Financial Crime World

Mauritius on FATF’s Radar: Combatting Financial Crimes in a Complex Operating Environment

In the global financial landscape, fraud and economic crime continue to pose significant challenges to organizations. Here are some alarming statistics:

  • The World Economic Forum estimated that fraud and financial crime was a trillion-dollar industry in 2018.
  • Private companies spent approximately US$8.2 billion on anti-money laundering (AML) controls alone.
  • The Association of Certified Fraud Examiners’ global report revealed that organizations typically lost 5% of their annual revenue to fraud.

Prevalence of Economic Crimes and Fraud

Recent findings from PwC’s 2020 Global Economic Crime and Fraud Survey highlighted some concerning trends:

  • Half of the respondents had experienced some form of economic crime or fraud.
  • The most common types of fraud were Customer Fraud, Cybercrime, Asset Misappropriation, and Bribery and Corruption.
  • Nearly half of the reported incidents resulted in losses of US$100 million or more and were often committed by insiders.

Mauritius on FATF’s Watchlist

Mauritius, a growing financial hub, has found itself on the Financial Action Task Force’s (FATF) list of jurisdictions under increased monitoring. Following an assessment by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), the country’s AML/CFT legal framework was reviewed, leading to new guidelines being issued by the Bank of Mauritius and the Financial Services Commission.

Adapting to the New Normal: Challenges during Covid-19

The ongoing Covid-19 crisis has introduced additional risks for organizations, especially as most businesses have shifted to remote working arrangements. Mauritius’ extended lockdown measures have made it more challenging for organizations to dedicate adequate resources to financial crime management.

Integrated Financial Crime Risk Management

Traditionally, financial crime was viewed as a regulatory compliance issue dealing primarily with money laundering and terrorist financing. However, with the rise of fraud and cybercrime, a more proactive and holistic approach is required:

  1. Customer identification and authentication.
  2. Monitoring and detection of suspicious behavior.
  3. Response, investigation, and crisis management.

These activities should be guided by the same senior management and supported by shared data and technologies to promote streamlined processes and a better customer experience. The following sections provide more detail on these essential steps.

Customer Identification and Authentication

Effective customer identification and authentication is crucial to maintaining a robust financial crime risk management strategy. Organizations need to develop and implement reliable procedures for identifying and verifying their customers, such as:

  • Ensuring proper documentation is provided and verified.
  • Conducting due diligence checks on potential customers.
  • Implementing risk-based customer profiling and segmentation.

Monitoring and Detection of Suspicious Behavior

Monitoring and detecting suspicious behavior is another essential step in managing financial crime risks:

  • Continuously monitoring transactions to identify unusual patterns.
  • Setting up automated fraud detection systems.
  • Establishing reporting mechanisms for suspicious transactions.
  • Implementing regular risk assessments to identify and address emerging risks.

Response, Investigation, and Crisis Management

Once suspicious activity has been identified, it is important for organizations to have a well-defined response, investigation, and crisis management strategy in place. Key aspects include:

  • Establishing clear communication channels for reporting and responding to potential threats.
  • Conducting thorough investigations to determine the true nature and extent of the issue.
  • Engaging appropriate external experts where necessary.
  • Adopting a collaborative approach with local and international law enforcement agencies.

Integrating Efforts for Effective Financial Crime Risk Management

The interconnected nature of different financial crimes necessitates an integrated approach to managing risk:

  • Siloed approaches to financial crime management may lead to inefficiencies and excessive costs.
  • Organizations need to implement systems and processes that enable them to identify, detect, and resolve complex interconnected risks effectively.

Example of Interconnected Risks: Cybercrime and Money Laundering

An instance of interconnected risks could involve a cyber intrusion by sanctioned states or terrorist groups, resulting in data theft and subsequent laundering of funds. In such a scenario, a siloed approach would complicate the incident resolution process and result in inefficiencies and excessive costs.

Conclusion

In conclusion, a proactive, integrated approach to financial crime risk management is crucial for organizations navigating the complex business environment. By focusing on customer identification, monitoring behavior, and response, organizations can minimize costs and losses while effectively combatting fraud, money laundering, cybercrime, and other financial crimes.