Mauritius war on money laundering gets it closer to exiting FATF grey list

Grey list may have created negative perception among pension, endowment and SWFs. RBI too rejected applications for NBFC licences recently, as investment was routed via Mauritius

Mauritius may have taken another step towards exiting the Financial Action Task Force’s (FATF’s) grey list, with the inter-governmental body — which sets anti-money laundering standards — acknowledging the progress the island nation has made in its fight against money laundering and terrorist financing.

"Mauritius has taken steps towards improving the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regime, by developing a risk-based supervision plan for global businesses and management companies,” said the FATF in a note.

It has asked the country to continue working on its action plan to address strategic deficiencies, by focusing on five aspects that include implementing the risk-based supervision plan effectively for the Financial Services Commission, and ensuring access to accurate basic and beneficial ownership information by competent authorities. 

In February, the country was put on the list of jurisdictions that required increased monitoring. This list is often referred to as the “grey list”. Further, Mauritius in September regained its position of being the second-largest foreign portfolio investor in India, having ceded its place to Singapore in August.

Jurisdictions under increased monitoring actively work with the FATF to address strategic deficiencies in their regimes. These are done to counter money-laundering, terrorist financing, and proliferation financing in a more efficient manner.

The FATF has already rated the banking framework in Mauritius as largely compliant, based on the control measures implemented for cross-border transactions.

“Necessary actions continue to enhance and further align the framework in place for the financial services sector, with international best practices. The ministry wishes to reassure the investor community regarding Mauritius’ ongoing commitment — including at the highest political level — to exit the FATF process at the earliest,” said a communique last week from the Ministry of Financial Services and Good Governance, Mauritius.

Mauritius has obtained technical assistance from the EU-funded AML/CFT Global Facility and the German government (through German Development Agency, GIZ) to support implementation of the FATF Action Plan. Mauritius meets 53 out of the 58 recommended actions, including the big six recommendations, and there is an agreed timeline to cure the identified shortcomings.

“The ICRG (International Co-operation Review Group) has informed FATF members of the significant progress made by Mauritius, despite the Covid-19 situation, to demonstrate effectiveness. They recommended that Mauritius continue with the implementation of the action plans,” said Rubina Toorawa, chief operating officer, Sanne in Mauritius (formerly International Financial Services Limited).

She added that Mauritius has to continue with the implementation and submit an updated report by end of 2020 for the next plenary in February 2021. It is expected that the plenary session will result in Mauritius being taken off the grey list.

The list may have created a negative perception towards Mauritius globally, especially among large investors such as pension, endowment, and sovereign wealth funds, said experts. The Reserve Bank of India, too, recently rejected a few applications for NBFC licences as the investments were routed through Mauritius.

Iceland and Mongolia were the two countries recently taken off the grey list, which comprises 16 countries including Pakistan and Yemen.