Shahannah Abdoolakhan, CEO of Abler Consulting : “The cost of complying to the AML/CFT is much cheaper than the cost of non-compliance”

The recent steps taken by Mauritius in extending the AML/CFT legal framework to real estate agencies has taken the industry by storm. Shahannah Abdoolakhan shares how compliance professionals can help companies navigating through the complex rules.

 

As part of the fight against money laundering, the authorities have set up the Anti Money Laundering / Combating the Financing of Terrorism (AML / CFT). What is the impact of this new legislation on the activities of real estate professionals?

 Mauritius has taken significant steps to ensure that it has a robust anti-money laundering and combating the financing of terrorism (AML-CFT) legal framework which is aligned with international standards and embedded in our laws, rules and regulations. In August 2020, the Financial Intelligence Unit (FIU) issued the Guidelines On The Measures For The Prevention Of Money Laundering And Countering The Financing Of Terrorism For The Real Estate Sector (Guidelines), pursuant to section 10(2)(ba) of the Financial Intelligence and Anti-Money Laundering Act (FIAMLA) 2002.

The Guidelines aim to assist the key players in the Real Estate Sector in Mauritius to comply with their obligations in relation to the prevention, detection and reporting of money laundering (ML), terrorism financing (TF) and proliferation financing (PF) (referred as ML/TF below) crimes through the adoption of a Risk-Based Approach (RBA).

The key elements of the RBA include:

• Risk Identification and Assessment

This entails the identification of the inherent ML/TF risks facing a firm, given its customers, products and services offered and countries of operation and the use of publicly available information and sector specific typologies regarding ML/TF risks.

• Risk Management and Mitigation

This entails identifying and applying measures to effectively and efficiently mitigate and manage the identified ML/TF risks.

• Risk Monitoring

The establishment of an AML/CFT program to ensure policies, procedures, processes and controls remain effective in the monitoring and mitigating of changes to ML/TF risks.

Other than the RBA, some of the key highlights of the Guidelines involve the Real Estate Sector having the duties to conduct exercises as:

• the business risk assessment;
• the client risk assessment, based on customer due diligence, identifying beneficial owners, identify source of funds and wealth of customers and screening against santions lists;
• the appointment of a Compliance Officer (CO) and a Money Laundering Reporting Officer (MLRO); and
• the transactions monitoring and reporting of any suspicious transactions, including providing information to the FIU as and when requested.

What are the procedures to which buyers must now submit?

Property acquirers are required to provide all due diligence documents to their property agents, to allow the latter to undertake their obligations with regards to AML/CFT. Should they be considered high risk client, the agent will ask them for further information.

Some real estate agencies were initially reluctant to comply with this obligation. Why is that ?

Increased requirements resulting from new AML/CFT laws, rules and regulations also increases the cost of doing business. However, what we know for a fact, that the cost of complying is much cheaper than the cost of non-compliance. We believe that Real Estate professionals would be wise to invest in the compliance function and to view this investment as an asset contributing to the sustainability of their business.

In order to ensure compliance with the prevailing laws, rules and regulations, a Real Estate agent must be equipped with its AML/CFT programme, policies and procedures and controls adapted to its Real Estate operations, failing which the agent may be subject to sanctions by the FIU, which include amongst others, administrative sanctions under FIAMLA and revoking or cancelling of licences and permits. 

Do you think that real estate agencies have the in-house skills to carry out the verifications required by the AML / CFT?

Complying with AML/CFT obligations entails a number of internal changes to cope with external changes including changes in the laws, rules and regulations. Amongst the forerunners actions comprise of ensuring that agents:

1. are adequately trained to understand the obligations of the function;
2. have the right tools, including screening tools, to ensure they are able to identify and manage risks identified and assessed with relationships;
3. maintain adequate records of the assessments to ensure they take informed decisions about risks; and
4. have the appropriate mechanisms and functions to report any suspicion arising from any unusual activities of such relationships.

You are regularly contacted by the real estate agencies to support them in these procedures. Are they receptive to the advice you give them?

Usually for big structured Real Estate agents, model from a foreign set up, and as a result they are quick in adapting to recommended changes. The medium to small size operations, adopting recommended changes may be slow to implement given the cost of ensuring compliance. We have assisted some companies in drafting their Business Risk Assessment framework, drafting their internal controls and compliance manual, training their people, including directors, and assist them in their screening and risk assessment of client, amongst others.

 Do you think that this administrative procedure can discourage some investors from buying properties in Mauritius?

No, i would not say so. Adopting a structured approach is always to the advantage of the investor before they part with their money.

 What do you think are the advantages of AML / CFT?

Effective AML-CFT regimes are essential to protect the integrity of markets and of the global financial framework as they help mitigate the factors that facilitate financial abuse and prevent the integration of illicit money into the financial sector. Compliance with AML/CFT obligations, in particular customer due diligence, transaction monitoring and record keeping also offer high level principles which aid the administrative processes of the Real Estate agents, whether they relate to property acquisition or verification of property ownership and historic transactions, based on records maintained the prescribed period (7 years) following the completion of the transaction.