Mauritius seeks to challenge proposed ‘high-risk’ listing by EU

The European Commission announced on 7 May 2020 that it had proposed 12 new countries, including Mauritius, should be added to the EU’s list of ‘high-risk third countries’ in order to align it more closely with the lists published by Financial Action Task Force (FATF).

The Commission said the update was necessary because, under the 5th Anti-Money Laundering Directive, third countries listed by the FATF will in principle also be listed by the EU. As a result, it is proposing the addition of the Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe to its own list.

“These countries have expressed a high-level political commitment to implement an action plan agreed with FATF to address their strategic deficiencies. We welcome those commitments and invite those jurisdictions to implement them swiftly,” said the Commission.

The proposed list is not yet final and still has to be submitted to the European Parliament and the EU Council of Ministers for approval. Given the coronavirus outbreak, the regulation listing third countries – and therefore applying new protective measures – is not to be applied until 1 October 2020.

The Commission said further updates would take place once it had engaged with third countries subject to the EU’s autonomous assessments. For countries de-listed by FATF, it would assess whether the reasoning for de-listing was also sufficiently comprehensive from the EU’s point of view.

Listing does not entail any type of sanctions, restrictions on trade relations or impediment to development aid but requires banks and obliged entities to apply enhanced vigilance measures on transactions involving these countries. This includes obtaining additional information on the customer and on the beneficial owner or obtaining the approval of senior management for establishing a business relationship.

The government of Mauritius said it had only become aware of the proposed listing of Mauritius through a press article published on 5 May and had immediately initiated actions to open a dialogue with the 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,” said the Ministry of Financial Services and Good Governance in a statement.

“We understand that the EU listing is a direct consequence of the listing of Mauritius by the FATF on its list of ‘Jurisdictions under Increased Monitoring’. It must be recalled that the government of Mauritius has, in February 2020, given a high level political commitment to the FATF to implement the Action Plan within agreed timelines and is taking all necessary measures to honour its commitment.”

The statement said that Mauritius did not have technical compliance issues and its anti-money laundering and combatting the financing of terrorism (AML/CFT) legal framework was now ‘compliant’ or ‘largely compliant’ with 35 out of the 40 FATF Recommendations compared to only 14 at the time of its FATF Mutual Evaluation Report in September 2018.

More importantly, Mauritius has met FATF targets in respect of the ‘Big Six Recommendations’: the criminalisation of the offence of money laundering; criminalisation of the offence of terrorism financing; implementation of a framework for targeted financial sanctions; customer due diligence; record keeping; and the reporting of suspicious transactions.

Mauritius has made a high-level political commitment to address the remaining deficiencies identified by the FATF by September 2021 at the latest. In fact, a first progress report was submitted to the FATF earlier this year, within the agreed timeline, despite the country being under a lockdown due to coronavirus since 20 March.

However, this report remains unassessed by the FATF because their own process has been suspended in view of the Covid-19 pandemic. Mauritius further noted that it was obtaining technical assistance to support implementation of the FATF Action Plan from both the EU-funded AML/CFT Global Facility and the German Development Agency.

“The government of Mauritius reiterates 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 reassures the global investment community that Mauritius remains a credible and trusted jurisdiction,” said the statement.

Sovereign will keep clients informed of developments but if you have any questions or need further information, please contact Richard Neal, Managing Director of Sovereign Trust (Mauritius) Ltd.

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