During the last quarter of 2020, there were some interesting changes in the financial regulatory framework of Mauritius. The following provides a summary of some of them.
‘Fit and proper' guidelines revised
An essential consideration in the Financial Services Commission's (FSC) decision to grant a financial services activity licence is whether the principals of the applicant for the licence are ‘fit and proper'.
The nomenclature is traditionally quite loose to allow discretion, but it is customary for regulators to provide guidance on their expectations.
The criteria set out under the Financial Services Act 2007 (FSA) to determine whether a person is ‘fit and proper' includes the following factors:
- financial standing;
- relevant education;
- qualification and experience;
- character; and
- financial integrity and reliability of the applicant/licensee.
The revised guidelines on Fitness and Propriety 2020 (Guidelines), which came into effect on 1 November 2020 and which supersede the Guide on Fitness and Propriety previously issued by the FSC on 9 June 2020, set out more specific factors and examples that the FSC will consider when assessing fitness and propriety.
For instance, one of the considerations that is relevant to determine good character and reputation of an applicant/licensee or its officer, is whether the person has been censured, disciplined, suspended and/or disqualified by the FSC or any other local or foreign regulatory authority/organisation.
However, the Guidelines are not exhaustive, and each case will be considered on the basis of its own merits.
Regulated entities are required to reflect the elements of the Guidelines in their internal policies, procedures and controls and apply them in their assessments of persons who manage, control, direct, own or perform key functions in a regulated entity.
Financial Services (Exemption from Approval of Controllers and Beneficial Owners) Rules 2017 revoked
On 22 October 2020, the FSC issued the Financial Services (Exemption from Approval of Controllers and Beneficial Owners) (Revocation) Rules 2020 (Principal Rules) which revokes the Financial Services (Exemption from Approval of Controllers and Beneficial Owners) Rules 2017 (Previous Rules).
Under Section 23(1) of the FSA, the prior approval of the FSC is required for any transfer or issue of shares, legal or beneficial interest of 5% or more in a licensee (other than for a licensee holding only a global business licence or an authorised company).
The Previous Rules specified that the requirement to seek approval under Section 23(1) of the FSA does not apply to an issue or transfer of share, legal or beneficial interest in a licensee that does not carry voting rights. With the revocation of these rules, the approval from the FSC becomes mandatory for the issue or transfer of non-voting shares, legal or beneficial interest where it exceeds the threshold of 5% of the stated capital.
It is, however, noteworthy that pursuant to the amendment made to the FSA by the Anti-Money Laundering and Combatting the Financing of Terrorism (Miscellaneous Provisions) Act 2020, Section 23(1) of the FSA does not apply to the following licensees in respect of the issue or transfer of the type of shares that do not carry voting rights (irrespective of the number of non-voting share being transferred or issued):
- collective investment schemes or closed-ended funds, authorised under the Securities Act 2005; and
- reporting issuers, registered under the Securities Act 2005, that do not hold an activity licence for a licensable activity but whose securities are listed on a Securities Exchange in Mauritius.
Code on the Prevention of Money Laundering & Terrorist Financing repealed
The FSC has, by way of a circular letter dated 6 November 2020, repealed its Code on the Prevention of Money Laundering & Terrorist Financing which has been in force since 1 April 2012 until the issuance of any additional enforceable anti-money laundering/combatting terrorist financing (AML/CFT) requirements.
It stated that this was prompted following the revamping of the AML/CFT framework through amendments made to the Financial Intelligence and Anti-Money Laundering Act, 2002 and the enactment of the Financial Intelligence and Anti-Money Laundering Regulations, 2018.
The repeal of the code does not affect any obligation or liability incurred under the former code or the previous operations, regulatory action or investigation carried out under the former code.
Recently, Mauritius has taken several steps to strengthen its anti-money laundering and countering financing of terrorism framework. These include the enactment of the Anti-Money Laundering and Combatting the Financing of Terrorism and Proliferation (Miscellaneous Provisions) Act, 2019, the United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act, 2019 and the Anti-Money Laundering and Combating of the Financing of Terrorism (Miscellaneous Provisions) Act, 2020.
In the same vein, the FSC has also issued the Anti-Money Laundering and Countering the Financing of Terrorism Handbook whose purpose is to assist and provide guidance to financial institutions to comply with the requirements of all relevant legislation pertaining to money laundering and terrorism financing, financial crimes and other related offences.
FSC licenced entities are still expected to demonstrate adherence to AML legislation by having in place policies, controls and procedures to mitigate and manage effectively the AML/CFT risks which reflect the revamped AML/CFT framework.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.