Financial Crime World

Virtual Asset Ecosystem Expands in Mauritius, but Risks of Money Laundering and Terrorist Financing Loom

The virtual asset (VA) ecosystem has been rapidly expanding in Mauritius, with various players and sectors interacting through a complex network of channels. According to a recent report by the Risk Assessment Working Group, this growth presents both opportunities and challenges for the country’s financial regulatory landscape.

VASP Channels and Sectors Interact

The report identifies 27 VASP (Virtual Asset Service Provider) channels, which include:

  • Wallet providers
  • Exchanges
  • Brokers
  • Management providers
  • Initial coin offering (ICO) providers
  • Investment providers
  • Validators/miners/administrators

These channels interact with various sectors in Mauritius, including:

  • The formal banking sector
  • Non-banking financial institutions (NBFI)
  • Trust and company service providers
  • Casinos
  • Dealers in precious metals and stones
  • Real estate agents
  • Accountants
  • Legal professionals

Formal Sector Interactions

The report highlights that only two sectors - banking and NBFI - interact with seven VASP channels. For example:

  • Banks may provide virtual asset wallets for their customers.
  • NBFI companies may offer investment products linked to virtual assets.

Informal Sector Challenges

However, the informal sector in Mauritius, which includes players operating outside traditional AML/CFT (Anti-Money Laundering and Combating the Financing of Terrorism) regulations, poses a significant risk. The lack of corporate accountability and limited regulatory oversight creates an environment conducive to illicit financing activities.

Risk Assessment Findings

The Risk Assessment Working Group identified several risks associated with the VASP channels and sectors in Mauritius, including:

  • Money laundering and terrorist financing threats
  • Lack of transparency and anonymity in virtual asset transactions
  • Inadequate AML/CFT controls among some VASP providers
  • Limited regulatory oversight and enforcement
  • High risk of illicit financing activities in the informal sector

Recommendations

To mitigate these risks, the report recommends that:

  1. The Mauritian government strengthen its AML/CFT regulations and enforcement.
  2. VASP providers implement robust AML/CFT controls and reporting mechanisms.
  3. Sectors interacting with VASP channels develop comprehensive risk management strategies.
  4. The informal sector be brought under regulatory scrutiny to prevent illicit activities.

As the virtual asset ecosystem continues to evolve in Mauritius, it is essential that regulators, businesses, and individuals work together to address these risks and ensure a safe and secure financial environment for all stakeholders.