Financial Crime World

Financial Services Commission Warns of Growing Risks in Financial Sector

The Financial Services Commission (FSC), Mauritius, has issued a warning to financial institutions to be vigilant against growing risks in the sector. In its latest brochure, the FSC outlines the importance of implementing risk-based differentiation, identifying gaps in existing programs, meeting regulatory requirements, and protecting organizations.

Risk Categories

The FSC identifies three key risk categories:

  • Country/Geographical Risk: The location where financial institutions do business can impact heavily on the risk matrix. For instance, the Financial Action Task Force (FATF) publishes statements on high-risk and non-cooperative jurisdictions.
  • Customer Risk: Financial institutions must rethink their business relationships and customer acceptance processes in light of the growing focus on Know Your Customer (KYC). The FSC recommends segmenting and detailing customer acceptance processes for each client category, taking into account characteristics such as:
    • Politically exposed foreign persons
    • Non-face-to-face relationships
    • Organizations with complex legal structures
  • Product Risk: Financial institutions must consider innovative products and services. The FSC advises monitoring high-risk accounts, situations where it is difficult to identify beneficiaries of trusts, and large transactions with no apparent economic value or service.

Internal Controls

To have an effective risk-based approach, internal controls are essential. An internal control system includes:

  • Control Environment: Policies, processes, tasks, behaviors, and other aspects of a company
  • Risk Assessment: Identifying potential risks and evaluating their likelihood and impact
  • Control Activities: Implementing measures to mitigate identified risks
  • Information and Communication: Ensuring that relevant information is shared throughout the organization
  • Monitoring: Continuously monitoring internal controls to ensure they are effective

Disclaimer

The Financial Services Commission disclaims any liability for loss or damage suffered by anyone relying on the information contained in this brochure. This publication is intended for information purposes only and should not be taken as providing financial, legal, or professional advice.

Contact Information

For more information, please contact the Financial Services Commission at: