AML - SurveyReport

THE RISKS, EXTENT AND TREND OF MONEY LAUNDERING AND FINANCING OF TERRORISM IN MAURITIUS
National Survey Report

Produced on behalf of the Board of the Financial Intelligence Unit
May 2006
NATIONAL AML/CFT SURVEY 2006
Acknowledgements
Many staff of the FIU assisted in the development of this study. We would particularly like to thank the staff of the Independent Commission Against Corruption, the University of Mauritius, the Ministry of Finance and Economic Development and all the respondents who took part in this study. We would also like to extend a special thank to all the volunteers who conducted the field interviews and helped in processing the questionnaires.
Financial Intelligence Unit Republic of Mauritius. All Rights Reserved
TABLE OF CONTENTS
Disclaimer Executive Summary 1.0 2.0
2.2 2.3
4 5 7 9
9 12
Introduction Methodology
Survey Design Limitations
3.0
3.4 3.5
Level of Awareness
Role of the FIU Commitment of Senior Management to AML/CFT issues
14
16 17
4.0
4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8
AML/CFT Compliance / Support

Levelling of Playing Field Control Systems Impact on Competitiveness Impact of Compliance on Non-Reporting Institutions Real benefits from Compliance Suspicious Transaction Reports filed Reporting of Suspicious Money Laundering and Financing of Terrorism cases to the FIU Consideration
20
20 22 23 24 25 26 30 30
5.0
5.3 5.4 5.5
Perception
Underground Economy Nature of Predicate Crime Perception of risk by Sector
31
32 35 36
6.0
6.2 6.3
Level of Confidence
Views on Institutions Views on Legislations
38
38 39
Appendix I II
QUESTIONS SET IN THE QUESTIONNAIRES GLOSSARY
41
NATIONAL AML/CFT SURVEY 2006

This research is commissioned by the Board of the Financial Intelligence Unit to assess the risk, extent and nature of money laundering and terrorist financing in Mauritius. The author of this report is Danny Sougith Sanhye, Assistant Director of the Financial Intelligence Unit and the information in this report is not intended to address the circumstances of any particular sector, entity or individuals. This report is intended as a basis for discussion only. Whilst every effort has been made to ensure its accuracy and completeness and the material therein, the author of this report, the Financial Intelligence Unit, its Director and its Board give no warranty in that regard and accept no liability for any loss and/or damage incurred through the use of, or reliance upon, this report or the information contained herein.
EXECUTIVE SUMMARY
1.0 Anti-Money Laundering legislation and regulation has existed in Mauritius for some five years. As part of a process of learning lessons for continuous development and improvement, the Financial Intelligence Unit (FIU) carried out a survey among major stakeholder groups between January and March 2006. 2.0 The survey confirmed that good progress has been made in the fight against money laundering and the financing of terrorism. It is particularly encouraging to note the following: 2.1 Financial sector reporting organisations (banks, management companies and insurance companies etc) are becoming increasingly aware of the legislation, regulation and the role of the FIU. 2.2 Senior managers within the regulated sector recognise the risks associated with money laundering and the financing of terrorism and are devoting more time to ensuring that company policies and procedures provide appropriate safeguards. 2.3 The impact of legislation has not had a profoundly adverse impact on competitiveness. Indeed 80% of the surveyed financial sector reporting organisations companies considered that they had benefited from having a better knowledge of their customers as required by the legislation. 3.0 The survey revealed three main issues requiring further attention: 3.1 Raising awareness among all stakeholder groups regulated and non regulated, with respect to anti-money laundering legislation and the role of the FIU would strengthen potential impact.
EXECUTIVE SUMMARY
3.2
Developing capacity within the regulated sector vis--vis risk assessment surrounding Know Your Customer principles and the links to customer relationship programmes would improve the quality of reporting, reduce the burden on organisations and help to get greater buy in from stakeholders. 3.3 Extending existing regulation to cover the legal profession, accountants, estate agents and the gaming and betting sectors would tighten control over high risk parts of the economy and be consistent with international best practice.
4.0
The results of the survey highlight areas which need to be addressed in an effort to strike the right balance between, on the one hand, effective framework to prevent and detect money laundering and the financing of terrorism, and on the other hand, to address the displacement factor and avoiding an excessive burden on some sectors. 4.1 About 75 % of the respondents believe in the existence of an organised underground economy in Mauritius. The size of that economy is not known. 4.2 74% of the respondents believe that there is a severe problem of money laundering in Mauritius. 4.3 Proceeds of drug related offences and corruption were seen to be the main crime for money laundering purposes. 4.4 Between 60% to 70% of the of the respondents rated the gaming sector to be most exposed to money laundering activities
1.0 INTRODUCTION
1.1 This report describes the results of research carried out by the Financial Intelligence Unit between the months of January and March 2006, seeking to identify the nature, extent and perception of money laundering and the financing of terrorism in Mauritius. 1.2 Mauritius was one of the first countries on the African Continent to develop and enact legislations which criminalises money laundering and the financing of terrorism, and establish a system of reporting of suspicious transactions to a central agency Financial Intelligence Unit (FIU). 1.3 In the last five years or so, significant progress has been made in the fight against money laundering and the financing of terrorism. Several legislations have been enacted and new institutions set up to address the problem of money laundering and putting up a barrier against terrorists and terrorist organisations
4. Financing of Terrorism (1) Any person who, by any means whatsoever, willfully and unlawfully, directly or indirectly, provides or collects funds with the intention or knowledge that it will be used, or having reasonable grounds to believe that they will be used, in full or in part, to commit in Mauritius or abroad (a) an offence in breach of an enactment specified in the Third Schedule; or (b) an act of terrorism, shall commit an offence.
Extract of Section 4(1) of the Convention for the Suppression of the Financing of Terrorism Act 2003
3. Money Laundering (1) Any person who (a) engages in a transaction that involves property which is, or in whole or in part directly or indirectly represents, the proceeds of any crime; or (b) receives, is in possession of, conceals, disguises, transfers, converts, disposes of, removes from or brings into Mauritius any property which is, or in whole or in part directly or indirectly represents, the proceeds of any crime, where he suspects or has reasonable grounds for suspecting that the property is derived or realised, in whole or in part, directly or indirectly from any crime, shall commit an offence. (2) A bank, financial institution, cash dealer or member of a relevant profession or occupation that fails to take such measures as are reasonably necessary to ensure that neither it nor any service offered by it, is capable of being used by a person to commit or to facilitate the commission of a money laundering offence shall commit an offence.
Extract of Section 3 (1) and 3 (2) of the Financial Intelligence and Anti-Money Laundering Act 2002
from misusing the financial sector. All countries now face the challenge of expanding and refining their systems for it to be effective and comprehensive. However, there has never been an attempt, to identify the nature and extent of the problem. This report is timely and an excellent first step towards assessing the success of anti-money laundering and the financing of terrorism legislation and regulation in Mauritius. In particular, we believe that the
INTRODUCTION findings of the survey report will assist in fine tuning the AML/CFT legislations and law enforcement actions in Mauritius. Also, its publication will help to increase the stakeholders. awareness of the general public of the risk of money laundering and the financing of terrorism and foster partnership among the different
Quotes:
We have added relevant quotes collected from respondents of members of the public and
Non-Reporting Institutions during the interviews. Most of the comments collected were very negative in their tone and have not been included in the report. However, we selected some of the negative quotes to give a balance. Many respondents who were more or less satisfy with the AML/CFT system did not make any comment.
2.0 METHODOLOGY
2.1 To gather sufficient data to measure the extent of money laundering and the financing of terrorism reasonably and assess the nature of such crimes, three surveys were conducted as part of this research to capture the perceptions of the population of interest. The questionnaires were designed to reflect our findings from the Suspicious Transaction Reports (STRs) received and personal interviews were carried out. We took into account the various opinions received in arriving at the final set of the questions.
2.2
Survey Design
2.2.1 From the three questionnaires designed to collect the responses of the Reporting Institutions, the Non-Reporting Institutions and members of the General Public, there were specific questions proper to the sector or the public plus questions of common interest to the three groups. 2.2.2 The survey comprised a main sample, designed to be representatives of the population of interest and a booster sample of the general public. The booster sample was included to compare perceptions of risks of money laundering and the financing of terrorism and also to understand the different level of appreciation and knowledge of AML/CFT. 2.2.3 A random probability sample was selected of both males and females above the age of 18 years old in various sectors across Mauritius and Rodrigues, where appropriate weighting has been applied to compensate for possible bias in selection.
There is lack of transparency in our system and there is also a lack of trust in the laws. (Public)
METHODOLOGY 2.2.4 Besides, the socio-demographic characteristics of the sample, it is further stratified by the level of education, age, type of job, sector of operation and gender. 2.2.4.1 A survey of the Reporting Institutions, i.e. institutions that have got an obligation under the Financial Intelligence and Anti-money Laundering Act 2002 to report suspicious transactions to the FIU. The questionnaire was designed to capture information about the control system in place and its efficiency, risk assessment programme, reporting of STRs, training and the general perception about the AML/CFT legislations and institutions set up to detect, prevent, prosecute and disrupt money laundering and the financing of terrorism activities. The responses from the regulated sector were collected through self-administered questionnaire and for some, through face to face interviews.
Targeted 193 17 132 29 42 22 28 81 50 50 38 29 49 6 10 776 % Achieved 54.4% 47.1% 29.5% 37.9% 73.8% 50.0% 46.4% 21.0% 18.0% 22.0% 34.2% 17.2% 8.2% 50.0% 10.0%
Banks FEDs/ Money Changers Management Cos NBFIs Insurance Cos Insurance Brokers Stockbrokers Accountants/ Auditors Attorneys Barristers Notaries Chartered Secretaries Bookmakers Casinos Gaming Houses TOTAL
8/19 2/6 8/55 3/15 5/18 1/17 1/11 3/81 6/41 8/47 6/35 2/29 4/9 1/2 2/7
Figure 1 % respondents achieved from Reporting Institutions
The need for FIU to conduct sensitisation campaigns, inculcate the reporting culture and educate the whole population about money laundering and the financing of terrorism. (Public)
10
METHODOLOGY 2.2.4.2 A survey for the Non-Reporting Institutions, i.e. institutions where the risk of money laundering and the financing of terrorism is present but has no obligation to report suspicious transactions to the FIU. The questionnaire was designed to establish the usage of cash in some sectors and to capture more or less the same information as the Reporting Institutions. 502 people were targeted from various sectors and 95% responded to our survey. All the responses were collected through face to face interviews.
New Car Dealers Imported Secondhand Car Dealers Second Hand Car Dealers Car Rental Spare Parts Charitable institutions Real Estate Agents Chartered Surveyors Contractors Architects Interior Designers Gem Dealers TOTAL Targeted 40 72 12 96 29 24 46 26 27 16 7 107 502 % Achieved 87.5% 100.0% 100.0% 95.8% 100.0% 100.0% 95.7% 57.7% 96.3% 100.0% 85.7% 97.2% 95%
17/20 36/36 5/5 46/48 14/14 24/24 22/23 15/26 14/14 11/15 7/7 107/107
Figure 1.1 - % respondents achieved from Non-Reporting Institutions
2.2.4.3
There was a general questionnaire for the General Public, designed to capture the understanding and awareness of the problems of money laundering and the financing of terrorism and their perceptions about the areas of risks. Also, their views on the AML/CFT legislations and institutions put in place to fight money laundering and the financing of terrorism were captured. The General Public was divided into two sub-groups; namely a specific group of interest for profession, occupation and sectors not capture in Non-Reporting Institutions and a sub-group for members of the Ggneral public by geographic location.
Need for more awareness campaigns regarding AML/CFT. (Non-Reporting Institutions)

11
METHODOLOGY
Special Categories NGOs Trade Unions Hotels Restaurants Electronic Shops Doctors Discotheque Journalists University TOTAL Strategic Points Black-River Flacq Grand-Port Moka Pamplemousses Plaine-Wilhems Port-Louis Riviere du Rempart Savanne Rodrigues TOTAL TARGETED 57 21 74 101 63 150 10 15 166 657 TARGETED 95 209 315 52 112 951 653 298 77 22 2784 % ACHIEVED 86.0% 33.3% 73.0% 100.0% 31.7% 68.0% 0.0% 60.0% 100.0%
% ACHIEVED 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Figure 1.2 - % respondents achieved from General Public
2.3
Limitations
2.3.1 Level of Bias. As only a sample of the population is surveyed, findings are subject to sampling error. That is the result obtained may differ from those that would be obtained if the entire population had been surveyed. 2.3.2 Non-Response. Not all those selected to participate actually did so, either
because they flatly refuse to take part or were not available during the fieldwork period. The non-response bias is mainly an issue for the Reporting Institutions given the low response rate. to those who did not take part.
Money laundering and the financing of terrorism is a serious problem in Mauritius which has caused increase in crimes and this has negative effects on our economy. (Public)
Despite the use of non-response weighing to
correct for this, it may still be that those who participate differed in key respects
12
METHODOLOGY 2.3.3 Coverage. The survey excluded members of the legislative assembly and other people, who are known to be politically active. It also excludes people from law enforcement and supervisory bodies. However, there is due representation of journalists, trade unionists, representatives of non governmental organisations and under and post graduate university students. 2.3.4 Threshold of Tolerance. Evidence suggests that better educated respondents tend to apply a lower threshold of tolerance and therefore are more likely to perceive the indications of money laundering and the financing of terrorism while at the same time lower educated respondents tend to overlook the indications of money laundering and the financing of terrorism and accept it as part of normal activities. 2.3.5 Meaning of Money Laundering and Financing of Terrorism. An
oversimplification of the problem of financing of terrorism is assumed in this survey, as such no distinction is made between money laundering and terrorist financing. Although terrorist financing often involves money laundering, the activity of placement, layering and integration does not necessarily apply to the act of financing of terrorism as legitimate money can be used for such crime.
Law enforcement should work closely with the public. (Public)

13
3.0 LEVEL OF AWARENESS

3.1 Forging partnership among the various stakeholders namely the FIU, law enforcement agencies, regulatory authorities, supervisory authorities, banking institutions, non-banking financial institutions, unregulated sectors and members of the general public, is critical when building an effective AML/CFT framework. The risks posed by money laundering and the financing of terrorism to the reputation of the country and especially to the integrity of its financial systems are being recognised widely across the world. It is vital to develop a converging approach among the various stakeholders in order to build and maintain a solid AML/CFT regime. Also, strong links between the private and the public sectors would inevitably lead to better decisions based on greater understanding of the environment and the implementation of the requirements of the legislations. 3.2 The respondents were asked to state their level of understanding of the AML/CFT legislations and expressed their knowledge about their acquaintance with the work of the FIU.
KNOWLEDGE OF AML/CFT LEGISLATIONS BY AGE FOR ALL RESPONDENTS
4.2%
>50 15.8% 47.8% 32.2%
4.1%
30-50 21.4% 43.1% 31.4%
2.6%
<30 13.2% 34.1% 50.1%
0.0%
25.0% Very Good
50.0% Good Fair No Idea
75.0%
100.0%
Figure 2 - Knowledge of AML/CFT legislations by age
Gives a better image of the country while fighting money laundering. (Public)
14
LEVEL OF AWARENESS 3.3 The above figure gives the percentage of respondents by age and their knowledge of AML/CFT legislations which have been around for more than five years. It was first criminalised in 2000 in the Economic Crime and Anti-Money Laundering Act 2000 before being repealed and replaced by the Financial Intelligence and Anti-Money Laundering Act 2002 in June 2002. It is alarming to note that more than 75% of the respondents have very vague knowledge of the law. 75 % of respondents who know the AML/CFT legislations very well are more than 30 years old. The results also show that people below 30 years old are less aware of the AML/CFT legislations. The public should be educated about the risks that money laundering and the financing of terrorism may have on the economy and on Mauritius, as a country. It is very important for the public to be made aware of the governments actions, if people have confidence that laws will be used for its intended purpose, they will see the benefits and be supportive. However, if the public views the AML/CFT legislations as ineffective, new laws will not be supported or followed.
% RESPONDENTS FOR REPORTING INSTITUTIONS BY SECTOR WHO HAVE A GOOD KNOWLEDGE OF AML/CFT LEGISLATIONS
Gaming
37.5% 52.7% 60.0% 61.3% 92.3% 63.7%

25.0% 50.0% 75.0% 100.0%
Professionals
NBFIs/ Brokers
Insurance Cos
Management Cos Banks/ FEDs/Money Changers 0.0%
Figure 2.1 - Knowledge of AML/CFT legislation for Reporting Institutions
Also, there should be greater co-operation between the law enforcement institutions, professionals and members of the public to effectively and efficiently deal with AML/CFT (Public)
15
LEVEL OF AWARENESS 3.4 Role of the FIU
3.4.1 Monitoring the extent and the risk of money laundering and the financing of terrorism in Mauritius is not the primary role of the FIU, although it comes very close to its role as a central agency. The FIU is not mandated to conduct research and educate its stakeholders but it cannot ignore the fact that as a central agency it has to make the requirements of the law known to them. It is not a surprise to note that 87% of the respondents of the Reporting Institutions are conversant with the role of the FIU while only 32.6% of the non-reporting institutions and 40.9% of the public are aware of the role of the FIU. Significantly in terms of knowledge of the AML/CFT legislations, 64% of those surveyed from the Reporting Institutions have very good and good knowledge, and 34% know the law fairly well. However, the gap created by the absence in the function of a competent authority to educate the public and create more awareness about the risk of money laundering and the financing of terrorism is reflected in the poor knowledge of the AML/CFT legislations among Non-Reporting Institutions and members of the General Public.
UNDERSTANDING THE ROLE OF THE FIU
PUB
40.9%
59.1%
NRI
32.6%
67.4%
RI
87.2%
12.8%
0.0%
25.0%
50.0% YES NO
75.0%
100.0%
Figure 3. - Role of the FIU for Reporting & Non-Reporting Institutions and public
Money laundering is seen as a result in increase in undetected crimes. (Non Reporting Institutions)
16
LEVEL OF AWARENESS 3.5 Commitment of Senior Management to AML/CFT Issues
3.5.1 A number of financial scandals have rocked the corporate world, well publicised events like BCCI, Enron, Parmalat, to name but a few, have triggered spontaneous reaction from authorities in the industry. To strike a balance between reputation and competitiveness, many organisations have included the AML/CFT risks in their main risk assessment programme and have placed compliance near the top senior management agenda.
% SENIOR MANAGEMENT RESPONDENTS OF REPORTING INSTITUTIONS ON THE AVERAGE TIME SPENT ON AML/ CFT ISSUES
Gaming
33.3% 40.5% 54.5% 62.5% 53.8% 45.5%

25.0% 50.0% < 25% > 25%
Professionals
7.1% 4.5%
NBFIs/ Brokers
Insurance Cos
25.0% 38.5% 45.5%

75.0% 100.0%
Management Cos
Banks/ FEDs 0.0%
Figure 4 Average time spent on AML/CFT issues by senior management
3.5.2 Figure 4 above suggests an increasing focus on AML/CFT by senior management. Between 25%-50% of senior management of banks, management companies and insurance companies surveyed from the Reporting Institutions spent more than 25% of their time on AML/CFT issues. 80% of them believe that compliance with AML/CFT have benefited their organisations in terms of better knowledge of customers. 3.5.3 There is however some interesting differences when analysing the responses of banks and management companies; further 52.6% of them perceived that implementation of AML/CFT policies and procedures have benefited them and those benefits are mostly accrued to international financial institutions.
Laws must be adapted to Mauritius. (Public)
17
LEVEL OF AWARENESS 3.5.4 Senior management from other financial services providers spend less time on AML/CFT issues but perceived that their organisations have suffered greatly in terms of loss opportunities. Responses received from the gaming sector show that not more than 2% of their time is spent on AML/CFT.
INCIDENCE OF AML/ CFT POLICIES ON THE ORGANISATION ACCORDING TO SENIOR MANAGEMENT
Gaming 2.4% Professionals 14.3%
66.7%
33.3%
83.3%
Other Regulated Financial Institutions
46.7%
16.7%
36.7%
Banks/FEDs/OMCs
40.5%
43.2%
16.2%
0.0%
25.0%
50.0% SUFFERED
75.0% NO EFFECT
100.0%
BENEFITTED
Figure 4.1 - Incidence of AML/CFT
3.5.5 We asked respondents from the Reporting Institutions to ignore the cost of implementing AML/CFT policies and procedures and to state how much their organisations had suffered or benefited from the implementation of such policies and procedures. The results are shown in Figure 4.1 above. 3.5.6 Consolidated responses for the non-regulated and regulated sectors are compared in figure 4.2. The figure shows that there is an equal belief from respondents of the non-regulated sector that AML/CFT had no real effect on their businesses.
Laws should be applied to everybody. (Public)

18
LEVEL OF AWARENESS
INCIDENCE OF AML/ CFT POLICIES ON THE ORGANISATIONS
Other Regulated Financial Institutions
33.3%
31.8%
34.8%
Banks/ FEDs/ MCs
52.6%
28.3%
19.1%
0.0%
25.0% BENEFITED
50.0% SUFFERED
75.0%
100.0%
NO EFFECT
Figure 4.2 - Incidence of AML/CFT
3.5.7 They were then asked to select from a list how they perceived their organisations had suffered or benefited. The chart in figure 4.3 shows the perceptions for senior and middle management. competitiveness. 25 % of them believe that their organisations have suffered mainly in terms of loss of opportunities, loss of customers and reduced
% MANAGEMENT RESPONDENTS OF REPORTING INSTITUIONS WHO CLAIM THAT THEIR ORGANISATION SUFFERED IN THE FOLLOWING AREAS
Loss of Opportunities Fines Sanctions by Regulators Reduce Competitiveness Loss of Customers 0.0%
22.2% 24.3%
1.2% 1.7% 28.4% 25.2% 25.9% 23.5%

25.0% 50.0%
SENIOR
MIDDLE
Figure 4.3 - How Reporting Institutions have suffered for senior & middle management
Institutions should be more independent. (Public)

19
4.0 AML/CFT COMPLIANCE / SUPPORT

4.1 Levelling of Playing Field
4.1.1 To succeed in the fight against money laundering and financing of terrorism, there should be a levelling of playing field as far as compliance with the requirements of the law is concerned. This is important in order to prevent gaps or weaknesses in the system at the mercy of criminals to launder the proceeds of their crimes or use those sectors where opportunities are gaping, as conduit to gain access to banking or other regulated sectors. The Financial Intelligence and Anti-Money Laundering Act 2002 was amended in September 2003 and before that, in June 2003 a set of regulations were passed for banks, financial institutions and cash dealers. The new amendments and the regulations have split the Reporting Institutions in two categories, on the one side, sectors under the supervision of the Bank of Mauritius and the Financial Services Commission and on the other side, financial services provided by legal professionals and accountants plus the gaming and betting sector which are not bound by the June 2003 Regulations and are not supervised with regards to compliance with AML/CFT legislations.
% RESPONDENTS FOR NON-REPORTING INSTITUTIONS BY SECTOR WHO HAVE A GOOD KNOWLEDGE OF AML/CFT LEGISLATIONS
Jewellery
15.4%
Charitable Institutions
4.2%
Motor Vehicles
14.1%
Real Estate
14.2%
25.0% 50.0% 75.0% 100.0%
0.0%
Figure 5 - Knowledge of AML/CFT legislations for Non-Reporting Institutions
I believe that the officers of the FIU should be more present in Rodrigues in order to detect possible cases of corruption or money laundering. (Public)
20
AML/CFT COMPLIANCE/SUPPORT 4.1.2 Many of the sectors that we classified as non Reporting Institutions in this report, have got reporting obligations in other countries because they are not spared from the risks of money laundering and the financing of terrorism. There is a general erroneous believe among respondents of the non-reporting institutions, the lawyers, accountants, notaries and gaming sector that their services are relatively safe from criminal activities. It emerged from many of these respondents, a common feature of complacency and a low degree of awareness about the threats of money laundering on their sectors. 4.1.3 Given the low knowledge of AML/CFT and the low level of awareness in the gaming sector and professionals providing financial services, it is not surprising to note the relatively low percentage of perception of risk in these sectors.
% RESPONDENTS WHO THINK THEIR ORGANISATIONS MAY BE EXPOSED TO ML & FT IN THE NEXT FIVE YEARS
Gaming
12.5% 25.5% 28.6% 54.8% 51.3% 41.6%

25.0% 50.0% 75.0% 100.0%
Professionals
NBFIs/ Brokers
Insurance Cos
Management Cos Banks/ FEDS/ Money Changers 0.0%
Figure 5.1 - % respondents who think their organisations may be exposed to money laundering and the financing of terrorism in the next five years
The lack of co-operation between different institutions gives rise to crimes opportunities in Mauritius. (Public)
21
AML/CFT COMPLIANCE/SUPPORT 4.2 Control Systems
4.2.1 Respondents of Reporting Institutions were asked a number of questions on the control system in place in their organisations to mitigate the risk of money laundering and the financing of terrorism. A very high level of compliance with AML/CFT regulations in the regulated sector is noted. It is not known if the implementation of the control system is perceived as good business practice or for fear of sanctions from the authorities. From the responses received, it demonstrates that control has been stepped up in high risk areas. 4.2.2 94% of respondents from the banking sector and foreign exchange dealers have policies and procedures on AML/CFT. There is also a high level of monitoring of such policies and procedures, 87% revised them every three years. them revised their policies and procedures every three years.
YES 93.8% 100.0% 87.1% 88.6% 41.8% 50.0% NO 6.2% 0.0% 12.9% 11.4% 58.2% 50.0%
All the
management companies surveyed have policies and procedures and 97% of
Figure 6 - % respondents having AML/CFT policies and procedures for Reporting Institutions
Banks & FEDs/Money Changers Management Cos Insurance Cos NBFIs/Insurance Cos / Brokers/Stockbrokers Professionals Gaming
4.2.3 When asked about the identification of real beneficial owners, again we note that 1/3 of the respondents from banks and foreign exchange dealers do not have any knowledge of them. More than 50% of them are from foreign exchange dealers.
Many people launder their money in the cash based sector fictitious company. (Public)
22
AML/CFT COMPLIANCE/SUPPORT
% RESPONDENTS WHO ARE AWARE OF ALL THE REAL BENEFICIAL OWNERS OF ACCOUNT HOLDERS OR COMPANIES
Gaming
0% 50.9% 82.9% 74.2% 100.0% 66.4%

25.0% 50.0% 75.0% 100.0%
Professionals
NBFIs/ Brokers
Insurance Cos
Figure 6.1 - % respondents who are aware of all the beneficial owners of account holders or companies
4.2.4 While the primary legislation covers all the Reporting Institutions, the AML/CFT regulations do not apply to all of them. The lack of AML/CFT supervision on the financial services provided by the professionals (legal and accountants) and the gaming and betting sector are clearly reflected by the level of control systems they have put in place.
4.3
Impact on Competitiveness
4.3.1 The survey results indicate that the impact on banks, gaming sector and professionals is not profound. Some of the respondents from these sectors believe there are more factors that are relatively impacting on competitiveness. However, responses from leasing companies, stock brokers, insurance and management companies appeared to be more significant. One possible explanation for this could be the difficulty to pass on extra AML/CFT cost to their clients and provide other type of services which are not AML/CFT related.
A money laundering indication is visible when people live a lavish life and have no official or legal source of revenue. (Public)
23
% RESPONDENTS WHO THINK THAT COMPLIANCE HAS REDUCED COMPETITIVENESS OF THEIR ORGANISATIONS IN THE LAST THREE YEARS
Gaming
25.0% 23.6% 57.1% 35.5% 43.6% 28.3%

25.0% 50.0% 75.0% 100.0%
Professionals
NBFIs/ Brokers
Insurance Cos
Figure 7 - % respondents who think that compliance has reduced competitiveness of their organisations
4.4
Impact of Compliance on Non-Reporting Institutions
4.4.1 To have an indication of the AML/CFT risks in the non-reporting sectors, respondents were required to state if they ask their customers or clients to declare their source of funds. request proof of funds. common method of payment. Not surprisingly, only 6% of the respondents 81% find it easy to conduct transactions with 21% of the respondents 68% of the respondents accept cash as the most
banks and other financial institutions in Mauritius.
believe that their activities may be exploited by criminals for money laundering activities. 30% said they do not asked for proof of income and proof of address when conducting transactions with banks and other financial institutions.
% RESPONDENTS BY SECTOR WHO TRANSACT IN CASH
Jewellery
98.1%
Charitable Institution
66.7%
Motor Vehicle
92.1%
Real Estate
74.5%
25.0% 50.0% 75.0% 100.0%
0.0%
Figure 8 - % respondents who deal in cash in their sector
Money laundering is a complex and secretive crime, and it is very difficult to detect. (Public)
24
AML/CFT COMPLIANCE/SUPPORT 4.4.2 On the other hand, respondents from the public were asked to state the most common method of payment in the sector in which they operate, 62% of them used cash and only 7.4% conduct transactions in excess of Rs 350 000 in cash, mostly when acquiring properties.
4.5
Related benefits from Compliance
4.5.1 The responses from the Reporting Institutions were analysed between middle and senior management. All sectors together shows that the middle It management has definitely acquired better knowledge of their customers. business from existing clients.
% MANAGEMENT RESPONDENTS WHO CLAIM THAT THEIR ORGANISATIONS HAS BENEFITED IN THE FOLLOWING AREAS
would be interesting to know if the knowledge has resulted in generating new
Cross selling
1.2% 0.9% 4.9% 7.0% 38.3% 29.6% 19.8% 24.3% 54.8% 81.5%
75.0% 100.0%
Generating new customers/ clients Better mgmt reputational risk
Better mgmt credit risk
Better knowledge of customers/clients
0.0%
25.0%
50.0%
SENIOR
MIDDLE
Figure 9 - % respondents who claim that their organisations benefited
4.5.2 Respondents were asked to state if specific AML/CFT policies and procedures for high net worth individuals have been implemented in their organisations. 60% of banks and foreign exchange dealers have implemented such systems which is 14% lower than management companies. Although not asked specifically about Politically Exposed Persons (PEPs), we would assume that PEPs are included in
More investigations should take place. (Public)
25
AML/CFT COMPLIANCE/SUPPORT the high net worth customers/clients as some respondents confirmed this as the policy of their organisations. It would be interesting to know if this is the case for other Reporting Institutions.
% RESPONDENTS HAVING SPECIFIC AML/CFT PROCEDURES FOR HIGH NET WORTH CUSTOMERS/ CLIENTS
Gaming
37.5% 18.2% 37.1% 54.8% 74.4% 60.2%

25.0% 50.0% 75.0% 100.0%
Professionals
NBFIs/ Brokers
Insurance Cos
Figure 9.1 - % respondents having specific AML/CFT procedures for high net worth customers/clients
4.6
Suspicious Transaction Reports filed
4.6.1 There has been a sharp decrease in the level of STRs filed in last two years. In 2004, there was a 50% drop in the level of STRs compared to 2003. The number slightly went up in 2005, this is because one particular Reporting Institutions has been consistent in its reporting to the extent that in 2003 that institution filed 80% of the reports received and in 2004 and 2005, it filed between 35% 50% of the reports. 88% of those STRs filed by this particular institution have been disseminated to law enforcement bodies for further investigation.
14. Reporting obligations of banks, financial institutions, cash dealers and members of relevant professions or occupations (1) Every bank, financial institution, cash dealer or member of a relevant profession or occupation shall forthwith make a report to the FIU of any transaction which the bank, financial institution, cash dealer or member of the relevant profession or occupation has reason to believe may be a suspicious transaction. Nothing in subsection (1) shall be construed as requiring a law practitioner to report any transaction of which he has acquired knowledge in privileged circumstances unless it has been communicated to him with a view to the furtherance of a criminal or fraudulent purpose.
(2)
Extract of Section 14 of the Financial Intelligence and Anti-Money Laundering Act 2002
There is a lack of transparency in investigation and prosecution of criminals. (Public)

26
AML/CFT COMPLIANCE/SUPPORT 4.6.2 The purpose of the legislations is not to turn Reporting Institutions into detectives but to conduct proper due diligence, conduct discrete commercial enquiry, prompt detailing of firm suspicions and report suspicious transactions to the FIU. A failure to report STR may increase AML/CFT risks on the organisations. The basis of trust on which the Reporting Institutions operate with their clients or customers, can easily be undermined by the involvement of Reporting Institutions in criminal activity wittingly and unwittingly. Whatever the level of AML/CFT compliance cost would be, it would not serve its intended purposes if staff are not trained in the application of policies and procedures. The figure below shows the high level of confidence expressed by respondents from various reporting institutions to report STRs to the FIU.
% RESPONDENTS BY SECTOR WHO FEEL CONFIDENT REPORTING SUSPICIOUS TRANSACTIONS TO THE FIU
% of STRs filed in 2005 0%
Gaming
62.5% 83.6% 80.0% 77.4% 100.0% 87.6%

25.0% 50.0% 75.0% 100.0%
Professionals
1.3% 1.3% 3.9% 22.4% 71.1%
NBFIs/ Brokers
Insurance Cos
Management Cos
Banks/ FEDs 0.0%
Figure 10 - % respondents who feel confident to report STRs
4.6.3 The level of confidence to file STRs with the FIU is compared with the actual STRs received. It is not known what factors the respondents considered when deciding their level of confidence, however, it is worth noting that high level of confidence does not necessarily means high level of STRs
Proximities of law enforcement agencies and availability of hotlines are much needed. (Public)
27
Evolution of STRs : 2002-2005
170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0
No of STRs
2002 2003 2004 2005
Banks
Management Companies
Investigatory & Supervisory Bodies
Others
Total
Reporting Entities
Source: Annual Report 2005 of the Financial Intelligence Unit of Mauritius
Figure 10.1 Evolution of STRs
0 Banks FEDs/ Money Changers NBFIs Management Cos Corporate Custodians/ Trustees Captive Insurance Managers Insurance Cos Insurance Brokers Stockbrokers Attorneys Barristers Notaries 8 6 47 81 24 6 19 18 11
1-2 5 1 1 4 0 0 2 0 0 0 0 0
3-6 4 1 0 1 0 0 0 0 0 0 0 0
7 - 10 1 0 0 1 0 0 0 0 0 0 0 0
> 10 1 0 0 0 0 0 0 0 0 0 0 0
Accountants/ Auditors 0 0 0 0 Figure 10.2 Frequency distribution of STRs filed by Reporting Institutions in the year 2005
4.6.4 The basis for forming a suspicion is extremely wide and it is not possible to draw a checklist to determine if a transaction is suspicious or not. Figure 10.3 shows the high level of confidence among respondents of different sectors in their control systems.
It projects a bad image of the Mauritian economy on the International scale. (Non-Reporting Institutions)
28
Q4.2 Do you have any system in place to detect failure by any member of your staff to report suspicious transactions internally? Yes Banks/FEDs /Money Changers Management Cos Insurance Cos NBFIs/Brokers Professionals Gaming 89.7% 45.2% 54.3% 29.1% 37.5% 7.7% 41.9% 40.0% 40.0% 50.0% 2.6% 12.9% 5.7% 30.9% 12.5% 72.6% No 19.5% Not Applicable 8.0%
Q4.3 Do you suspect that any suspicion of money laundering or financing of terrorism activities might go undetected in your organisation in one way or another? Yes 23.0% 10.3% 29.0% 17.1% 16.4% 12.5% No 69.0% 87.2% 51.6% 80.0% 61.8% 87.5% Not Applicable 8.0% 2.6% 19.4% 2.9% 21.8% 0.0%
Figure 10.3 Level of confidence among respondents of their control systems
4.6.5 On the premise that the responses are reliable, Reporting Institutions should have had more information on their customers and make timely reporting. However, many of the STRs received were long after the transactions took place which may be interpreted either as a lack of relevant information to appreciate the nature of the transactions or simply being complacent about their reporting obligation.
% RESPONDENTS ON REPORTING SUSPICIOUS ACTIVTY ANONYMOUSLY
NO IDEA, 10.5%
NO, 28.6%
YES, 60.9%
Figure 10.4 - % respondents (Non-Reporting Institutions & Public) reporting suspicious activity anonymously
Public must be encouraged to report money laundering cases. (Non-Reporting Institutions)

29
AML/CFT COMPLIANCE/SUPPORT 4.7 Reporting of Suspicious Money Laundering and Financing of Terrorism cases to the FIU 4.7.1 61% of respondents of the Non-Reporting Institutions and public stated they would report suspicion of money laundering and financing of terrorism cases to the FIU anonymously. One possible explanation for this high percentage could be a lack of trust in the system or the system does not provide for protection for whistleblowers. Anonymity and confidentiality are crucial preconditions for the public to report suspicious cases of money laundering and financing of terrorism. 4.8 Consideration
4.8.1 The survey results suggest a high degree of compliance in the regulated sector. However, there is no guarantee that the control systems put in place are working fine to mitigate the risk of money laundering and the financing of terrorism. It is not known if regulatory pressure has encouraged this high degree of compliance or whether compliance is seen as a firewall against potential reputational risk. The concept of risk based approach to AML/CFT issues is a way forward to soothe the increasing AML/CFT compliance cost. For it to be effective, service providers would require a well defined risk assessment policies and procedures couple with tailored Know Your Customer and Customer Due Diligence requirements to avoid bias in any judgement. This approach would shift the burden on the service providers where compliance cost would be more of a risk assessment cost. 4.8.2 Given the low level of cross selling, it transpires that high knowledge of customers acquired through Customer Due Diligence is not being translated into a customer relationship programme to identify opportunities for cross-selling. This knowledge could also help in better management of credit risk.
There are loopholes in the legislation and these facilitate money laundering. (Non-Reporting Institutions)
30
5.0 PERCEPTION
5.1 Money Laundering was an underrated and a somewhat ignored crime in Mauritius until the beginning of the 21st Century. As a consequence, it has undoubtedly prospered relatively undeterred. On that premise, many criminals may have successfully converted their ill-gotten gains into established businesses and integrated themselves in the normal economy. The world of money laundering is very secretive in nature, it is so vast and so hidden that it defeats any attempts to identify and quantify. We cannot judge the extent and nature of money laundering and the financing of terrorism only by the number of suspicious transactions reported or number of successful prosecutions, because not all proceeds of crime are laundered through the formal system and not all crimes are detected. Nevertheless, it is possible, by using reasonable conjectures to estimate its nature and extent. 5.2 It is worth noting that there were no major events of money laundering and any kind of financing of terrorism reported in the media during the survey period. This is to say that the judgement of the respondents was dependent on their ability to recall what they have seen and read before the survey period and their experience. The perception of the respondents on the extent of money laundering and the financing of terrorism in Mauritius could reasonably be classified as falling into three primary groups; 5.2.1 Money laundering cases that have been exposed and are in the public domain either because of wide press coverage; or the criminals were arrested 5.2.2 The money laundering suspicions or alleged offences have been disclosed but details have not been made public. In these circumstances the knowledge of the Reporting Institutions about these cases could have influenced their perceptions.
People should be encouraged to come forward to give information. (Public)
31
PERCEPTION 5.2.3 The third group would be about money laundering activities that are not detected. But the perceptions of the respondents are influenced by the unexplained wealth of individuals which hit directly the eyes of the public. 5.3 Underground Economy
5.3.1 Besides the macroeconomics, social and political implications of money laundering, undetected money laundering activities contributes to the growth of the underground economy which comprises of both the informal economy and illegal economy. One arguments raised against the underground economy is that it makes economic assessment impossible as these activities are by their very nature secretive. Also, especially in the developing countries, it fulfills the function of a social safety net by facilitating the flow of resources between the underground and legal economy. The ability of criminals to launder money in the underground increase opportunities for them as entrepreneurs and also raise their standard of living. 5.3.2 For the purpose of the survey, we explained the underground economy as a group of clandestine transactions that create (financial) value, but are conducted with the intention of escaping something; i.e. primarily taxes, revelation of bribes, government regulations or escaping prohibition and criminal prosecution
Reporting Institutions Non Reporting Institutions Public 75% 75% 80%
Figure 11 - % responses on the existence of an underground economy in Mauritius
People have the perception that little is being done to fight money laundering and financing of terrorism. (Public)
32
PERCEPTION 5.3.3 The growth of the underground economy is exacerbated by the enactment of legislations and its enforcement. There is a general consistency in the perception of the respondents of all three groups when asked about whether they believe there is an underground economy in Mauritius, between 75% - 80% of the respondents answered in the affirmative. However, there are only 25% of the respondents from the gaming and betting sector who believe that there is an underground economy in Mauritius. It would be very interesting to examine their arguments. The absence of regulation and supervision, and the heavy reliance on the use of cash in some sectors of the economy might be one of the main reasons for the high level of activity in underground. The outlaw of the use of cash payment above Rs 350 000 could be another factor which might have pushed people to the informal sector to escape formal money laundering control and identification. known. There is a widespread belief among respondents about the existence of an underground economy in Mauritius, but its actual size is not
% RESPONDENTS WHO PERCEIVE THE EXTENT OF ML/FT TO BE SEVERE
PUB
76.5%
NRI
70.3%
0.0%
25.0%
50.0%
75.0%
100.0%
Figure 11.1 - % respondents who perceive the extent of ML/FT to be severe
People are afraid to disclose their identity. More protection should be given to the members of the public. (Public)
33
PERCEPTION 5.3.4 74% of the respondents from public believe that there is a severe problem of money laundering and the financing of terrorism in Mauritius which is more or less consistent with the percentage of public who believe that there is an underground economy in Mauritius. 19 % of the public have no idea about the existence of such an economy. Conversely, 48 % of Non-Reporting Institutions believe that the problem of money laundering and the financing of terrorism is serious. 5.3.5 One way of reducing the attractiveness to the informal sector is to tackle the problem at the interface between the formal and the informal sectors. Reporting institutions should be encouraged to pay particular attention to transactions that they suspect relate to informal operation and report those transactions accordingly. Criminals operating in the underground sector would not necessarily go to the formal sector, but might instead covert their wealth into gold, silver or other gem stones which are easily transportable or into foreign currencies. Other might acquire and dispose of properties for large amounts of cash at an over or under-declared value as the actual price would represent an unrecorded asset. 5.3.6 Another way of tackling the problem is to outlaw the use of cash for transactions above a certain size. Although, this is already in existence (a threshold of Rs 350,000 in cash or its equivalent) operators undertaking transactions over this threshold often circumvent the legislation by structuring their payments or do commingling of funds. To get round this problem is to set the threshold could very high level, and gradually reducing it as the financial system developed, or introduce a large cash transaction reporting system. recorded. 5.3.7 Also, an amnesty could be considered to incite the operators in the underground to join the formal sector. The amnesty could be in the form of tax, registration fee or penalty.
It projects a bad image of the Mauritian economy on the international scale. (Non-Reporting Institutions)
This would ensure that
those engaged in such transactions would be formally identified and transactions
34
PERCEPTION 5.4 Nature of Predicate Crime
5.4.1 All respondents were given a list of most common crimes detected from the investigative analysis carried out on the suspicious transaction reports and asked to select the one they saw as the main cause of money laundering and the financing of terrorism in Mauritius. They were asked to grade their perception in terms of severe, moderate and insignificant. A dont know was included as a fourth option for respondents who do not want to express their views. 5.4.2 There is a general consistency from respondents of all the groups that drug related offences are the main crime for money laundering in Mauritius. It is not possible to say why respondents have this strong perception but it is most likely that many have based their judgement on cases which are reported in the media. 5.4.3 The results for the respondents who checked the box severe are displayed below. Drug related offences were seen as the main crime generating illicit money for money laundering.
Drug Reporting Institutions Non Reporting Institutions Public Average Total 88% 95% 88% 90%
Fraud 55% 81% 80% 72%
Tax 30% 60% 62% 51%
Corruption 65% 82% 83% 77%
Smuggling 52% 80% 75% 69%
Figure 12- % total responses of different groups who rated the above crimes as severe
5.4.4 Figure 12 also indicates that corruption is perceived as most prevalent in Mauritius. Other crimes listed in the questionnaire also scored a high level of percentage with the exception of tax evasion which is 51%.
Money laundering cannot be stopped but can be controlled. (Non-Reporting Institutions)
35
PERCEPTION 5.5 Perception of risk by sector
5.5.1 No sector is safe from money laundering and the financing of terrorism, however, the extent of risk would depend on the types of control in place, the anonymity it provides and the types of monetary instruments that are commonly in use in the sector. 5.5.2 Respondents were asked to state the sector where they perceive the risk of money laundering and the financing of terrorism to be most prevalent in Mauritius. We compared the perceptions of the three different groups and noted that between 60%-70% of the respondents rated the risk in the gaming sector as the most severe for money laundering purposes. As a cash intensive industry, it offers money launderers the ease to disguise and convert bulk illicit cash into less conspicuous forms.
People are scared to reveal money laundering cases. (Non-Reporting Institutions)
36
PERCEPTION
THE PERCEPTION OF RESPONDENTS ON THE RISK OF ML IN THE FOLLOWING SECTORS
Betting/Horse Racing Casinos Real Estate Money Changers Car Dealing Global Business Jewellery Notaries Attorneys Informal Sector Banking/Financial Services Accountants Lawyers Tourism Family Insurance Stock Exchange 0.0%
12.1% 16.4% 18.4% 23.3% 21.0% 39.4% 37.6% 35.5% 60.4%
70.9%
34.7% 27.2% 31.6% 27.1% 31.1% 22.9% 29.4% 25.5% 29.1% 24.3% 16.5% 28.1%
26.0% 24.2% 13.9% 24.7%
20.2% 27.7% 17.0% 27.1% 16.8% 14.0%

25.0%
28.9% 36.2%
50.0% 75.0% 100.0%
DONT KNOW
SEVERE
Figure 13 - the perception of respondents on the risk of money laundering
Lack of technologies and human resources to combat those crimes. (Public)
37
6.0 LEVEL OF CONFIDENCE

6.1 People who are better informed on the activities of different institutions in the AML/CFT framework tend to have a better opinion on the works that are carried out to fight money laundering and the financing of terrorism. Individual attitudes on the operational efficiency of institutions will always differ, however institutions must continue to conduct their affair in a transparent manner. Also, access to accurate information about what is being done to fight crime can definitely improve confidence in the system. However, the general confidence measure for the public remains the level of successful prosecution. 6.2 Views on Institutions
6.2.1 Respondents from all three groups were asked to rate in a scale of 1-5 from low to high, how well they perceive institutions are doing in detecting, preventing, prosecuting and disrupting money laundering and terrorist financing activities. As AML/CFT is about taking the proceeds out of the crime, respondents were also asked to express their views on confiscating and forfeiting proceeds of crime. 6.2.2 Between 5%-10% of respondents from the Reporting Institutions gave institutions a high rate of 5, while between 32%-48% believe that institutions are doing neither good nor bad. 48% believe that prosecution of money launderers is low. As criminal confiscation depends on successful prosecution, 47% of respondents rated actions on this line as low. The low rating responses were principally from respondents between the age of 30-50 years old. 43% of female respondents gave an average rating to the institutions compared to 37% of male respondents.
Money laundering is seen as a result in increase in crimes. (Public)
38
LEVEL OF CONFIDENCE
% RESPONDENTS BY GROUP GIVING 5 & 4 RATING TO INSTITUTIONS
Disrupting ML/FT activities
9.9%
14.8%
Confiscating proceeds of ML/FT
10.0%
16.7%
Prosecuting ML/FT
10.1%
15.8%
Preventing ML/FT
10.2%
17.5%
Detecting ML/FT
10.0%
15.7%
25.0% HIGH 5 4 50.0%
0.0%
Figure 14 - % respondents by group giving 5 &4 rating to institutions
6.2.3 About 50% of respondents from the public gave low rating to the institutions and about 20%-35% gave an average rating. institutions. In return, about 20% of the respondents from Non-Reporting Institutions gave a rating of 5 and 4 to
6.3
Views on Legislations
6.3.1 The attitude of respondents on institutions was tested through another question to establish if the high or low rating was dependant on the efficiency and inefficiency of the AML/CFT legislation in Mauritius. Between 46%-61% of the respondents perceive the legislations as effective in detecting, reducing and deterring money laundering and the financing of terrorism, and the scope of crime. 24%-37% do not have any idea and this is more or less consistent with the percentage of respondents that have low knowledge of the legislations.
The assets of money launderers should be confiscated. (Public)

39
LEVEL OF CONFIDENCE
% RESPONDENTS WHO GRADE THE EFFECTIVENESS OF THE AML/ CFT LEGISLATIONS IN MAURITIUS
ALL
45.1%
33.9%
PUB
31.0%
48.8%
NRI
50.9%
35.4%
RI
53.4%
17.6%
0.0%
25.0%
50.0% EFFECTIVE INEFFECTIVE
75.0%
100.0%
Figure 15 - % respondents who grade the effectiveness of AML/CFT legislations
6.3.2 Respondents were then asked to select from a list, actions that they think would reduce the risk of money laundering and the financing of terrorism activities for the financial sector to be effective.
% RESPONDENTS BY GROUP ON ACTIONS TO REDUCE RISK OF ML & FT
81.1%
78.5%
76.7%
Adoption of international best practices 89.2% Increasing awareness about AML/CFT
92.5%
88.2%
64.4%
89.9%
86.2%
Reinforcing enforcement of regulations Strengthening existing regulations
47.0%
0.0% 25.0%
86.1%
50.0%
83.0%
75.0%
100.0%
RI
NRI
PUB
Figure 15.1 % respondents by group on actions to reduce risk of ML & FT
Too many publicity by institutions but no results. (Public)
40
Appendix I: QUESTIONS SET IN THE QUESTIONNAIRE

1.0 Common questions in Reporting Institutions (RIs), Non- Reporting Institutions (NRIs) and the Public questionnaire 1.1 Respondents were asked to grade their knowledge about the AML/CFT legislations in Mauritius and whether they were conversant with the role of the FIU. 1.2 Respondents were asked to rate the risk by sector where they thought ML/FT was most prevalent on a scale of insignificant, moderate, severe and no idea. The sectors were classified in financial institutions, made up of banks, global businesses, money changers, stock exchange; Non financial Institutions, made up of betting and horse racing, car dealing, real estate, precious stones & jewellery businesses, casinos and professional intermediaries; informal sectors and other sectors not traced. 1.3 The respondents were asked to rate the degree of prevalence; on a scale from insignificant, moderate, severe to no idea; on offences (drug trafficking, fraud, tax evasion, corruption smuggling or others) that would be committed by criminals to generate proceeds of crime in Mauritius. 1.4 They were asked to rate the efficiency of Mauritian institutions in detecting, preventing, disrupting ML/FT activities and prosecuting money launderers and terrorists, confiscating/ forfeiting their assets. They were requested to rate these institution on a scale from 5 (high) to 1 (low). 1.5 The respondents were also requested to grade the efficiency of the AML/CFT legislation in Mauritius in detecting and deterring ML/FT and reducing the scope of crimes. 1.6 The respondents were asked to give their opinion as to whether the AML/CFT framework is more effective than three years ago and whether they thought that an underground economy exists in Mauritius. 2.0 2.1 Common questions in the NRIs and Public questionnaire Respondents were asked whether they accepted payments in cash in excess of Rs 500,000 or its equivalent in foreign currencies and whether they believed that the products/services they are dealing in could be exploited by criminals for ML activities.
41
Appendix I: QUESTIONS SET IN THE QUESTIONNAIRE 2.2 They were also asked about the most common methods of payments (cash, cheques or any other mode of payments) for the sector in which they are operating in Mauritius. They were even asked if they were able to identify clients/ customers of high vulnerability to ML 2.3 The respondents were also asked if they have been requested, while conducting transactions at financial institutions in Mauritius, to produce proof of income and address. 2.4 The respondents were also asked to grade the extent of ML /FT in Mauritius on a scale from insignificant, moderate and severe to no idea. 2.5 The respondents were also asked about their course of action if they ever come across an ML/FT activity by reporting that act to the Mauritius Police Force, ICAC, Income Tax Office, and the FIU or to report to the above mentioned institutions anonymously. 2.6 The personal views of the respondents were sought as regards to ML/FT in Mauritius
3.0 3.1
Specific questions to RIs Questions were set to subdivide the population by age, position in organisations and organisations having overseas branches or head offices.
3.1
The respondents were asked to give an indicative percentage of their time that they spend on average per month in preventing and detecting the risk of ML/FT in their organisations.
3.2
A series of questions about the policies, procedures and compliance of organisations to ML/FT were set. The respondents were asked whether they have in place policies and procedures to detect, prevent and report suspicious transactions relating to ML/FT and whether such policies and procedures have been reviewed in the last three years.
3.3 The respondents were also asked whether (i) they document source of wealth of their clients; (ii) they have set up AML/CFT procedures fort high net worth individuals; (iii) they are aware of all the real beneficial owners of account holders or companies for which they provide their services; and (iv) they have identified types of accounts and transactions that require high security or constant monitoring.
42
Appendix I: QUESTIONS SET IN THE QUESTIONNAIRE
3.4
The respondents were asked to give an indicative figure that has been spent by their organisations as compliance cost for the last financial year and to indicate whether they believe that their organisations could be exposed to ML/FT in the next five years. .
3.5
Some questions were set in connection with the consequences of AML/CFT. First, the respondents were asked to grade the consequences of implementing AML/CFT policies and procedures on a scale from suffered greatly, suffered moderately, benefited moderately, benefited greatly to no effect. They were also requested to specify the benefits or losses in terms of better knowledge of clients, better management of credit risk, better management of reputational risk, generating new customers and cross selling; or loss of customers, reduce competitiveness, sanctions by regulators, fines and loss of opportunities.
3.6
They were also requested to state the frequencies; on a scale of always, sometimes, rarely to never; with which they carry out due diligence on new customers, new services for established customers, politically exposed persons, customers dealing with NCCT countries, customers dealing with countries having no equivalent jurisdiction for AML/CFT, or on transactions of nonprofit making organisations.
3.7
There were various questions set to assess and monitor risks against ML/FT. In this respect, the respondents were asked to confirm whether they monitored all transactions of their clients, may it cash or otherwise.
3.8
In identifying risks, they were also asked whether (i) they were able to identify changes (both in nature and size) in their clients transactions; (ii) they have identified places where ML /FT could occur in their organisations; (iii) they have identified customers of high vulnerability to ML/FT in their organisations; and (iv) they have in-house skills to investigate financial crimes committed by an insider or in collusion of a partner of their organisations.
3.9
Questions were set in relation to records keeping and the respondents were asked if their records are easily available and retrievable and whether they have systems in place to ensure that records are not destroyed or altered.
43
Appendix: QUESTIONS SET IN THE QUESTIONNAIRE 3.10 There were questions addressing suspicious transaction reports and the respondents were asked whether (i) they feel confident to report STRs to the FIU; (ii) they are able to identify a suspicious transaction; (iii) they need to receive feedback from FIU on all STRs filed; and (iv) they were aware of all information that need to be filed with the FIU. 3.11 The respondents were asked whether they had reported any suspicious transaction to the FIU and if they felt that the reporting obligation need to be extended to other persons than those listed in the FIAML Act 2002. 3.12 They were even asked if they have systems in place to detect failure by staffs to report suspicious transactions internally and if they believed that suspicion on ML could go undetected in their organisation. 4.0 4.1 Specific questions on NRIs questionnaire Some questions were set on the operational activities of non-reporting institutions. The respondents were requested to state whether they request their clients about the source of their funds. They were also requested to state whether they verify and keep records of their clients. 4.2 They were requested to state whether their businesses necessitate payments in cash exceeding Rs 350,000 of its equivalent on foreign currencies and also to indicate the methods of payments and/or receipts (cash, cheques, wire transfers or otherwise) to suppliers and/or from customers respectively and they were asked if they physically transported funds internationally. . 4.3 The respondents were asked if they found it easy to conduct transactions with bank and financial institutions in Mauritius and whether they were aware that banks had a duty to report suspicious transactions of Ml/FT to the FIU. . 5.0 5.1 Specific question on Public questionnaire The respondents were asked to state whether they made payments or received cash in excess of Rs 350,000.
44
Appendix II: GLOSSARY

The following terms are used throughout this report. Anti-Money Laundering (AML): The process by which efforts are made to prevent and detect money laundering activity. Cash means (a) money in notes or coins of Mauritius or in any other currency; (b) and includes any cheque which is neither crossed nor made payable to order whether in Mauritian currency or in any other currency; Compliance: The process of complying with laws, regulations, and guidance. FIUs: Financial Intelligence Units are central, national agencies responsible for the receiving, requesting, analysing, and disseminating to competent authorities, disclosures of financial information in relation to suspicions of money laundering and financing of terrorism. Integration: This phase occurs after the original source of the funds has been obscured and at that stage of the money laundering process is for the money to appear as legitimate funds or assets Know Your Customer (KYC): The requirement that financial institutions understand who their customers are, including by obtaining documentation to verify identity, address, source of funds, etc. KYC is often referred to as customer due diligence (CDD). Layering: When dirty money passes through a series of transactions in order to obscure the origin of the proceeds, it is called layering. These transactions may involve different entities, such as companies and trusts, different financial assets such as shares, securities, properties or insurance products. Money Laundering (ML): The process by which the proceeds of crime are converted into assets that appear to have a legitimate origin. NCCT countries means non-cooperative countries and territories which may be having detrimental rules and practices that impede international co-operation in the fight against money laundering; Placement: This phase of money laundering occurs when the cash generated from crime is placed into the financial system or is used to purchase gods. In this phase, the proceeds of crime are most apparent and therefore most at risk.
45
Appendix II: GLOSSARY Politically Exposed Persons (PEPs) refers to persons who perform important public functions for a state and includes heads of state, government and cabinet ministers, senior judges, senior or influential officials, functionaries and military leaders, and people with similar functions in international or supranational organisations as well as members of ruling royal families. The term also applies to the family and close associates of such individuals. Risk-Based Approach: A risk-based approach involves organisations (a) identifying and assessing the money laundering risks that they face, given their particular customer, product, services, and geographic profile, and (b) identifying and applying measures to manage and mitigate these risks. Suspicious transaction means a transaction which: (c) gives rise to reasonable suspicion that it may involve (i) the laundering of money or proceeds of crime; or (j) funds liked or related to, or to be used for, terrorism or acts of terrorism or proscribed organisations, whether or not the funds represent proceeds of crime; (d) is made in circumstances of unjustified complexity; (e) appears to have no economic justification or lawful objective; (f) is made by or on behalf of a person with whom the transaction is made; or (g) gives rise to suspicion for any other reason. Terrorist Financing (TF): The financing of terrorist acts, terrorists, and terrorist organizations. Underground economy means a group of clandestine transactions that create financial value, but are conducted with the intention of escaping something primarily taxes, revelation of bribes, government regulations, exchange controls or criminal prosecutions.
46

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THE RISKS, EXTENT AND TREND OF MONEY LAUNDERING AND FINANCING OF TERRORISM IN MAURITIUS

National Survey Report

NATIONAL AML/CFT SURVEY 2006

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

AML/CFT Compliance / Support

QUESTIONS SET IN THE QUESTIONNAIRES GLOSSARY

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

NATIONAL AML/CFT SURVEY 2006

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

Figure 1 % respondents achieved from Reporting Institutions

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

Figure 1.1 - % respondents achieved from Non-Reporting Institutions

Need for more awareness campaigns regarding AML/CFT. (Non-Reporting Institutions)

Figure 1.2 - % respondents achieved from General Public

Despite the use of non-response weighing to

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

Law enforcement should work closely with the public. (Public)

3.0 LEVEL OF AWARENESS

KNOWLEDGE OF AML/CFT LEGISLATIONS BY AGE FOR ALL RESPONDENTS

25.0% Very Good

50.0% Good Fair No Idea

Figure 2 - Knowledge of AML/CFT legislations by age

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

37.5% 52.7% 60.0% 61.3% 92.3% 63.7%

Management Cos Banks/ FEDs/Money Changers 0.0%

Figure 2.1 - Knowledge of AML/CFT legislation for Reporting Institutions

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

LEVEL OF AWARENESS 3.4 Role of the FIU

UNDERSTANDING THE ROLE OF THE FIU

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

LEVEL OF AWARENESS 3.5 Commitment of Senior Management to AML/CFT Issues

33.3% 40.5% 54.5% 62.5% 53.8% 45.5%

25.0% 38.5% 45.5%

Banks/ FEDs 0.0%

Figure 4 Average time spent on AML/CFT issues by senior management

INCIDENCE OF AML/ CFT POLICIES ON THE ORGANISATION ACCORDING TO SENIOR MANAGEMENT

Gaming 2.4% Professionals 14.3%

Other Regulated Financial Institutions

Figure 4.1 - Incidence of AML/CFT

Laws should be applied to everybody. (Public)

INCIDENCE OF AML/ CFT POLICIES ON THE ORGANISATIONS

Other Regulated Financial Institutions

Banks/ FEDs/ MCs

Figure 4.2 - Incidence of AML/CFT

1.2% 1.7% 28.4% 25.2% 25.9% 23.5%

Institutions should be more independent. (Public)

4.0 AML/CFT COMPLIANCE / SUPPORT

Figure 5 - Knowledge of AML/CFT legislations for Non-Reporting Institutions

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

12.5% 25.5% 28.6% 54.8% 51.3% 41.6%

Management Cos Banks/ FEDS/ Money Changers 0.0%

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

AML/CFT COMPLIANCE/SUPPORT 4.2 Control Systems

management companies surveyed have policies and procedures and 97% of

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

0% 50.9% 82.9% 74.2% 100.0% 66.4%

Management Cos Banks/ FEDS/ Money Changers 0.0%

Financial Intelligence Unit Republic of Mauritius. All Rights Reserved

25.0% 23.6% 57.1% 35.5% 43.6% 28.3%