A critical analysis of the anti-money laundering legal and regulatory framework of Mauritius: a comparative study with South Africa
| DOI | https://doi.org/10.1108/JMLC-12-2021-0141 |
| Published date | 08 February 2022 |
| Date | 08 February 2022 |
| Pages | 401-417 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Ambareen Beebeejaun,Lubnaa Dulloo |
A critical analysis of the anti-
money laundering legal and
regulatory framework of
Mauritius: a comparative study
with South Africa
Ambareen Beebeejaun and Lubnaa Dulloo
University of Mauritius, Reduit, Mauritius
Abstract
Purpose –Indeed, the value of money laundering globally is between 2% and 5% of the world’sgross
domestic product, which represents $800bn to $2tn per year. There is therefore a dire and urgent need to
curb money laundering offences at both national and international level. As such, the purposes of this
research are to critically analyse the anti-money laundering (AML) laws and regulations of Mauritius, to
identify loopholes in inherent in the Mauritian system and to suggest recommendations to enhance the
AML laws in the country.
Design/methodology/approach –To achieve these research objectives, the studywill adopt the black
letter methodology by analysing laws and regulations on AML of Mauritius and will also conduct a
comparative analysis against the corresponding AML laws of South Africa. In fact, South Africa has been
selected for the comparisonto assess how Africa’s most powerful economic powerhouseis dealing with issues
of money launderingand whether Mauritius may implement some of these measures to enhanceits legal and
regulatoryframework on AML.
Findings –The research sets out a comprehensiveview on the AML legislative framework of South Africa
and Mauritius. It has highlightedthe mechanisms used in these two countries to combat money launderingis
the risk-based approach. Finally, recommendations have been proposed to improve the existing AML
frameworks of Mauritius andwhich can further protect the financial system of the country. However, these
suggestions will dependon the evolution of financial crimeswithin and outside the jurisdiction, and ongoing
amendmentswill always be required to rigidly protect Mauritiusfrom money launderers.
Originality/value –At present, to the best of the authors’knowledge, this study will be amongst the
first academic writings on the effectiveness of the legal and regulatory measures unde rtaken by the
Mauritian authorities to dealwith AML crimes in the country. The study is carried out with the aim of
combining a large amount of empirical,theoretical and factual information that can be of use to various
stakeholders and not only to academics.
Keywords Money laundering and Mauritius, FIAMLA, Mauritius FIU, Risk-based approach,
Suspicious transactions
Paper type Research paper
1. Introduction
The International Monetary Fund defines money laundering as the process of concealing
assets obtained from criminal activity by obscuring the connection between the funds and
their illegal origins (International Monetary Fund, 2021). Money laundering is a three-step
process where the original proceeds of funds are converted in a way to make it appear
legitimate (Anderson and Anderson, 2015). The first step, known as “Placement”, is the
process of placing illegal funds into the financial system. This moneycan be obtained from
Comparative
study with
South Africa
401
Journalof Money Laundering
Control
Vol.26 No. 2, 2023
pp. 401-417
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-12-2021-0141
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
the selling of drugs and exchanging currency, among others. Layering is the second step
where the illegal funds put into the financial system, are scattered into different bank
institutions, both local and foreign.As a result, this process of layering makes it differentto
trace. The last step is the “Integration”step where the illegal moneyis returned in the hands
of its owner. This processmakes the illegal funds seemed as fully legitimate funds, obtained
lawfully (Andersonand Anderson, 2015).
In fact, some 2000years ago, money laundering activities started by Chinese merchants
whereby they used to transfer their money through a chain of different businesses to hide
income from government regulators in China. However, the financial mode of money
laundering was first practiced in the USA in the early 1900’s when gangs like Al Capone
bought Laundromats to filter black money fromillegal activities and mix the proceeds with
the lawful business funds to make it appear legitimate. Indeed, Meyer Lansky was
recognised as the Father of Money Laundering since he wasconvicted of laundering money
by placing his funds in Swiss bank and later transferred them to various foreign banks, in
the process of portraying them as legitimate (Paxton, 2015). Consequently, the US Bank
Secrecy Act 1970 (BSA) was the first legislation to be created to combatand prevent money
laundering activities (Anderson and Anderson, 2015). The focus of the BSA was record-
keeping and reporting requirements. Nevertheless, even though many countries started
enacting anti-money laundering (AML) legislations around the world, their institutions set
up to combat AML were not acting effectively. Therefore, the United Nations (UN), under
pressure of the USA, draftedthe first international agreement to encourage member states to
enact AML legislations to combat narcotics trade, at that time. The UN Convention against
Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Vienna Convention) was set
up in that respect (Gordon, 1999). Basically,The Wall Street Journal described AML laws to
be unconditionallyharsh. In fact, AML law is based on two main elements (Gordon,1999):
(1) the acts and doings of laundering money and its proceeds are made illegal.
Criminal and civil sanctions are provided, in terms of fines and imprisonment; and
(2) “Know Your Customer”requirement is an essential element in AML laws whereby
any person or authority dealing with transactions has the obligation to report any
suspicious transactions to AML authorities.
However, despite the prevalence of national laws and international conventions and
guidelines on AML laws, the UN estimates that the value of money laundering globally is
between 2% and 5% of the world’s GDP, which represents $800bn to $2tn per year (Lazic,
2021). Furthermore, Pol (2020) conducted a study on the effectiveness of AML strategies to
reduce or eliminate money laundering activities across the globe. Surprisingly, the results
demonstrate that only 0.1% of illegally acquired funds are recovered from criminals and
concluded that efforts to combatmoney laundering is ineffective in the sense that the rest of
99.9% of laundered funds are still used by lawbreakers for criminal acts (Lazic, 2021). As
such, it becomes imperative to assess the existinglegal and regulatory framework on AML
to bring forward solutions to deal with issues of money laundering more effectively. In the
context of the research under this paper, it is intendedthat the AML laws and regulations of
Mauritius which is a developing island located in the Indian Ocean with a gross domestic
product of US$11.4bn as of end of year 2020 (Statistics Mauritius, 2021), be scrutinised to
this effect. Accordingly, the governing law relating to AML in Mauritius is the Financial
Intelligence Anti-Money Laundering Act 2002 (FIAMLA) and thepurpose of this particular
legislation was highlighted by the SupremeCourt of Mauritius in the case of Abongo v The
State 2009 Supreme CourtJudgment (SCJ) 81 as follows:
JMLC
26,2
402
To continue reading
Request your trial