Mauritius Makes Progress Towards For Better FSF Ranking

by Lorys Charalambous, Tax-News.com, Cyprus

16 June 2003

Sushil Khushiram, Mauritius Minister of Economic Development, Financial Services and Corporate Affairs recently set out details of the country's current moves in combatting money laundering and terrorist financing, at the opening of a Financial Intelligence Unit seminar.

'Since this Government took office in September 2000', said the Minister, 'the political will to combat money laundering and terrorist financing and promote clean and reputable financial services has been strong and steadfast. We have implemented a programme of deep seated reforms in the regulatory and supervisory framework of financial services, which led to the establishment of the FSC and the FSPA. In parallel, we have modernised our Companies Act and introduced a new Trusts Act.

'We know the dramatic changes that took place in the international financial environment in the wake of global terrorist threats and amplified money laundering. Government introduced a series of legislation in early 2002, namely the Prevention of Corruption Act, The Prevention of Terrorism Act and the Financial Intelligence and Anti-Money Laundering Act, following which the ICAC, and soon after the FIU, became operational.

'Mauritius also volunteered for a diagnosis of the strengths and vulnerabilities of our financial sector by the IMF/World Bank under a Financial Sector Assessment Programme (FSAP) at the end of last year. This exercise is designed to help countries enhance their resilience to financial crises, and to foster growth by promoting financial soundness and stability. The assessment included a review of AML/CFT regime in place. It is now in the process of being completed. The FSAP reports will be presented to the IMF Executive Board next month, and Mauritius will then seek an upgrading of its ranking by the Financial Stability Forum. You will recall that Mauritius was ranked in the third and lowest category of offshore financial centres by the FSF in April 2000 with regard to the quality of its financial supervision. It has not been an easy toil, but we are almost there, and the expected adjustment the country’s FSF ranking will further strengthen our credibility in attracting new and better business in financial services.

'As part of the FSAP exercise, certain amendments have been proposed to the existing legislation to fine-tune some provisions and clear certain ambiguities. We obtained technical assistance from the World Bank and IMF to look deeper into the proposed AML/CFT amendments. A TA Team of two AML/CFT experts visited us in March 2003 and submitted their final report in April. A broad-based National Coordination AML/CFT Committee set up in early 2003 under the aegis of my ministry met with the experts and discussed the final report. The Committee, which has been meeting regularly to coordinate national AML/CFT policies, comprises the intelligence and investigative bodies, namely FIU, ICAC, the Police, the regulators, i.e. the BOM and the FSC, the relevant ministries – the Prime Minister’s Office, the Ministry of Finance, the Ministry of External Affairs, the State Law Office and the Commissioner for Drugs.

'Further measures will be examined with IMF/World Bank technical assistance to reinforce the operational effectiveness of the institutions involved in AML/CFT. A Task Force has been set up by the AML/CFT Coordination Committee to streamline and formalize procedures for dealing with financial crime, from a STR to final prosecution. Moreover, we are consolidating the AML/CFT framework through other supporting legislation to be introduced in the coming months. A Convention for the Suppression of Terrorism Bill, in obligation to UN requirements, a Mutual Legal Assistance Bill and an Extradition Bill are being finalised.

'No one should entertain any doubts about Government’s commitment to combating corruption, money laundering and the financing of terrorism. Institutions such as ICAC and FIU are coming up fast on their learning curve and will soon reach their cruising speed. ICAC is investigating several high profile cases, while some 80 suspicious transactions reports have been received by the FIU. I understand that a number of these STRs have already been disseminated by the FIU to ICAC or Police for investigation. The regulators, namely the Bank of Mauritius and the Financial Services Commission have finalised AML/CFT guidelines for their licensees. I am sure that during the presentations this morning you will learn more about the operations of these organisations and the role they play in achieving our common AML/CFT objectives.

'Ladies and gentlemen, the most effective way to combat money laundering is for both the public and the private sectors to play their part in understanding and targeting criminal finance. This involves intelligence, investigation and prosecution. Without these three components, an AML/CFT strategy cannot be truly effective. There is a clear divide between those who receive and disseminate financial intelligence i.e. the Financial Intelligence Unit, and those whose job is investigate, determine the criminality and prosecute, e.g. the ICAC, Police and Customs. The logic behind this approach is that intelligence is different from evidence. Intelligence reports prepared by experts produce pictures of the criminality – not just who is doing what, but what type of crime is being committed, how criminality is evolving and where the next threat is coming from. Using intelligence to follow the money – identified through suspicious transactions reports –can often lead to the criminal.

'However, some banks and financial institutions are not making sufficient efforts to understand the institutional or legal framework that emphasizes financial intelligence in combating money laundering and terrorist financing. A few banks are invoking legal or other reasons in refusing to provide full and complete information to the FIU. Let me make it clear that the existing legal ambiguities in the Banking Act will be dealt with very shortly. Those of you who are familiar with the forty recommendations of the Financial Action Task Force on Money Laundering, or more precisely Recommendation 5, will know that a country’s banking secrecy laws must not conflict with, or inhibit, the effectiveness of a national anti-money laundering strategy. The FATF recommendations are applied worldwide.

'Let me also comment on the role that “gate keepers” i.e. accountants, barristers and other professional advisers are expected to play in the AML/CFT combat. While I understand that new legislation may need time to sink down, I think that we need an accelerated culture change here. The Financial Intelligence and Anti-Money Laundering Act makes it mandatory for members of the relevant professions or occupations to make suspicious transactions reports to the FIU. But it seems that the submission of STRs by them will take some time to come by. The Bar Council, the Law Society, the Association of Notaries and Accounting Bodies represented in Mauritius are no doubt calling members to take disclosures of suspected money laundering cases seriously.

'Ladies and Gentlemen, AML/CFT also has a regional and international dimension. International action to combat money laundering started in the late 1980s with the ensuing development of international standards and national initiatives. The Financial Action Task Force which was set up in 1989 by the G7 nations has a leading role in the global drive to combat money laundering, and more recently terrorism financing. Its 40 plus 8 recommendations constitute the international benchmark for assessing the standards of an AML/CFT regime. Mauritius is initiating action to obtain observer status in the FATF, on the same basis as was granted to South Africa.

'At another international level, the Egmont Group is an informal forum open to all Government agencies having the means to prevent criminals from using the legitimate financial system and other economic sectors to profit from illegal activities. Membership of Egmont means direct involvement in the decision making process of the Group, participation in the activities of its Working Groups, participation in training sponsored by Egmont and more importantly access to Egmont Secure Web for information sharing and intelligence gathering.

'The Mauritian FIU was sponsored by the US FIU (FinCEN) for membership of the Egmont Group and I am pleased to announce that at its meeting of 31st March 2003 the Legal Working Group of Egmont has endorsed the application of Mauritius to join the Egmont Group and will make a formal recommendation on our candidacy before the 69 Egmont member FIUs during the next plenary meeting of the Group in Sydney on 23rd July, 2003. This will put Mauritius to the top league of countries with world class standards and structures to combat global financial crime.

'The Mauritius FIU is working closely with the newly created Financial Intelligence Centre of South Africa and the French FIU - Tracfin. As for FinCEN, it continues to be active in our FIU development and will be organising a regional training session in Mauritius in September this year for FIU and law enforcement officials from South Africa, UAE and India.

'Mauritius is also actively associated with a regional AML/CFT initiative, as a founding member of the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG), which is an FATF-style regional body receiving the full support of all international organisations involved in AML/CFT. ESAAMLG members have started a mutual evaluation of their respective AML/CFT regimes to assess compliance with the FATF 40 + 8 Recommendations.'

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