Mr Deputy Speaker, Sir, I am informed that as a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), Mauritius endorsed the revised international standards on combatting money-laundering and the financing of terrorism and proliferation issued by Financial Action Task Force (FATF) in February 2012. In this respect, Mauritius underwent a mutual evaluation of its Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) systems and procedures using the methodology for assessing technical compliance with the FATF Recommendations and the effectiveness of AML/CFT systems adopted by the FATF in February 2013.

43 The mutual evaluation process started in October 2016 and was completed with the publication of the Mauritius Mutual Evaluation Report (MER) in September 2018. The mutual evaluation which as conducted by ESAAMLG highlighted the areas of weaknesses in the AML/CFT legal and institutional framework of Mauritius. While Mauritius was rated largely compliant or compliant in only 14 of the 40 FATF Recommendations, on the other hand, Mauritius was rated partially compliant or non-compliant with 26 recommendations. Shortcomings were observed in relation to a number of FATF recommendations. In terms of effectiveness, the FATF adopted an approach focusing on a hierarchy of 11 defined outcomes. Mauritius was found to have either a low or a moderate level of effectiveness against the 11 immediate outcomes. The country achieved moderate effectiveness in 4 of the 11 immediate outcomes. Following the publication of the Mutual Evaluation Report in September 2018, Mauritius was placed under enhanced follow-up process in line with the ESAAMLG procedures for mutual evaluation and follow-up process. Mr Deputy Speaker, Sir, I am informed that after the observation period of one year, from October 2018 to October 2019, the FATF International Corporation Review Group (ICRG), accessed the progress made by Mauritius and considered that since the completion of the MER in 2018, while Mauritius had made some progress on some of its MER recommended action to improve technical compliance, the ICRG determined that not all strategic deficiencies had been fully addressed. Mauritius was, therefore, placed on the FATF list of jurisdictions under increased monitoring in February 2020 with an agreed action plan to address the strategic deficiencies identified in its AML/CFT regime. Mauritius was subsequently added to the European Union list of High Risk Third Countries on 07 May 2020, and in addition, to mirror the FATF list of jurisdictions under increased monitoring, the UK also included Mauritius in its list of High Risk Third Countries in March 2021. In fact, as stated in the Mutual Evaluation Report, published by the ESAAMLG, in September 2018, Mauritius was rated non-compliant or partly compliant on 26 out of the 40 FATF recommendations with significant shortcomings in risk assessment, supervision and beneficial ownership transparency. Moreover, the Report concluded that the country has a low level of effectiveness in 7 out of 11 immediate outcomes, notably in the areas of understanding of money-laundering risk, financial supervision, investigation and prosecution and implementation of targeted

44 financial sanctions. These findings triggered the ICRG referral process with Mauritius entering a one-year observation period. Regrettably, that one-year period was not optimally used. Instead of marshalling resources and driving through the necessary reforms, the previous government remained passive, allowing momentum to slip away and public trust to erode. The international consequences were swift. As the European Commission explained in its official notice on 07 May 2020, Mauritius has strategic deficiencies in its anti-money laundering and counter-terrorism financing regime that pose significant threats to the financing system of the Union. Similarly, the UK in its 26th March 2021 Regulatory Update justified Mauritius’ inclusion on its high-risk list by stating – “This jurisdiction poses increased risk due to strategic deficiencies in their AML/CFT regime and has been identified by the FATF as requiring increased monitoring.’’ These listings, unfortunately tarnished the reputation of the Mauritius International Financial Centre, created market uncertainty and placed investment clause and correspondent banking relationship under strain. The damage to our global image and economic prospect was real and avoidable, and the negative image is still prevalent globally until today. Mr Deputy Speaker, Sir, I must add that since I assume duty as Minister of Financial Services and Economic Planning, one of my priorities has been to sustain the trust of our international partners. While we cannot undo the economic and reputational harm caused, we believed that with decisive leadership, Mauritius can and will uphold the highest international standards. And in response to the continuously evolving AML/CFT/CPF landscape by key drivers such as emerging risk and development at the level of FATF, my Ministry has embarked on the following measures aimed at strengthening the National AML/CFT/CPF Framework and ensuring sustain alignment with revised international standards – • Firstly, participation in ESAAMLG meetings and attending the FATF plenary meetings to keep abreast of development at the level of FATF. • Secondly, conducting comprehensive risk assessments to identify and understand emerging risk and take necessary measures to mitigate identified risk. In this respect, the Ministry is currently conducting the money-laundering and terrorism financing risk assessment of legal persons and legal arrangements. The terrorist

45 financing risk assessment are non-profit organisation and the first proliferation financing risk assessment of the country. • We are also implementing capacity building programmes for competent authorities. For instance, my Ministry has recently organised an intensive 5-day assessors’ training which was facilitated by experts from the ESAAMLG Secretariat. We are also undertaking…

Can you conclude, please. If you want to circulate the answer because there are a lot of questions.

I have nearly finished, Mr Deputy Speaker, Sir. Just one last paragraph.

It has been a long answer.

I just want to add that in parallel, besides working on improving our systems, we are also undertaking a branding and promotional campaign to reinforce the brand image of Mauritius as a jurisdiction of substance and remove any negative perception about the reputation of the country. Thank you.

You have a question even with this clear answer? Yes, come on! Put your question!

Now we know that Mauritius was downgraded by the European Commission in 2020 …

Question! Question! Put your question!

… despite the advance warning given. Can the hon. Minister inform the House whether the grey listing had any adverse on the business activity in the sector?

Briefly! You have already replied to that but …

In terms of numbers, definitely, there was a drop in the number of new global business companies being incorporated during the period 2020-2021 when the numbers went drastically down. Thank you.

You have one question?

46

Thank you, Mr Deputy Speaker, Sir. Could the hon. Minister please advise when the next review of Mauritius is due and what are the strategic deficiencies that you referred to in your answer as mentioned by FATF?

Mr Deputy Speaker, Sir, the next mid-term evaluation is in 2027 and the second National Risk Assessment Report that we have released recently, comprises a list of deficiencies that have been identified and on which my Ministry is working with all the competent authorities to make sure that the country is ready for the next mid-term evaluation.

Okay. Hon. Second Member for Flacq and Bon Accueil. MAURITIUS TOURISM PROMOTION AUTHORITY – MR S.R. – OVERSEAS MISSIONS – COST INCURRED