AML/CFT legislation.

9. The FIAMLA and the DDA provide for a range of provisional and confiscation measures that enable the authorities to attach and, upon conviction, confiscate proceeds of crime. The legislation places the onus on the convicted person to establish that his or her possessions are not the proceeds of crime. Notwithstanding these measures, no property has been successfully confiscated.

10. The FIU exercises its functions pursuant to the FIAMLA and has taken significant steps to enhance its operational capabilities over the last few years. The FIU has appropriate electronic receipt, storage, and analysis platforms and software As a member of the Egmont Group, the FIU is active in sharing information with other member FIUs and in helping build FIU capacity within the region. While the Director manages the daily operations of the FIU, a separately appointed Board maintains an administrative role. Its role includes giving consent to disseminations of STRs, which raises an issue concerning the autonomy of the FIU, although to date this has not arisen. The FIU’s effectiveness, however, is compromised by some external factors, including the relatively low level of STRs it receives, often lengthy delays in receiving reports from reporting entities and lack of feedback from law enforcement authorities on the quality of the FIU’s disseminations.

11. The investigative and prosecutorial authorities have the necessary powers to execute their respective functions, but communication between the ICAC and the other authorities is virtually impossible due to the stringent confidentiality requirements set out in the Prevention of Corruption Act (POCA).

12. In early 2007, Mauritius adopted a disclosure system for cross-border physical transportation of currency. At the time of the mission, the system was in the process of being implemented with a limited outbound disclosure system in place and limited legal gateways of disclosure to the FIU or to foreign customs services.

D. Preventive Measures—Financial Institutions

13. There is a wide range of financial institutions operating in Mauritius. Institutions are subject to regulation by the BOM or the FSC. The BOM is responsible for the banks and other nonbank deposit-taking institutions (mostly leasing companies), together with cash dealers. The FSC is responsible for investment, insurance and trust and company service institutions. Significant steps have been taken by the Mauritius authorities in recent years to enhance the AML/CFT framework applicable to financial institutions even though certain financial institutions, such as the 120 cooperative credit unions, or administering or managing of client funds are not included in the framework. The banking legislation, the FIAMLA Regulations and underlying Guidance Notes and Codes, which are enforceable, provide the basic framework on customer verification and record keeping to be followed by regulated institutions but more provisions on when to undertake customer due diligence, verifying the identity of the beneficial owner, including determining the natural persons who ultimately own or control the customer, and ongoing due diligence should be included in law or regulation.

14. The BOM is a professional and well-organized supervisory body which devotes considerable efforts to ensure that appropriate AML/CFT measures are applied by the institutions that it regulates. The BOM has issued Guidance Notes on AML/CFT and has conducted on-site inspections of all the institutions it regulates. It appeared to the mission that compliance by regulated firms with the Guidance Notes was good. Shell banks cannot be established in Mauritius.

15. The FSC was established much more recently than the BOM and has issued AML/CFT Codes to insurance and investment institutions. A number of these institutions have been subject to on-site inspections. The FSC has encouraged institutions to put in place AML/CFT counter measures in line with the FSC’s requirements for customer due diligence, record keeping and internal controls. New legislation brought into force during the mission’s on-site visit provides the FSC with specific on-site inspection powers and a greater range of potential sanctions for breaches of the Codes. The FSC had issued directions to licensees with poor AML/CFT standards but the mission noted that some licensees nevertheless lacked robust AML/CFT systems.

E. Preventive Measures—Designated Non-Financial Businesses and Professions

16. The full range of DNFBPs operate in Mauritius. There are a number of global business licensees which are administered by local management companies (trust and company service providers) both of whom are regulated by the FSC. Apart from the FSC licensees, there are no AML/CFT supervisory regimes in the other DNFBP sectors. Suspicious transaction reporting obligations apply across the range of DNFBPs covered by the AML/CFT legal framework, but real estate agents and jewelers are not included. While the FIAMLA places a general requirement on DNFBPs for customer identity verification and record keeping, the lack of regulatory prescription, other than for the FSC supervised trust and company service providers, means that the balance of the DNFBP sector is not subject to effective CDD, record keeping, and internal control requirements.

F. Legal Persons and Arrangements & Non-Profit Organizations

17. Mauritius has achieved a good standard of transparency concerning the beneficial ownership and control of legal persons and legal arrangements. Competent authorities are able to have timely access to current information on beneficial ownership to most legal persons but access to beneficial ownership information for global business companies is slower as a court order is required. While bearer shares were permissible until 2001, they are no longer permissible under the Companies Act 2001. Companies created under former legislation were required to relinquish bearer shares by the end of 2001 or be struck off the register of companies.

18. Non-profit organizations (NPOs) must register with the Registry of Associations but there has been no risk assessment of the sector for AML/CFT purposes nor has there been any outreach in this regard to the 8,000 NPOs. International payments are not monitored by the Registrar or any other authority, although the Registrar reviews NPOs’ annual statements of account.

G. National and International Co-operation

19. A national Committee on Anti-Money Laundering and Combating the Financing of Terrorism was established with a view to creating a platform between all the relevant authorities in the fight against ML and FT. The BOM and the FSC are able to cooperate with their foreign counterparts.

20. With the Mutual Assistance in Criminal and Related Matters Act 2003 (MACRM Act) and the Extradition Act 1970, Mauritius adopted comprehensive laws that enable it to provide a wide range of measures at the request of a foreign State. Both ML and FT are extraditable offenses. The length of time to process requests could not be determined.

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H. Authorities’ Response

21. The authorities in Mauritius have taken cognizance of the recommendations made by the IMF/WB FSAP team. These recommendations are being examined by the respective authorities and necessary actions would be taken, where appropriate, both in the short and long term, to enhance the institutional and legislative framework for Mauritius to be in line with latest international standards and best practices. Technical Assistance is being sought of to look into the amendments that need to be brought to our legislation in order to improve on areas highlighted by the FSAP Team Report. Further to the recommendations made in the Report, the Bank of Mauritius has, on its part, already revised its Guidance Notes issued to its licencees. The Financial Services Commission, on its part, is currently working on a new comprehensive document which will result into a single code on AML/CFT for all its licencees. The new code will enhance the provisions of the existing ones.

1

The assessment team consisted of: Ms. Joy K. Smallwood, Ms. Nadine Schwarz, Mr. Andrew Gors (all LEG), Mr. Richard Walker (The Guernsey Financial Services Commission) and Ms. Poovindree Naidoo (Financial Intelligence Centre, South Africa, ESAAMLG active observer).

2

Compliant (C): the Recommendation is fully observed with respect to all essential criteria. Largely compliant (LC): there are only minor shortcomings, with a large majority of the essential criteria being fully met. Partially compliant (PC): the country has taken some substantive action and complies with some of the essential criteria. Non-compliant (NC): there are major shortcomings, with a large majority of the essential criteria not being met. Not applicable (NA): a requirement or part of a requirement does not apply, due to the structural, legal or institutional features of a country.

Mauritius: Report on the Observance of Standards and Codes: FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism
Author: International Monetary Fund