Sustainable Development: Is Mauritius Walking The Talk?

Appavoo Corporate Services Ltd

Alwyna Juttun

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In today’s era, sustainability has become a pressing topic for all types of organisations in the world. The world has now understood the importance of not being harmful to the environment or depleting natural resources and thereby supporting long-term ecological, social, and governmental balance. A vital mission long-neglected, sustainability is today as an important economic prerogative.

THE UN 17 SUSTAINABLE DEVELOPMENT GOALS (SDG)

In 2015, the 2030 Agenda for Sustainable Development comprising the 17 Sustainable Development Goals (SDGs) was adopted by all United Nations (UN) Member States, including Mauritius. This has set out a transformative plan of action and established a global partnership towards Sustainable Development.

ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE (ESG) BUSINESS METRICS

Integration of sustainable business practices in all areas has now become of paramount significance to guarantee an organisation’s existence and reputation. Business stakeholders now refer to the term ‘ESG’ which is an acronym for ‘Environmental, Social and Corporate Governance’. These are key business metrics which are being used by socially conscious stakeholders to measure the positive and negative impact of an organisation in terms of sustainability.

MAURITIUS AT THE CROSS-ROAD

At the corporate level in Mauritius, there has been increasing awareness since the past decade to include the sustainability variable in the corporate equation. The island is among one of the first in the world to have made it mandatory for profit making organisations to devote 2% of their profits to Corporate Social Responsibility (CSR) activities since 2009 with a view to promote more sustainable development.

Since the creation of the World Business Council for Sustainable Development (WBCSD) at the Rio Earth Summit in 1992, a number of stakeholders of the Mauritian business community have acknowledged their responsibility to contribute to economic, environmental and social issues through systematic public reporting on their environmental and social performance, together with economic performance. However, the adoption of sustainable strategies by corporates is still considered a secondary issue.

A range of corporate guidelines such as the UN Global Compact principles and the indicators of the Global Reporting Initiative (GRI) have proposed several comprehensive lists of corporate roles and responsibilities covering economic, social and environmental aspects. These have made their way into the Mauritian business community which is starting to adhere to these guidelines. Up to now, some 23 companies operating in diverse sectors ranging from financial services to travel and leisure, agriculture and tourism amongst others have registered as participants of the UN Global Compact.

 

THE NEW PARADIGM FOR SUSTAINABILITY

Mauritius has recently launched a sustainability index  known as ‘SEMSI’, (the ‘Stock of Exchange of Mauritius’ (SEM) Sustainability Index’) in 2015, thus becoming the second Exchange in sub-Saharan Africa to do so. The SEMSI provides a robust measure of listed companies against a set of internationally aligned and locally relevant environmental, social and governance (ESG) criteria. It offers a useful tool for domestic and international investors with an appetite for responsible investment in frontier markets to consider SEMSI sustainable companies as potential investible companies. The SEMSI criteria of eligibility are based on the GRI Guidelines and are aligned with international ESG and related sustainability issues, while also taking local imperatives into account.

In line with the principles of sustainability, the Bank of Mauritius (BOM) has been involved in the development of a Green Finance framework through the issuance of Sustainable Bonds. These are financial instruments aimed at supporting sustainable development by raising capital to finance or re-finance green or social or sustainability-linked projects.

Commercial banks in Mauritius namely the Mauritius Commercial Bank (MCB) and the State Bank of Mauritius (SBM) as well as other private sector operators have partnered with SUNREF, the “green finance” label of the Agence Française de Développement (AFD) to foster green and inclusive growth, whilst enhancing the resilience of the country to the adverse impacts of climate change through green lines of credit.

The way is still long ahead but Mauritius can no longer wait. Now that the island has been classified as one of the most vulnerable Island in terms of ecological degradation, it has become a national task for both government and the private sector to devise strategies which would see an early and seamless adoption of sustainable objectives.

At HLB Mauritius, we have a dedicated team which provides Sustainability, ESG and CSR advisory services in collaboration with our foreign experts.

Contact us at corporate@hlb-mauritius.com or on +(230) 203 3900 and we’ll take care of the rest.

 

Sustainability and CSR Advisory Brochure

Alwyna Juttun

Senior Business Consultant

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ANTI-MONEY LAUNDERING: An update on the 6th EU Directive

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After the Danske Bank scandal that reported the laundering of approximately Euro 200 billion, the EU recognised that the 5th Anti Money Laundering Directive (“5AMLD”) was deficient and that money laundering still remained a serious phenomenon, damaging the reputation, stability and integrity of the financial system. The 6th Anti Money Laundering Directive (“6AMLD”) was therefore introduced in October 2018, to deal with money laundering more effectively. The 6AMLD states that it “aims to criminalise money laundering when it is committed intentionally and with the knowledge that the property was derived from criminal activity”.

Obligated businesses in the EU member states were expected by the 3rd of June 2021 to have completely implemented the changes brought in by the 6AMLD in their AML/CFT compliance framework. Because the 6AMLD touches upon the fundamentals about the nature and scope of money laundering as an offence, its impact on the regulatory environment and its application gives rise to remarkable considerations.

 

By Kaminee Busawah
Managing Director
HLB Risk & Compliance Consultancy Ltd

Key changes brought in by the 6AMLD

The 6AMLD has brought along the following major changes:

  1. Clarifies Money laundering Predicate Offenses
  2. Widens the scope of Money Laundering Offenses
  3. Extends Corporate Liability
  4. Introduces tougher punishments

The above changes have been considered to be particularly important for ‘Designated Non-Financial Businesses or Professions’ (“DNFBPs”) dealing in the corporate, legal, accountancy and professional services sectors, providing advice and assistance on issues such as company formation, tax restructuring or the structuring of corporate finances.  No doubt Financial Institutions and asset service providers are also under the loop. The introduction of corporate criminal liability means that firms must have in place a comprehensive AML/CFT programme that comply with EU and local laws that are subject to on-going assurance testing and review. It is therefore critical that firms operating in the EU fully understand the details of these new regulatory requirements. With that in mind, let’s have a quick overview of the key changes listed above.

Clarifies Money laundering Predicate Offenses

The 6AMLD has attempted to update, harmonize and clarify what constitutes a predicate offense for money laundering across all EU member states by defining 22 predicate offences. It has also intended to address barriers to international legal cooperation on AML/CFT.

The term “criminal activity” has been defined as “any kind of criminal involvement in the commission of any offence punishable” by imprisonment for more than 6 months or one year (dependent on the jurisdiction) in line with national law. While criminal property has been defined as criminally-derived “assets of any kind,” and it is not only limited to fiat. A predicate offense is now a criminal act whose proceeds can be prosecuted under the money laundering offenses.   While many of the crimes listed in the 6AMLD  may be relatively familiar, such as drug trafficking, fraud, counterfeiting, terrorism, extortion, etc., the Directive included numerous new crimes for consideration such as:

  • Cybercrime
  • Environmental crime
  • Insider trading and market manipulation

The 6AMLD further introduces the concept of ‘extraterritoriality,’ meaning that countries could prosecute conduct that would be a crime if it had taken place in their territory.  The Directive even enables a member state to trigger an investigation if an offense is committed “in part on its territory”.

Widens the Scope of Money Laundering Offenses

The 6AMLD details the key money laundering offenses that member states should criminalise and widened the scope of what actually should constitute an offence.  They include:

  • Conversion or transfer– which means converting or transferring criminal property to conceal or disguise the illicit origin of the property or assisting a person who is involved in activity to evade legal consequences of their actions.
  • Acquisition, Possession or Use– which means acquiring, possessing and using criminal property with the knowledge that it is criminally derived property.
  • Concealment or disguise– This includes concealing or disguising the nature, source, location, disposition, movement or the ownership rights of criminal property.

Furthermore, the 6AMLD has created an additional offense of “aiding and abetting, inciting and attempting” any of the aforementioned offences, specifically targeting the DNFBPs. It also introduced the concept of ‘self-laundering,’ which is where a criminal cleans the proceeds generated by his or her criminal activity.  The changes represent considerable challenges to the DNFPs who have been also termed as ‘innocent’ criminal associates who while acting as gatekeepers might cooperate in the hiding, disguising or distancing of illicit assets.

The above inclusions make it clear that criminal conviction of the predicate offense is no more essential for bringing action against those suspected of committing any of the money laundering offenses.

Extends Corporate Liability

The 6AMLD makes it clear that not just individuals can now be considered liable for money laundering offenses, but businesses also can be liable where they failed to exercise control or supervision, which enabled or allowed money laundering. Law enforcement can pursue prosecutions against both individuals and businesses at the same time.

Also, the concept of corporate failure does no more prevent the ability to initiate criminal proceedings against individuals working in a non-complying business. Senior management staff can now be personally responsible for the doings of their junior member staffs.

Tougher Punishments

The 6AMLD introduces tougher punishments against individuals and corporates that are not effective, proportionate and dissuasive in respect of the AML/CFT compliance framework. Imprisonment has been increased for up to four years. Other measures might include fines, bans on running for public office or professional disqualification.  For corporates, measures range from being barred from accessing public benefits, revocation of license, administrative fines, closure of business, freezing and confiscation of assets.

It can be discerned that the introduction of the 6AMLD might eventually open floodgates for egregious and ongoing defaulters if their AML/CFT framework is not recalibrated to incorporate the changes brought by the latter.

Please contact us on legal@hlb-mauritius.com or on +(230) 203 3900.

Kaminee Busawah

Managing Director- Risk & Compliance

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Compliance with Data Protection Regulations and Principles

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The Data Protection Directive, officially Directive 95/46/EC, enacted in October 1995, is a European Union Directive which regulates the processing of personal data within the European Union and the free movement of such data to ensure the protection of fundamental rights and freedom of individuals.

The General Data Protection Regulation (“GDPR”), adopted in April 2016, has superseded the Data Protection Directive and became enforceable on 25 May 2018. On 25 January 2012, the European Commission (“EC”) announced it would be unifying data protection law across a unified European Union via a legislation called the GDPR. The EC’s objectives with this legislation included:
• the harmonisation of 27 national data protection regulations into one unified regulation;
• the improvement of corporate data transfer rules outside the European Union; and
• the improvement of user control over personal identifying data.
The GDPR has set the scene for local Data Protection legislation and Regulations and Mauritius has accordingly followed suit as from early 2018.

 

By Anshinee Narsimooloo
Legal & Compliance Executive
HLB Risk & Compliance Consultancy Ltd

Overview of Data Protection in Mauritius

The right to privacy is expressly provided in Sections 3 and 9 of the Constitution of Mauritius and Article 22 of the Mauritian Civil Code. In 2004, Mauritius enacted the Data Protection Act 2004, which provided for the protection of the privacy rights of individuals in view of the developments in the techniques used to capture, transmit, manipulate, record or store data relating to individuals.

The Data Protection Act 2004 which was supposed to be adopted in 2009 no longer fitted Mauritius’ evolving digital context and was therefore repealed and replaced by the Data Protection Act 2017 (the “Act”) which came into force on the 15th of January 2018.

The new Act seeks to align the data protection framework in Mauritius with international standards, namely the GDPR. The GDPR intends to strengthen and unify data protection for all individuals within the European Union (EU) and addresses the export of personal data outside of the EU. It provides for a harmonisation of the data protection regulations throughout the EU, therefore makes it easier for non-European companies to comply with these regulations.

Data Protection Principles applicable to our local context

It is thus primordial that all organisations embark on this journey by giving effect to the abovementioned legislations while incorporating data protection principles into their internal policies and procedures. These principles are the backbone of the management of sensitive personal information and how it is exchanged and should be treated. So, what are they specifically?

Section 21 of the Act makes mention of six data protection principles which are listed as follows:

Principle 1: Lawful, Fair and Transparent Processing
Principle 2: Purpose Limitation
Principle 3: Data Minimisation
Principle 4: Accuracy
Principle 5: Storage limitation
Principle 6: Rights of data subjects

Organisations can now claim to better understand their responsibilities and continuously endeavour to improve their mode of operations by putting privacy and protection of individuals’ information at the forefront of their business activities. They have had the opportunity to assess and review their processes and also perform a greater scrutiny on the information they collect, use it for, share it with and to question themselves on whether they actually need all the data that they collect and process.

In putting a Data Protection Framework in practice, three main office bearers are identified in the Act which are explained below in turn:

  1. Data Controller a person who or public body which, alone or jointly with others, determines the purposes and means of the processing of personal data and has decision-making power with respect to the processing.
  2. Data Processor – a person who, or public body which, processes personal data on behalf of a controller.
  3. Data Protection Officer – a person who is appointed by the company to inform and advise them as well as their employees on their obligations to comply with the relevant laws and other data protection standards.

What about you?

Have you implemented proactive measures to comply with the provisions of the Act such as the designation of specific office bearers or adopted adequate security and organisational measures to address personal data breaches? HLB Risk & Compliance Consultancy Ltd has a dedicated team of Data Protection consultants ready to assist you to comply with the above.

Please contact us on legal@hlb-mauritius.com or on +(230) 203 3900.

Data Protection Brochure

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Revival of two economies post COVID-19 trade preparedness: Spotlight on CECPA Mauritius-India

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The Comprehensive Economic Cooperation and Partnership Agreement (“CECPA”) which came into force as from 1st April 2021 is an unprecedented trade agreement signed by India with a country in continental Africa, Mauritius. CECPA Mauritius-India is a significant milestone in the trade growth and economic leveraging of the two countries and a positive leap in the overall economic development of the global marketplace.

By Dinusha Lakmini Gokool
Legal & Compliance Executive
HLB Risk & Compliance Consultancy Ltd

Objectives of the Agreement

  • The Agreement encourages exploitation of trade opportunities of both Mauritius and India through Trade in Goods, Trade in Services and Movement of Natural Persons, etc.
  • The key point to be noted is that the Agreement aims to facilitate the exchange of skilled labour and qualified professionals between the two countries and more specifically review their visa and stay requirements.
  • CECPA places Mauritius as a trade haven and a launch pad for Indian investors and businessmen who wish to establish themselves in the African market and thus avail themselves of an array of trade opportunities arising out of the agreement.
  • Furthermore, as a preferential transit investment hub for Indian investors and expatriates, Mauritius opens an investment facilitation pathway to the regional African treaties such as SADC and eventually tap the global export/import trade in goods worth USD 324 billion offered to member states under COMESA.
  • Taking a broad view of the multitude of incentives provided under CECPA, as a transit investment platform in view of promoting Indian investments, Mauritius emerges at the winning end of any joint venture between India and a third country.

Key Highlights of the Agreement

CECPA highlights four key elements, namely Trade in Goods, Trade in Services, and Technical Barriers to Trade (TBT) and Trade Remedies.

A. Trade in Goods

  • Beneficial to Mauritius: Mauritius will benefit from preferential market access into India for its 615 products (Duty free access on 376 products, Reduced duties on 127 products and Tariff Rate Quotas on 112 products), including frozen fish, special sugar, biscuits, fresh fruits, juices, mineral water, beer, alcoholic drinks, soaps, bags, medical and surgical equipment, and apparel.
  • Beneficial to India: Mauritius will provide preferential access on 310 products, with Tariff Rate Quotas on 88 products such as spices, tea, plastic articles, wooden furniture, parts of motor vehicles, amongst others.

Important note: In order to qualify for tariff preferences, potential importers and exporters  must ensure that all goods must meet the CECPA rules of origin and should be accompanied   by a Certificate of Origin/Origin declaration which can be issued by respective Government  Authorities of both countries. A Certificate of Origin (CoO) from the authorised Indian  agencies is mandatory for Indian exporters to benefit from the preferential benefits under the CECPA. Likewise, the CECPA Certificates in Mauritius will be issued by the Mauritius Revenue Authority (MRA) Customs Department.

B. Trade in Services

  • Beneficial to Mauritius: India has offered around 95 sub-sectors from the 11 broad services sectors, including professional services, R&D, other business services, telecommunication, environmental, health, tourism and travel-related services, recreational services and transport services.
  • Beneficial to India: Indian service providers will have access to around 115 sub-sectors from the 11 broad service sectors, such as professional services, computer related services, research & development, other business services, telecommunication, construction, distribution, education, environmental, financial, tourism & travel-related, recreational, yoga, audio-visual services, and transport services.

C. Technical Barriers to Trade (TBT) and Trade Remedies

  • A mutual cooperation between both countries in the area of standards, technical regulations and conformity assessment procedures with the objective of facilitating trade and information exchange in accordance with the decisions and recommendations of the World Trade Organisation.

D. Sanitary & Phytosanitary (SPS) measures

CECPA marks the beginning of a joint venture between India and Mauritius and cooperation for further development in the areas of animal health and plant protection, food safety and mutual recognition of sanitary and phytosanitary measures.

In the occurrence of the prevailing COVID-19 crisis, the SPS measures give an assurance and considerate assistance to both parties of the Agreement that the products of either party in view of alleviating urgent issues related to human, animal or plant life or health protection that arise or threaten to arise may be resolve at the earliest with the assistance of the relevant authorities and in compliance with relevant international criteria.

Are you considering Mauritius as a ‘Hub for trade’ in continental Africa? Or expanding your business using the Mauritius-India CECPA transit?

There is a plethora of investment opportunities available in Mauritius and choosing the right practice to assist you is very important. Everyone, irrespective of where they live, needs to think about their finances and good investment strategies for the future and HLB Risk & Compliance Consulting Ltd has a dedicated consortium of strategic partners which can assist you in your cross-border endeavors. Our expatriate services will take care of your personal and business moves!

 

Contact us at legal@hlb-mauritius.com or on +(230) 203 3900 and we’ll take care of the rest.

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Independent AML/CFT Audit obligations- Have you completed yours?

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The Financial Services Commission (“FSC”) has recently published an updated Anti Money Laundering and Counter Financing Terrorism (“AML/CFT”) handbook for financial institutions comprising of a new chapter namely “Independent AML/CFT audit”. This new chapter has been brought at an important time where the financial services sector is currently facing major challenges with the classification of Mauritius on the grey list of FATF, Blacklist of the European Union and High-Risk Third countries of the UK. Moreover, this new chapter is a guidance to Section 22 (1) (d) of The Financial Intelligence and Anti-Money Laundering Regulations 2018 “FIAMLR 2018” which requires every financial institution to conduct an independent AML/CFT audit of their existing compliance framework.

By Hishaam Mohammoodally
Legal & Compliance Executive
HLB Risk & Compliance Consultancy Ltd

WHAT IS AN INDEPENDENT AML/CFT AUDIT?

An independent AML/CFT audit is an audit conducted by an external professional AML/CFT auditor or firm using best practice. It a special assessment of whether the provisions of the applicable laws, rules & regulations and various orders, instructions issued by the competent authority are being complied with. It is an evaluation of the existing Risk Assessment and AML/CFT framework of your company through file testing, transaction testing and the testing of live application of policies and procedures.  It also helps to identify the money laundering and terrorist financing risks (ML/TF) faced by an organization, that it is keeping the assessment up to date, and effectively determining the levels of risk faced by its business. In essence, the independent audit of the Risk Assessment and AML/CFT Program is also geared towards assessing the adequacy and effectiveness of its implementation. It is an opportunity for an organization to obtain another view of how well the AML/CFT program is designed and functioning.

 

WHO SHOULD CARRY OUT THE INDEPENDENT AUDIT (INTERNAL OR EXTERNAL PROFESSIONAL)?

An independent AML/CFT audit may be conducted by either an internal team or an external audit professional or firm. However, the audit process should be carried out independently as stipulated by the FIAMLR 2018. This indicates that the internal auditor should be independent and must not have been involved in the development of risk assessment, or the establishment, implementation, or maintenance of the organisation’s AML / CFT framework. Thus, the audit function should be separate from operational and executive team dealing with the AML/CFT processes of the company.

In cases where an external audit professional has been appointed to conduct AML/CFT audit, the financial institution will have to demonstrate that the external auditor is adequately independent from its business and that there is no conflict of interest.

Where a reporting entity has retained the services of an auditor to perform AML/CFT audit, the company must conduct due diligence on the person or firm to ascertain that the selected auditor has the necessary skills, experience and qualifications. This will ensure that the AML/CFT audit is properly conducted, and the Auditor provides quality recommendations, so that the reporting entity can use the findings and recommendations to improve upon deficient areas. The criteria considered by the financial institution when assessing the independence and relevant experience of the external auditor to perform the audit, should be properly documented and shall be made available to the FSC upon request.

 

METHODOLOGY OF AN INDEPENDENT AML/CFT AUDIT

The independent AML/CFT audit covers a review of your Risk Assessment and AML/CFT Programme to ascertain that it meets the requirements of the FIAMLA, FIAMLR and relevant rules & regulations.

Typically, an AML/CFT audit should adopt the following methodology which is in line with best practice:

  1. A full review of your company’s AML existing compliance program manual
  2. Whether the program has been effectively implemented and whether the entity is complying with the policies and procedures in place
  3. Adequacy of AML risk-assessment procedures of the AML program
  4. Whether the organization is addressing the risk faced by its business in an effective manner
  5. Review of past audit reports to assess the efficacy of recommended implemented changes
  6. Compliance Officer functions and effectiveness
  7. Money Laundering Reporting Officer functions and effectiveness
  8. Customer Due Diligence and Enhanced Due Diligence
  9. Transaction Monitoring and evaluation of automated monitoring systems
  10. Suspicious transaction reporting process
  11. Targeted Financial Sanctions policies
  12. Record keeping processes
  13. Employee screening
  14. AML/CFT Training

 

FREQUENCY OF INDEPENDENT AUDIT REVIEW

The frequency and extent of the review should be proportionate with the licensee’s size, nature, context, complexity and internal risk assessment. Company applying a risk-based approach will need to determine the frequency and scope of the independent AML/CFT audit review but is encouraged that it is conducted on an annual basis. The frequency and the scope may also depend on the business risk assessment of a company. If the business risk assessment changes, then it is advisable to conduct more frequent audit review. High risk organizations should conduct their independent audit more frequently.

 

INDEPENDENT AUDIT REPORT

An independent AML/CFT audit report usually includes helpful recommendations. The more thoroughly an auditor understands your business and processes, the more helpful they can be. It is to be noted that the report should be duly signed and dated by the audit professional or firm. The report must cover all components of a compliance program. It should clearly outline other different components such as audit scope, audit objectives, audit methodology, audit observations, gap analysis and relevant recommendations to allow the reader to reach an informed conclusion on the adequacy of the AML/CFT program. Compliance audit reports must be issued in a timely manner to the Board of Directors of a company to allow them to take appropriate actions to address deficiencies and areas of non-compliance.

After a compliance audit has been completed, the reporting entity must seek to implement the necessary changes recommended in the report, share the findings with the relevant employees who are directly involved in the deficiencies that need to be corrected, solicit the advice of these employees, especially Front-Line staff on how they feel the Program could work better. Additionally, the risk or AML/CFT committee must set deadlines and timeframes for the changes and list those who are responsible for getting the tasks completed. Finally, detailed records of the Audit must be kept. These may be requested by FSC.

 

WHAT ABOUT YOU: HAVE YOU COMPLETED YOUR INDEPENDENT AML/CFT AUDIT?

HLB Risk & Compliance Consultancy Ltd has a dedicated team to help companies and Designated Non-financial Business Professionals (“DNFBPs”) to conduct independent AML/CFT audit. We have proven expertise to assist your company in complying with the different legislations/guidelines and to provide you with valuable recommendation for the improvement of your AML/CFT program. We use best practices and innovative methodologies which ensure quality, completeness and reliability.

Do you require a quote for an independent Audit?
Please contact us on legal@hlb-mauritius.com or on +(230) 203 3900.

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An overview of Trade based Money Laundering and Terrorist Financing and the risk indicators

HLB RISK & COMPLIANCE CONSULTANCY LTD

April 2, 2021

The term trade-based money laundering and terrorist financing (“TBML/FT”) refers to the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimise their illegal origins or the underlying financing of such activities. Criminal organisations and terrorist financiers use this process to move money for the purpose of disguising its illicit origins and integrate such funds into the formal economic system.

The Process

TBML/FT is an old medium used by money-launderers to launder illicit funds and they use various methods to operate which include the following, inter alias:

  • misrepresentation of the price, quantity or quality of imports or exports.
  • fictitious trade activities which have never happened physically .
  • involvement of front companies which are actually in existence in order to blur ‘occult’ transactions.
  • over- and under-invoicing of goods and services.
  • multiple invoicing for the same goods or services.
  • over- and under-shipments of goods and services.

More complicated schemes integrate the above fraudulent practices into more complex web of transactions and movements of goods across the globe.

The risk factors

The ‘Financial Actions Task Force’ (“FATF”) Typologies Report on Trade-based Money Laundering dated 23 June 2006 principally highlights the ways in which criminals exploit the vulnerabilities of the international trade route system for their own advantage and move value for money, rather than goods. The Report includes recommendations to address the risk associated with TBML.

The FATF and the Egmont Group have identified some potential risk indicators of TBML, from numerous samples of data and case studies. The risk indicators have been designed to enhance public & private sectors to identify suspicious activity associated with TBML so that they can collaboratively work towards mitigating them.

It is strongly recommended that TBML can be combatted: firstly by raising the awareness and the standard of risk assessment of public & private sectors involved in international trade and secondly by the promotion of public private partnership, allowing enhanced cooperation between private & public sector and information sharing of financial and trade data amongst the two sectors.

The massive, interconnected supply chains systems, lack of technical understanding and poor tracking and supervision of the whole end to end process makes detection of money laundering  difficult. Inherent vulnerabilities in the international trade system, including the enormous volume of trade flows, obscures individual transactions and therefore provide abundant opportunity for criminal organisations and terrorist groups to transfer value across borders.

The risk indicators have been broadly regrouped under the following 4 main categories:

i. Structural risk indicators
ii. Trade activity risk indicators
iii. Trade documents & commodity risk indicators
iv. Account and transaction activity risk indicators

The risk indicators under each category are analyzed below

Structural risk indicator

  • The corporate structure of a trade entity appears unusually complex and illogical, such as the involvement of shell companies or companies registered in high-risk jurisdictions.
  • A trade entity is registered or has offices in a jurisdiction with weak AML/CFT compliance.
  • A trade entity is registered at an address that is likely to be a mass registration address, e.g., high-density residential buildings, post-box addresses, commercial buildings or industrial complexes, especially when there is no reference to a specific unit.
  • The business activity of a trade entity does not appear to be appropriate for the stated address, e.g., a trade entity appears to use residential properties, without having a commercial or industrial space, with no reasonable explanation.
  •  A trade entity lacks an online presence, or the online presence suggests business activity inconsistent with the stated line of business, e.g., the website of a trade entity contains mainly boilerplate material taken from other websites or the website indicates a lack of knowledge regarding the particular product or industry in which the entity is trading.
  • A trade entity displays a notable lack of typical business activities, e.g., it lacks regular payroll transactions in line with the number of stated employees, transactions relating to operating costs, tax remittances.
  • Owners or senior managers of a trade entity appear to be nominees acting to conceal the actual beneficial owners, e.g., they lack experience in business management or lack knowledge of transaction details, or they manage multiple companies.
  • A trade entity, or its owners or senior managers, appear in negative news, e.g., past money laundering schemes, fraud, tax evasion, other criminal activities, or ongoing or past investigations or convictions.
  • A trade entity maintains a minimal number of working staff, inconsistent with its volume of traded commodities.
  • The name of a trade entity appears to be a copy of the name of a well-known corporation or is very similar to it, potentially in an effort to appear as part of the corporation, even though it is not actually connected to it.
  • A trade entity has unexplained periods of dormancy.
  • An entity is not compliant with regular business obligations, such as filing VAT returns.

Trade activity risk indicators

  • Trade activity is inconsistent with the stated line of business of the entities involved, e.g., a car dealer is exporting clothing, or a precious metals dealer is importing seafood.
  • A trade entity engages in complex trade deals involving numerous third-party intermediaries in incongruent lines of business.
  • A trade entity engages in transactions and shipping routes or methods that are inconsistent with standard business practices.
  • A trade entity makes unconventional or overly complex use of financial products, e.g. use of letters of credit for unusually long or frequently extended periods without any apparent reason, intermingling of different types of trade finance products for different segments of trade transactions.
  • A trade entity consistently displays unreasonably low profit margins.5 in its trade transactions, e.g., importing wholesale commodities at or above retail value, or re-selling commodities at the same or below purchase price.
  •  A trade entity purchases commodities, allegedly on its own account, but the purchases clearly exceed the economic capabilities of the entity, e.g., the transactions are financed through sudden influxes of cash deposits or third-party transfers to the entity’s accounts.
  • A newly formed or recently re-activated trade entity engages in high-volume and high-value trade activity, e.g., an unknown entity suddenly appears and engages in trade activities in sectors with high barriers to market entry.

Trade document and commodity risk indicators

  • Inconsistencies across contracts, invoices or other trade documents, e.g., contradictions between the name of the exporting entity and the name of the recipient of the payment; differing prices on invoices and underlying contracts; or discrepancies between the quantity, quality, volume, or value of the actual commodities and their descriptions.
  • Contracts, invoices, or other trade documents display fees or prices that do not seem to be in line with commercial considerations, are inconsistent with market value, or significantly fluctuate from previous comparable transactions.
  • Contracts, invoices, or other trade documents have vague descriptions of the traded commodities, e.g., the subject of the contract is only described generically or non-specifically.
  • Trade or customs documents supporting the transaction are missing, appear to be counterfeits, include false or misleading information, are a resubmission of previously rejected documents, or are frequently modified or amended.
  • Contracts supporting complex or regular trade transactions appear to be unusually simple, e.g., they follow a “sample contract” structure available on the Internet.
  • The value of registered imports of an entity displays significant mismatches to the entity’s volume of foreign bank transfers for imports. Conversely, the value of registered exports shows a significant mismatch with incoming foreign bank transfers.
  • Commodities imported into a country within the framework of temporary importation and inward processing regime are subsequently exported with falsified documents.
  • Shipments of commodities are routed through a number of jurisdictions without economic or commercial justification.

Account and transaction activity risk indicators

  • A trade entity makes very late changes to payment arrangements for the transaction, e.g., the entity redirects payment to a previously unknown entity at the very last moment, or the entity requests changes to the scheduled payment date or payment amount.
  • An account displays an unexpectedly high number or value of transactions that are inconsistent with the stated business activity of the client.
  • An account of a trade entity appears to be a “pay-through” or “transit” account with a rapid movement of high-volume transactions and a small end-of-day balance without clear business reasons, including:

An account displays frequent deposits in cash which are subsequently transferred to persons or entities in free trade zones or offshore jurisdictions without a business relationship to the account holder.

‒ Incoming wire transfers to a trade-related account are split and forwarded to non-related multiple accounts that have little or no connection to commercial activity.

  • Payment for imported commodities is made by an entity other than the consignee of the commodities with no clear economic reasons, e.g., by a shell or front company not involved in the trade transaction.
  • Cash deposits or other transactions of a trade entity are consistently just below relevant reporting thresholds.
  • Transaction activity associated with a trade entity increases in volume quickly and significantly, and then goes dormant after a short period of time.
  • Payments are sent or received in large round amounts for trade in sectors where this is deemed as unusual.
  • Payments are routed in a circle – funds are sent out from one country and received back in the same country, after passing through another country or countries.

The above risk indicators are potential signs of the likelihood of the occurrence of unusual or suspicious activity. Nevertheless, they do not automatically warrant the occurrence of suspicious activity, but they rather prompt for an in-depth assessment and monitoring of the whole trade chain.

Although the above risk indicators should remain the triggering events for an enhanced monitoring, the basic fundamental principles of customer due diligence should never be undermined.

Kaminee Busawah

Managing Director- Risk & Compliance

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An International platform to serve clients differently!

L. Clensy Appavoo

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A new paradigm of competitive advantage

The pandemic has changed the paradigm of Competitive Advantage. Operational agility, lean supply chains, deep understanding of customer demand, a high level of remote and digital readiness are now the key factors of success. More than a re-branding exercise, Appavoo Group becomes HLB MAURITIUS to re-invent business with a real paradigm shift and to serve clients better.

Applying the ‘Rule of 5’ for a modern business approach

As a member of HLB, the Global Accounting and Business Advisory Network, HLB Mauritius will be the Network’s Desk for Africa and it will drive business in this part of the world. We realise that post-pandemic challenges go beyond economic uncertainty and recovery.

Our Group has put in place and it continues to instigate clients to follow the same path in applying the ‘Rule of 5’ which is the Five Foundations to drive business successfully in the new ‘normal’:

  • Digital Acceleration: CEOs must adopt a holistic approach to build a digital enterprise. The digitalisation of operations is no longer a choice but a ‘must’ for survival and growth.
  • Workforce transformation: Business enterprises must adopt the lean model which allows up and downsizing of teams to deliver goods and services on a timely basis. Work from home, access to data from anywhere and new work protocols based on workforce efficiency measured by productivity gains should form an integral part of business culture.
  • Consumer Acumen: Business strengthening essentially goes through consumer acumen. B2C is on the decline and businesses need to make sure products & services, sales channels, customer service and brand messages meet the new demands of their markets.
  • Cost Management: The pandemic has shed light on ‘cash control’ and ‘management’ as the keys for survival. Cash is ‘KING’ more than ever before. Business leaders need to centralise ‘Cash’ and optimise operational efficiency and productivity by constantly controlling costs.
  • Supply chain re-invention: Smart use of technology such as AI and Blockchain can make inventory checks more efficiently and the Japanese philosophy of ‘Just In Time’ (JIT) buying has become the order of the day.

A Matrix Organisation with Nine Clusters of service

HLB Mauritius has adopted the ‘Matrix Organisation’ strategy to drive its service offerings through Nine Service Clusters. The ‘Vertical Hierarchy’ has done its time and is no longer relevant and reliable. Matrix favours a horizontal line, a project-based approach which brings diverse expertise (both internal and external) on one single line of service.

TOGETHER WE MAKE IT HAPPEN

Download HLB Mauritius Brand Advert and CEO’s article

L. Clensy Appavoo

Chief Executive Officer & Senior Partner

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An insight in Voluntary Administration

by Kaminee Busawah

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Backdrop to Voluntary Administration

Faced against unparalleled uncertainties caused by the COVID-19 pandemic which is affecting business at all levels, company directors may find it difficult to ascertain that they would most likely be able to continue operations or promote the success of the company for the benefit of its members as a whole. Breaks in supply chain, faltering demands resulting in sharp decline in revenue, cash flow issues, failure to comply with loan repayments are all factors that may unfortunately progressively result in a number of companies facing insolvency or near insolvency situations.

It should be noted that directors have a duty to act with care, skill and diligence while holding their office as directors. Directors must therefore be prudent and be sufficiently prepared to mitigate impending risk of financial difficulties while preventing the risk of been exposed to personal claims.

Download Voluntary Administration Brochure

Kaminee Busawah

Managing Director- Risk & Compliance

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Relationship between Employers and Employees

Following the COVID-19 Act 2020

by Kaminee Busawah

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It is no secret to anybody that, like any other country, Mauritius has been heavily impacted by the COVID-19 pandemic and its reverberations. The outbreak of the pandemic has disrupted our lives and livelihood at all levels causing an unprecedented halt to the global economy. All sectors including production, hospitality, trade and business in general have been paralyzed.

The sanitary curfew prevailing since the 20 of March 2020 was lifted on 31 May 2020 after which normal activity started in almost all sectors. However, with economic activity on hold for more than two months, resumption, faced to an unpredictable and muted economic recovery, appears very challenging. While most business are having great difficulty in navigating through the troubled aftermath of the pandemic, the most commonly asked question from our business associates is: ‘how do we deal simultaneously with re-inventing the business with a view to salvaging it while on the other hand preserving employment?’

HLB Mauritius, bearing in mind the quandaries of its stakeholders, wish to highlight, in simple words, the
implications of the Covid Act relative to employment and the new rules for industrial relations.

Download Relationship between employers and employees following the Covid-19 Act

Kaminee Busawah

Managing Director- Risk & Compliance

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