The European Commission, the executive branch of the European Union, has included Mauritius in its revised list of high-risk countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks.
The new methodology takes into account the interaction between the EU and the Financial Action Task Force (FATF) listing process, an enhanced engagement with third countries and consultation with member states. The FATF is an inter-governmental body that sets anti-money laundering standards.
Earlier this year, Mauritius was put on the FATF’s “grey list", which led to concerns that trades and fresh FPI registrations from the country could be halted in India. The Securities and Exchange Board of India (Sebi), however, issued a clarification the following day that they would remain eligible for registration, but with increased monitoring. In April, the government had allowed investment entities from Mauritius to register as Category-I foreign portfolio investors (FPIs) with lower KYC requirements.
According to market watchers, the impact of the EU list on India investments flowing through Mauritius will be minimal.
“India’s FPI regulations use FATF as the reference point, not EU. Mauritius investments into India will get impacted only if FATF were to put Mauritius in the black list,” said a custodian, requesting anonymity.
“The Government of Mauritius has reiterated its high level of political commitment to implement the action plan of the FATF at the earliest to exit the FATF and the EU lists and reassure the global investment community that Mauritius remains a credible and trusted jurisdiction,” added Khushboo Chopra, head of business development (India), Sanne.
Globally, however, the FATF and EU lists could create a negative perception towards Mauritius, especially among large investors such as pension, endowment, and sovereign wealth funds, said experts.
“We need to put an end to dirty money infiltrating our financial system. Today we are further bolstering our defences to fight money laundering and terrorist financing, with a comprehensive and far-reaching Action Plan. There should be no weak links in our rules and their implementation. We are committed to delivering on all these actions over the next 12 months,”
said Valdis Dombrovskis, executive vice-president, European Commission.
“Unlike in the past when there were always fruitful consultations in line with EU practice prior to any major decision being taken, the present decision is contrary to the spirit of dialogue and partnership which binds Mauritius and the EU," Ministry of Financial Services and Good Governance, Mauritius, said in a note on Saturday.
It believes the EU listing is a direct consequence of the listing of Mauritius by the FATF on its list of “jurisdictions under increased monitoring”. Mauritius has obtained technical assistance from the EU-funded AML/CFT Global Facility and the German government to support the implementation of the FATF Action Plan.
“Under the FATF Action Plan, Mauritius does not have technical compliance issues. The Anti-Money Laundering and Combatting the financing of terrorism (AML/CFT) legal framework has been extensively revamped and as at date, Mauritius is largely compliant or compliant with 35 out of the 40 Recommendations as compared to 14 largely compliant or compliant ratings at the time of the publication of its Mutual Evaluation Report in September 2018,” the communique observed.
The Bahamas, Barbados, Ghana, Jamaica, Myanmar, Panama, and Zimbabwe are among the other countries that have been included in the revised list, which will be submitted to the European Parliament and Council for approval, and become applicable from October 1.
Countries that have been delisted include Ethiopia, Lao People's Democratic Republic, Sri Lanka, and Tunisia.