OBJECTIVE Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. Recently on 21st February, 2020, it released a publication titled "Jurisdictions under Increased Monitoring" which included countries in the "Grey List". Among others, Mauritius was one of the jurisdictions in the said list. In this webinar, we shall be discussing the reasons behind the inclusion of Mauritius in such list and analyse the consequence of such inclusion.

1. Mauritius' Inclusion in FATF’s
Grey List
CA Divakar Vijayasarathy

2. Research Credits
Harish Kumar
CA Jugal Gala
2

3. Legends Used
AML Anti Money Laundering
BO Beneficial Ownership
CFT
Combatting the Financing of
Terrorism
DNFBP
Designated Non-Financial Businesses
and Professions
FATF Financial Action Task Force
FDI Foreign Direct Investment
FPI Foreign Portfolio Investor
GAFI Groupe D'action Financière
LC Largely Complaint
LEA Law Enforcement Agencies
NC Non-Complaint
NPO Non- Profit Organisation
NRA National Risk Assessment
PC Partially Complaint
SEBI
Securities and Exchange
Board of India
TF Terrorist Financing
US United States

4. Presentation Schema
4
Background Objectives of FATF
FATF
Recommendations
Members and
Observers
Grey List and Black
List
Economic
Consequences of
being in Grey List
Overview of
Mauritius Global
Business Sector
FATF Mutual
Evaluations
Priority Actions
Recommended
Compliance
Position for
Mauritius
Series of Events
Leading to
Inclusion
Action Plan Agreed
SEBI’s Position and
Ramifications
Way Forward

5. Overview
5

6. Background
6
The Financial Action Task Force (FATF) is the global money laundering and terrorist
financing watchdog
It is also known by its French name Groupe D'action Financière (GAFI)
It is an inter-governmental decision-making body
It was established in 1989 during the G7 summit in Paris to develop policies to
combat money laundering
In 2001, its mandate was expanded to include terrorism financing
In April 2012, it added efforts to counter the financing of proliferation of weapons of
mass destruction

7. Objectives of FATF
7
It develops and promotes policies to protect the global financial system against
Money laundering
Terrorist financing
The financing of proliferation of
weapons of mass destruction
In this regard, it has set out FATF Recommendations in a comprehensive and
consistent framework
It sets an international standard which countries should implement through
measures adapted to their particular circumstances
The main area of focus for FATF is to confirm and assess whether member
countries comply with FATF Recommendations

8. FATF Recommendations
8
Till date FATF has issued 40 recommendations, which sets out the essential measures that
countries should have in place to
Identify the risks, and develop policies and domestic coordination;
Pursue money laundering, terrorist financing and the financing of proliferation;
Apply preventive measures for the financial sector and other designated sectors;
Establish powers and responsibilities for the competent authorities (e.g.,
investigative, law enforcement and supervisory authorities) and other institutional
measures;
Enhance the transparency and availability of beneficial ownership information of
legal persons and arrangements; and
Facilitate international cooperation

9. Members and Observers
9
The FATF currently comprises 37 member jurisdictions and 2 regional organisations, representing
most major financial centres in all parts of the globe, and 1 Observer (Indonesia)
37 member countries
2 regional organisations
European
Commission
Gulf Co-operation
Council
Argentina Germany Luxembourg South Africa
Australia Greece Malaysia Spain
Austria Hong Kong (China) Mexico Sweden
Belgium Iceland Netherlands Switzerland
Brazil India New Zealand Turkey
Canada Ireland Norway United Kingdom
China Israel Portugal United States
Denmark Italy Russian Federation
Finland Japan Saudi Arabia
France Korea Singapore

10. Grey List and its Consequences
10

11. Grey List and Black List
11
The FATF identifies jurisdictions with weak measures to combat money laundering and
terrorist financing (AML/CFT) in 2 FATF public documents that are issued 3 times a year (in
February, June, and October) viz. Grey List and Black List
Countries under Grey List face increased monitoring, which are actively working with
the FATF to address strategic deficiencies in their regimes to counter money
laundering, terrorist financing, and proliferation financing
When the FATF places a jurisdiction under Grey List, it means the country has
committed to resolve swiftly the identified strategic deficiencies within agreed
timeframes and is subject to increased monitoring
Grey List (also known as Jurisdictions under Increased Monitoring)
Black List (also known as High-Risk Jurisdictions subject to a Call for Action)
Countries with serious strategic deficiencies which doesn’t take steps to
counter money laundering, terrorist financing, and financing of proliferation
For all countries identified as Black List, the FATF calls on all members and urges
all jurisdictions to apply enhanced due diligence
In the most serious cases, countries are called upon to apply counter-measures
to protect the international financial system

12. Countries under Grey List and Black List
12
Albania Iceland Pakistan
Bahamas Jamaica Panama
Barbados Mauritius Syria
Botswana Mongolia Uganda
Cambodia Myanmar Yemen
Ghana Nicaragua Zimbabwe
Currently 18 countries are under Grey List which are as follows:
Countries under Black List are as follows:
Democratic People's Republic of Korea
Iran

13. Economic Consequences of being in Grey List
13
Difficulties in economic sanctions from IMF, World Bank
Problem in getting loans from international institutions and other
countries
Reduction in international trade
International boycott
Countries in Grey List may face:
On February 21, 2020, the FATF released a publication titled “Jurisdictions under
Increased Monitoring” (Grey List), whereby Mauritius was added to such list

14. Reasons for Inclusion and Action
Plans Recommended
14

15. Overview of Mauritius Global Business Sector
15
Mauritius is the second-largest source of Foreign Portfolio Investor (FPI)
flows into India, after the US
Mauritius established the global business sector in 1992 and it has
now become one of Africa’s largest international financial centres
Mauritius is the 20th most favourable country in terms of business
environment
It is the 4th largest destination for FDI in the Small Island Developing
States

16. FATF Mutual Evaluations
16
FATF mutual evaluations are in-depth country reports analysing the implementation
and effectiveness of measures to combat money laundering and terrorist financing
Mutual evaluations are peer reviews, where members from different countries
assess another country
A mutual evaluation report provides an in-depth description of a country’s
financial system for preventing criminal abuse as well as focused
recommendations to the country
Mutual evaluations are strict and a country is only deemed compliant if it can prove
this to other FATF members

17. Priority Actions Recommended for Mauritius
17
18 priority actions were provided in Mutual Evaluation Report (MER) 2018, out of
which, major ones are as follows:
Complete National Risk Assessment (NRA) exercise and implement a National
AML/CFT plan of action in a coordinated manner, involving both the public and
private sector to address the key areas of risk identified
Take necessary legislative action to broaden the scope of preventive measures
applicable for FIs and DNFBPs consistent with the FATF Recommendations
Take steps to ensure that adequate, accurate and current Beneficial Ownership
(BO) information of legal persons and legal arrangements is available to
competent authorities in a timely manner
Conduct parallel investigations in general, and particularly for offences such as
drug-trafficking which is a high-risk offense

18. Contd.
18
Enhance the legal provisions by including effective, proportionate administrative sanctions
and mandating supervisory authorities to apply them against noncompliance with AML/CFT
obligations
Remove all legislative impediments to law enforcement’s accessing information directly
from trusts and the global business sector
Establish a legal, regulatory, and institutional framework to monitor, supervise, and
effectively implement targeted financial sanctions related to proliferation
Implement the mechanism for the sharing of assets confiscated with foreign countries that
provide assistance especially where predicate offenses have been committed in those foreign
jurisdictions

19. Compliance Position for Mauritius
19
Based on Mutual Evaluation Report in 2018, out of the 40 recommendations issued,
ratings for the same were provided for Mauritius, as follows:
NC 13
PC 13
C 03
LC 11
Total 40
Compliant (C) - There are no shortcomings
Largely compliant (LC) - There are only minor shortcomings
Partially compliant (PC) - There are moderate shortcomings
Non-compliant (NC) - There are major shortcomings

20. Segregation of Compliance
20
NC PC LC C
Assessing Risks & Applying A Risk-
Based Approach National Cooperation And Coordination Money Laundering Offence
Reporting Of Suspicious
Transaction
Targeted Financial Sanctions Related
To Terrorism And TF Terrorist Financing Offence
Confiscation And Provisional
Measures
Responsibilities Of Law
Enforcement And
Investigative Authorities
Targeted Financial Sanctions Related
To Proliferation
Financial Institution Secrecy Laws Record Keeping
Powers Of Law
Enforcement And
Investigative Authorities
Non-Profit Organisations
Politically Exposed Persons
Powers Of Supervisors
Customer Due Diligence Money Or Value Transfer Services Financial Intelligence Units
Correspondent Banking
Internal Controls And Foreign Branches
And Subsidiaries Guidance And Feedback
New Technologies Higher-Risk Countries International Instruments
Wire Transfers Tipping-Off And Confidentiality Mutual Legal Assistance
Reliance On Third Parties
Transparency And Beneficial Ownership
Of Legal Arrangements
Mutual Legal Assistance: Freezing
And Confiscation
DNFBPs Customer Due Diligence
Regulation And Supervision Of Financial
Institutions Extradition
DNFBPs: Other Measures Cash Couriers
Other Forms Of International
Cooperation
Transparency And Beneficial
Ownership Of Legal Persons Statistics
Regulation And Supervision Of
DNFBPs Sanctions

21. Series of Events Leading to Inclusion
21
Priority actions were provided under MER 2018
1st Enhanced Follow-up Report & Technical Compliance
Re-Rating was issued in April 2019
2nd Enhanced Follow-up Report & Technical Compliance
Re-Rating was issued in September 2019
At the end of the 2nd enhanced follow-up report,
progress of Mauritius was insufficient to address the
strategic deficiencies and thus, was added to Grey List
Action Plans were agreed by Mauritius for improving its
position in FATF

22. Action Plan Agreed by Mauritius
22
The action plan was issued in February, 2020 which was agreed by Mauritius for its revival:-
Demonstrating that the supervisors of its global business sector and Designated Non-
Financial Businesses and Professions (DNFBPs) implement risk-based supervision;
Ensuring the access to accurate basic and beneficial ownership information by
competent authorities in a timely manner;
Demonstrating that Law Enforcement Agencies (LEAs) have capacity to conduct money
laundering investigations, including parallel financial investigations and complex cases;
Implementing a risk based approach for supervision of its Non-Profit Organisation (NPO)
sector to prevent abuse for Terrorist Financing (TF) purposes, demonstrating the adequate
implementation of targeted financial sanctions through outreach and supervision
Priority actions recommended would be accomplished basis the above plan

23. India’s Position and Way Forward
23

24. SEBI’s Position
24
SEBI (Foreign Portfolio Investors) Regulations, 2019 states that an applicant is eligible to
become a FPI if it is not resident in the country identified in the public statement of FATF as-
a jurisdiction having a strategic Anti-Money Laundering or Combating the
Financing of Terrorism deficiencies to which counter measures apply; or
a jurisdiction that has not made sufficient progress in addressing the
deficiencies or has not committed to an action plan developed with the FATF
to address the deficiencies
After the FATF placed Mauritius in the list of jurisdictions under increased monitoring, SEBI
issued a press release (PR No.: 10/2020 dated 25.0.2020) providing clarity and assurance
that FPIs from Mauritius continue to be eligible for FPI Registration with increased
monitoring as per FATF norms
There were lot of speculations about Mauritius being tagged as “high risk” and “non co-
operative” and shall not be allowed to make fresh investments

25. Ramifications
25
“Grey List” categorization shall lead to concerns related to diligence for investments from
Mauritius in Alternative Investment Fund in India
Institutional investors and asset managers prefer Mauritius as an efficient jurisdiction
for investing in India on account of lower operational costs and favourable tax treaty
position
Mauritius continues to remain amongst the most preferred sources for FPI and FDI into
India
Thus, issuance of Press Release is a welcome move considering the above perspective

26. Way Forward
26
In order to be removed from FATF monitoring, Mauritius must address all or nearly all the
components of its action plan
Once the FATF has determined that Mauritius has done so, it will organise an on-site visit to confirm
that the implementation of the necessary legal, regulatory, operational reforms is underway and
there is the necessary political commitment and institutional capacity to sustain implementation
If the on-site visit has a positive outcome, the FATF will decide on removing Mauritius from public
identification at the next FATF plenary
Mauritius will then need to continue working within the FATF or the relevant FSRB, through its
normal follow-up process, to further improve its AML/CFT regime
On 4th March, 2020, Financial Service Commission, Mauritius has confirmed that around 90% of
the priority actions are addressed and will continue to actively work with Government, industry
stakeholders and FATF to address the remaining actions

27. Thank You!
27
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