Some specialists do not hesitate to affirm that the carrots are cooked for Mauritius, with the publication, in the Gazette of the European Union (EU), of the list of high-risk countries, put on the blacklist. However, the government is consolidating the existing legal framework as of Tuesday, June 23, to better combat money laundering and the financing of terrorism.

While some specialists in the financial services sector argue that the carrots are already done for Mauritius (with the EU's decision to place us on its blacklist), others, on the other hand, see a glimmer of hope there. In the meantime, the government is trying, on the legal front, to demonstrate the country's good will to combat money laundering and the financing of terrorism, by coming, as of Tuesday, with new legislation. This would extend the supervision to other sectors where the risks of money laundering are real, in particular jewellery, games of chance or even real estate.

In fact, the new legislation, The Anti-Money Laundering and Combatting the Financing of Terrorism (Miscellaneous Provisions) Bill 2020 (AML/CFT), presented to Parliament tomorrow by Financial Services Minister Mahen Seeruttun, is intended to to be a response to the criticisms of the European authorities regarding the legal shortcomings of which we are accused in our fight against the risks linked to money laundering and the financing of terrorism. This, in particular, in Global Business and, by extension, to the entire financial services sector.

Concretely, this new text of law, which comes to consolidate the existing legal framework, brings amendments to about twenty laws covering various sectors of activity. They range, among others, from banking institutions, with the Banking Act, to jewelry stores, with the Jewelers Act, including betting operators (Gambling Regulatory Authority Act) or land and real estate (Notaries act). Other legislation, such as the Financial Services Act, the Dangerous Drugs Act, the Financial Intelligence and Anti-Money Laundering Act (FIAMLA) or the Financial Reporting Act, are on this list of legislation that will be strengthened.

“The new law, the AML/CFT, stems from the government's commitment, since last year, to make major changes to the five recommendations of the Financial Action Task Force's action plan. Force (GAFI/FATF) by September”, explains the director of the Mauritius Bankers Association, Daniel Essoo. This body was consulted by the authorities when this law was drafted.

Daniel Essoo explains that the new legislation has put in place a system whereby operators in economic sectors most exposed to money laundering risks will be legally obliged to report suspicious transactions to the Financial Intelligence Unit (FIU), the authority empowered to carry out investigations financial related to this offence. To this end, new legal provisions are included to ensure that in certain professions, the reporting of these transactions is done rigorously.

For example, the Mauritius Institute of Professional Accountants (MIPA) will be required to ensure that accounting firms which detect, as part of their audit exercise, a suspected case of money laundering, report the case directly to the FIU through an online questionnaire. The FIAMLA amendments reduce the prescribed time limit for submitting an STR (Suspected Transaction Report) from 15 days to 5 days.

Like accountants, betting operators, including bookmakers, are also affected by the new framework law. Amendments to the GRA Act impose a legal obligation on them to inform the relevant authorities of any transaction that may raise suspicion. Moreover, it is no secret that games of chance, whether horse racing or casinos, remain a privileged instrument for laundering dirty money. With the new amendments, bookmakers and other operators working in this sector will have to collaborate with the GRA to limit the risks of money laundering. Ditto for jewelers, real estate agencies, notaries and lawyers, where the same system will be applied for optimized reporting of suspicious transactions.

Will this new legal framework meet EU expectations? To this question, specialists are wondering if it is not too late to turn the tide and extricate Mauritius from the red zone... Daniel Essoo is of a rather nuanced opinion, estimating that with this new legislation, Mauritius will be equipped with an avant-garde tax arsenal that even some European states do not have. However, he is skeptical about whether this progress on the tax front would get Mauritius off the EU blacklist by October 1st. As a result, efforts at all levels must be continued, he said.

Blacklist: financial services under high tension

We had already anticipated it since June 7. The publication of Maurice's name in the Gazette of the European Union (EU), thus formalizing his blacklisting by the European authorities, is definitely a source of concern. This, both for the government and for the operators because the economic effects could be more devastating than those of the new coronavirus. While waiting for the last chance meeting with experts from the Financial Action Task Force (FATF) on August 31, operators are asking questions about the sustainability of this sector, which has been a growth driver for more than two decades, and which has generated jobs for Mauritian graduates and other professionals, while contributing up to 12% of our GDP.

Mahesh Doorgakant, president of the Association of Trust & Management Companies, recognizes that the task is not easy to get Mauritius off this blacklist. Because, he said, we must concentrate on the work that remains to be done to win the confidence of the FATF. He insists that the ball is in the government's court and that it is up to the government to demonstrate that the country does not deserve to be included on this list. Mahesh Doorgakant recalls, in the process, that the government has sufficiently defended this file with the European authorities. "I don't see what more we could have done. This situation happened at the wrong time. If it weren't for this pandemic, our leaders would have made the trip to plead Mauritius' case with the EU. A physical meeting would have had more impact than exchanges by telephone.

Between the publication of Mauritius' name in the EU Gazette and the October 1 deadline, when all the doors will be closed to us (if the authorities fail to convince European leaders), there is no great flexibility. “All-out communication is needed to demonstrate that, by the end of this year or at the latest at the beginning of 2021, criticism of the Mauritian jurisdiction will be a thing of the past.” However, recalls Mahesh Doorgakant, if Brussels remains intransigent, investors will have no choice but to settle elsewhere, accepting to incur the high costs associated with a possible relocation of their operations.

For accounting firms, which follow this situation closely, the entire financial services sector would be threatened because there are risks associated with the very reputation of the Mauritian jurisdiction. Wasoudeo Balloo, tax partner at KPMG, finds that it will be difficult for the sector to attract new clients, with the damaged image of Mauritius following this blacklisting. “The tax implications will be huge as financial institutions will be subject to punitive rates when dealing with Development Financial Institutions operating in Europe.” Hence the insistence that the sooner Mauritius is removed from this list, the better it will be for the financial sector.

Moreover, as the misfortunes of some are the happiness of others, the positioning of Kigali, the capital of Rwanda, as a financial center of reference in sub-Saharan Africa, challenges operators. Should we be afraid of this situation? “It's fair game, especially since this sector is only at its beginning. We would have done the same to attract to us investors likely to leave one financial center for another,” says Mahesh Doorgakant.

Will Maurice be able to pass the test of August 31? The Minister of Financial Services and Good Governance, Mahen Seeruttun, explains that the entire strategy developed to comply with the FATF action plan goes in this direction. He adds that the government is stepping up initiatives to make the EU change its posture vis-à-vis our jurisdiction. "We are in regular contact with the European Union and the FATF, to explain to them the progress made in relation to the five remaining recommendations..."

The inclusion or exclusion of a jurisdiction on its list of high-risk financial centers is a common procedure at EU level. As soon as it is satisfied with the elimination of breaches reported according to its recommendations, the rehabilitation of the sanctioned jurisdiction is immediate. This is what happened on June 19: while Mauritius and 19 other jurisdictions are officially placed on the EU blacklist, six others have left it. They are: Bosnia and Herzegovina, Guyana, Laos, Ethiopia, Sri Lanka and Tunisia.