Mauritius, that lazy, friendly little island in the Indian Ocean, beloved of holidaymakers and honeymooners, has a dark side. It is also a favourite haunt of money launderers and tax evaders and in fact, is known as one of the world’s top corporate tax havens.
In July 2019, the International Consortium of Investigative Journalists’ (ICIJ) #MauritiusLeaks investigation exposed the full extent of the tropical shenanigans. In the same way that the Panama Papers and other leaks shone the light of truth on the tax-evading clients of Mossack Fonseca, the ICIJ’s painstaking exposition revealed the shameful Mauritian system that “diverts tax revenue from poor nations back to the coffers of Western corporations and African oligarchs”.
Now the EU has again listed Mauritius as a high-risk country for money laundering and the financing of terrorist activities. In October 2019, to the intense displeasure of activists, the EU removed Mauritius, Switzerland and the UAE from its high-risk list. Coming just four months after #MauritiusLeaks broke, this move was not popular.
“The EU has whitewashed two of the world’s most harmful tax havens,” Oxfam’s EU policy advisor on tax and inequalities, Chiara Putaturo, said in a statement. “Mauritius’ role as a tax haven has been exposed in the MauritiusLeaks, and the country won’t stop allowing corporations to shift billions in profits from other African countries.”
But Mauritius is not the only African country under the microscope. The Financial Action Task Force (FATF) maintains a list of jurisdictions under increased monitoring – often referred to externally as the grey list – and on 21 February 2020 Botswana, Ghana, Uganda and Zimbabwe were added to the list, with Mauritius and other countries.
Because of the well-known links between corruption and money laundering – the latter is often used to squirrel away the proceeds of the former – this is a puzzling development. Not only have Botswana, Mauritius and Ghana long been perceived to be some of the less corrupt countries in Africa, but for years the former two have out-performed South Africa, and indeed most of the continent, on the Corruption Perceptions Index.
So why are these apparently respectable countries under increased scrutiny?
FATF explains that jurisdictions under increased monitoring have strategic deficiencies which make their regimes vulnerable to money laundering, terrorist financing, and proliferation financing.
To address these gaps, these jurisdictions commit to timeframes within which to complete their tasks and swiftly resolve their legislative and regulatory loopholes. During this time they therefore are subject to increased monitoring.
The named African countries share some common vulnerabilities, says FATF, but they are actively working with the task force and the East and Southern Africa Anti-Money-Laundering Group (ESAAMLG) to address the identified strategic deficiencies and implement the recommendations according to the agreed-upon timeframe.
FATF’s observations and recommendations as of 21 February 2020 are listed below:
|AFRICAN COUNTRY||ACTION PLAN|
Since October 2018, when Botswana made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its anti-money-laundering and combating the financing of terrorism (AML/CFT) regime and address any related technical deficiencies, Botswana has taken steps towards improving its AML/CFT regime, including by developing its national AML/CFT strategy and operationalising the country’s company registry to maintain beneficial ownership information. Botswana should continue to work on implementing its action plan to address its strategic deficiencies.
|(1) assessing the risks associated with legal persons, legal arrangements, and NPOs;|
(2) implementing risk-based AML/CFT supervisory manuals;
(3) improving its analysis and dissemination of financial intelligence by the FIU;
(4) implementing a CFT strategy, and ensuring the TF investigation capacity of the law enforcement agencies;
(5) ensuring the implementation without delay of targeted financial sanctions measures related to terrorist financing and proliferation financing, and
(6) applying a risk-based approach to monitoring non-profit organisations.
Since October 2018, when Ghana made a high-level political commitment to work with the FATF and GIABA to strengthen the effectiveness of its AML/CFT regime, Ghana has taken steps towards improving its AML/CFT regime, including by raising awareness of the supervisors and regulated entities to the identified ML/TF risks. Ghana should continue to work on implementing its action plan to address its strategic deficiencies.
|(1) implementing a comprehensive national AML/CFT Policy based on the risks identified in the NRA, including measures to mitigate ML/TF risks associated with the legal persons;|
(2) improving risk-based supervision, by enhancing the capacity of the regulators and the awareness of the private sector;
(3) ensuring the timely access to adequate, accurate and current basic and beneficial ownership information;
(4) ensuring that the FIU is focusing its activities on the risks identified in the NRA, and adequately resourced; and
(5) applying a risk-based approach for monitoring non-profit organisations.
In February 2020, Mauritius made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime. Since the completion of its MER in 2018, Mauritius has made progress on a number of its MER recommended actions to improve technical compliance and effectiveness, including amending the legal framework to require legal persons and legal arrangements to disclose of beneficial ownership information and improving the processes of identifying and confiscating proceeds of crimes. Mauritius will work to implement its action plan,
|(1) demonstrating that the supervisors of its global business sector and DNFBPs implement risk-based supervision;|
(2) ensuring the access to accurate basic and beneficial ownership information by competent authorities in a timely manner;
(3) demonstrating that LEAs have capacity to conduct money laundering investigations, including parallel financial investigations and complex cases;
(4) implementing a risk-based approach for supervision of its NPO sector to prevent abuse for TF purposes, and
5) demonstrating the adequate implementation of targeted financial sanctions through outreach and supervision.
In February 2020, Uganda made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime. Since the completion of its MER in 2016, Uganda has made progress on a number of its MER recommended actions to improve technical compliance and effectiveness, including conducting its first national ML/TF risk assessment and amending the relevant legal frameworks to addressed the technical deficiencies in its ML and TF offences. Uganda will work to implement its action plan.
|(1) adopting a national AML/CFT strategy;|
(2) seeking international cooperation in line with the country’s risk profile;
(3) developing and implementing risk-based supervision to FIs and DNFBPs;
(4) ensuring that competent authorities have timely access to accurate basic and beneficial ownership information for legal entities;
(5) demonstrating LEAs and judicial authorities apply the ML offence consistent with the identified risks;
(6) establishing and implementing policies and procedures for identifying, tracing, seizing and confiscating proceeds and instrumentalities of crime;
(7) demonstrating that LEAs conduct TF investigations and pursue prosecutions commensurate with Uganda’s TF risk profile;
(8) addressing the technical deficiencies in the legal framework to implement PF-related TFS and implementing a risk-based approach for supervision of its NPO sector to prevent abuse for TF purposes.
Since October 2019, when Zimbabwe made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies, Zimbabwe has taken initial steps towards improving its AML/CFT regime, including by establishing a legal framework to collect beneficial ownership information of legal person and arrangements. Zimbabwe should continue to work on implementing its action plan.
|(1) improving understanding of the key ML/TF risks among the relevant stakeholders and implementing the national AML/CFT policy base on the identified risks;|
(2) implementing risk-based supervision for FIs and DNFBPs including through capacity building among the supervisory authority;
(3) ensuring development of adequate risk mitigation measures among FIs and DNFBPs, including by applying proportionate and dissuasive sanctions to breaches;
(4) developing a comprehensive legal framework and mechanism to collect and maintain accurate and updated beneficial ownership information for legal persons and arrangements, and ensure timey assess by the competent authorities; and
(5) addressing remaining gaps in the TF and PF-related TFS frameworks and demonstrating implementation.