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James George | How Mauritius managed to come off the Grey List in record time

James George | How Mauritius managed to come off the Grey List in record time
04-10-22 / James George

James George | How Mauritius managed to come off the Grey List in record time

Johannesburg - It’s been a year since Mauritius was removed from the Financial Action Task Force (FATF) list of countries under enhanced monitoring, commonly referred to as the ‘Grey List.’ Having only been on it for less than two years (February 2020 – October 2021), with it came the automatic removal from the EU’s ‘Blacklist’ and the UK’s list of ‘High-risk third countries.’

As neighbour, South Africa seems to be heading in the same direction and may end up on the Grey List itself. Looking at how Mauritius managed their grey time provides some good insight into what needs to be done to improve South Africa’s anti-money laundering (AML) and terrorist financing measures.

Mauritius was initially grey listed for several reasons, including a lack of effective risk-based supervision, limited access to beneficial ownership information, and insufficient oversight on non-profit organisations who may be subject to terrorist financing. There was also a general ineffectiveness in conducting money laundering investigations. 

In many ways, the Mauritian adventure within the ‘dark spot’ of FATF for some 20 months has been deemed a ‘blessing in disguise’ and was required for Mauritius to live by this experience and draw the important lessons of ‘non-compliance’. It took a lot of work to align Mauritian financial laws with practical applications, and to see these efforts pay off.  

And this ‘wake-up call’ goes beyond financial services, having touched all sectors including accountants, auditors, real estate developers, dealers in precious metals, co-operative societies and more.

Could this be the case for South Africa as well, enhancing defences against financial fraud in the process? By no means is it recommended to end up on the Grey List but the threat of such a status has seen South Africa’s proposed Anti-Money Laundering and Combating Terrorism Financing Amendment Bill come into play, as a step to avoid it.

From State Capture to Steinhoff, South Africa is no stranger to its own issues and has been under FATF observation for a year already. We have until February 2023 to show improvements on financial crime prevention, or the Grey List is an inevitable consequence. We might not be as lucky as Mauritius was to get off the list so quickly, as countries tend to spend several years on the list tackling legal amendments, but it is possible. Mauritius is now largely or fully compliant with 39 of the 40 FATF recommendations, but it’s an ongoing process.

Mauritius has its FATF-approved objectives set out across core strategies such as strengthening their AML/CFT (Anti-Money Laundering / Counter Financing Terrorism) Legal and Regulatory Framework to meet international standards, effective in mitigating risks. Implementing a comprehensive risk-based supervision framework is another strategy to monitor financial institutions and designated non-financial businesses, such as real estate brokers, banking and securities, and jewellery stores.

Mauritius has improved the process of detecting threats of fraud, prosecuting criminals, and confiscating illegal proceeds.

They have enhanced the transparency of legal persons and enlisted national co-ordination, as well as regional and international cooperation, which means authorities are working closely together to combat money laundering and financial crime. Increasing training, capacity and raising awareness have also been crucial steps to ensure all stakeholders are working in accordance with AML/CFT obligations.

Mauritius has implemented an AML/CFT data collection system as well, which aims to continuously improve on risk detection. These are all very good steps that have gone a long way for Mauritius and South Africa would do well to take note.

*James George, Compliance Manager, Compli-Serve SA.


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