On 7 May 2020, the European Commission announced the adoption of a new list of third countries which, according to the Commission, had strategic deficiencies in their anti-money laundering and counter terrorism financing (AML-CFT) regimes.
On the very same day, the Commission announced that it had come up with a new methodology to establish this list. This is how Mauritius, much to its surprise, was included therein.
This high risk third-country list, in the form of a Delegated Regulation, if approved by the European Council and the European Parliament within one month, with a possible extension of one additional month would become effective on 1 October 2020. Government is determined to convince the European Union to remove Mauritius from this list.
Since its independence, Mauritius has maintained a close relationship with the European Union (EU). Such a privileged relationship has been founded on our common and strong values of Democracy, Rule of Law, Justice, Freedom and above all Social Justice and Equity. This historic partnership is now on the verge of being seriously compromised. Over the years, Mauritius has thrived as a peaceful multicultural society. It also adopted a socio-liberal economic approach, and an inclusive development agenda in which the financial services sector plays a pivotal role.
Mauritius has always adhered to international standards of good governance, transparency and taxation. To recall, the EU and the OECD have recently confirmed that Mauritius’ tax regime is in conformity with their governing standards. Mauritius has also incorporated FATCA and CRS requirements into its domestic laws and has ratified the OECD’s Multilateral Instrument (MLI).
The determination to convince the EU to remove Mauritius from this list is premised on the following:
Mauritius, was not given an opportunity to provide any explanation or make any representation to the Commission prior to its inclusion on the list. Mauritius was furthermore neither consulted nor heard, let alone informed that a new methodology had come into effect.
The fundamental right of the states to be heard before an impactful decision is taken against their interests, has therefore not been respected, despite the fact that this fundamental right is clearly spelt out in Article 41 of the EU Charter of Fundamental Rights. Furthermore, in contravention with its own procedures, the Commission merely replicated the findings of the Financial Action Task Force (FATF) without considering the intrinsic and fundamental differences between countries that form part of the FATF blacklist as compared to other countries like Mauritius, that are on the monitoring list. In so doing, the Commission literally amalgamated Mauritius with a number of countries that are traditionally classified as blacklisted by the FATF.
This was done without even providing Mauritius with an opportunity to make any representation whatsoever. The Commission further disregarded the fundamental principle of proportionality in failing to measure the seriousness of the consequences of including Mauritius on this list as compared to the actual risks posed to the EU financial system.
The Mauritius International Financial Centre is internationally recognised as a jurisdiction of choice and substance. It has been established on the basis of a strong legal framework supported by an independent Judiciary. In January of this year, Mauritius took cognisance of the FATF conclusions on its legal and regulatory framework on AML-CFT.
It immediately formulated and agreed upon a detailed action plan with the FATF, with specific deadlines to remedy the identified shortcomings. It is noteworthy to mention that out of a total of 58 recommended actions, Mauritius has only 5 outstanding actions to implement by September 2021. Mauritius had initially reviewed the implementation programme with the assistance of its technical advisers in order to complete the exercise by the end of the year. It subsequently decided to further accelerate this process with a final completion target of August 2020. As such, our Government commits to implement the action plan one year ahead of the schedule which was initially agreed with the FATF.
We understand that the Government of Mauritius has opened a dialogue with the EU in this regard and has also reiterated its high level political commitment to implement the action plan of the FATF at the earliest so as to exit the FATF and the EU lists and has reassured the global investment community that Mauritius remains a credible and trusted jurisdiction.
To date, Mauritius has submitted:
- an initial progress report in March 2020 which remained unassessed by the FATF because of the Covid-19 pandemic crisis;
- a revised progress report to the FATF on 31 July 2020; and
- an updated progress report on 31 August 2020.
A virtual meeting was held between the Joint Group (JG) of the FATF and the local authorities at the request of the Mauritian authorities on 8 September 2020. The JG was satisfied of the seriousness with which the Action Plan is being implemented by Mauritius and commended the progress achieved by the country so far. The JG has already submitted their findings to the FATF Plenary, which will be convened later this month.
Osiris have spoken to the largest banks in Mauritius and they do not anticipate any major issues, particularly as they already undertake due diligences on each transaction.
Osiris therefore expect business to continue as usual and Mauritius to be removed from the list in the next 6 – 12 months.