AML/CFT: Mauritius revises its Fit and Proper Person test

Considering that money laundering and other scandals are becoming rampant everywhere around the world, it is important for jurisdictions to introduce the appropriate measures so that firms operating in their area and investors are protected. This has become more than essential.

Following this line, Mauritius has been strengthening its financial sector. One of the measures taken is amendments to the Fit and Proper Person test. On the 2nd of October 2020, the Financial Services Commission (FSC) rolled out its revised “Guidelines on Fitness and Propriety”. This is to ensure that businesses conducted in the financial services and global business sector is done in a sound environment. The guidelines became applicable as from the 1st of November of the same year.

What is the Fit and Proper Person test?

The Financial Services Authority has listed out the criteria determining whether a person is ‘fit and proper’. This pertains to their “ability to perform the relevant functions properly, efficiently, honestly and fairly” and their “reputation, character, financial integrity and reliability”. To put it simply, they are able to conduct business in an honest and right way.

What will be assessed? The financial standing, relevant education, qualifications and experience, reputation, character, financial integrity, reliability and their capacity to perform relevant functions properly, efficiently, honestly and fairly.

Who are going to be assessed by the regulatory institution? Besides the ‘person’, who is the applicant, the fit and proper test involves anyone who is, or will be, employed by, or is associated with the person and any representation or agent of the applicant. In the case of the applicant being a corporation, it will look at the officers and any shareholder of the corporation, its related corporations and their officers.

A first ‘Fit and Proper Test’ will be conducted when a person, or a firm, submits an application for a licence or requests any other authorisation from the FSC. Following this, the test will be applied on a continuous basis to ensure that the applicant remain ‘fit and proper’ at all times.

Why conduct the “Fit and Proper Person” test?

What is the purpose of the ‘Fit and Proper Person” test? The FSC has determined several reasons, listed below, for conducting this assessment. It should be noted that the list is non-exhaustive. The test aims to:

  • establish a standard benchmark for licensing and for continuous regulation and supervision of licensees/applicants,
  • encourage high standards of conduct in the market,
  • maintain a high level of confidence and trust amongst those using (Mauritius as a base for their business. This is also applicable to those considering to do so,
  • act as a deterrent to protect the interests of consumers of financial services in the country,
  • promote a business environment that meets acceptable international standards,
  • deter dishonest, incompetent, unskilled or inappropriate operators in Mauritius.
  • deter making an abuse of the Mauritian financial market, and
  • to ensure that persons, who are not “fit and proper” to perform functions in a regulated field of activity, are precluded from doing so, in the public interest.

What are some of the amendments in the Guidelines?

The guidelines with regards to the ‘Fit and Proper Test’ have been amended to increase the efficiency of the test and to increase the safety of the financial sector in Mauritius.

The scope of the ‘Fit and Proper’ test has been extended. Now, besides just the applicant, benefit owners and the controllers of a licence being assessed, the FSC will look at other persons whose involvement will be relevant. Incumbent officers such as the money laundering reporting officer (the “MLRO”), the deputy MLRO and the compliance officer, and the external and outsourced auditors of regulated entities will also be assessed to determine whether they are ‘fit and proper’.

According to the previous guide, the FSC has the right to make this assessment to determine whether an individual is capable enough to take over, or hold, a particular or a proposed position. To generate an impact on the long-term, the guidelines have been revised to give the FSC more power to keep reviewing whether the person is still meeting the conditions involved in the ‘fit and proper’ test. This means that the process is a continuous one and the entity may have its licence revoked following the result of the test.

The FSC has also reviewed the questionnaire of the ‘Fit and Proper’ test. It is now more extensive than the previous version. Now, the following documents must be provided for the test:

  • previous residential addresses, occupation, and regulatory approvals or licences held (with dates of approvals) for the ten preceding years,
  • information concerning the principal bank account. For instance, the opening date of said account, and
  • affiliations with politically exposed persons, and several new confirmations, to know if the applicant acts under the directions of others.

Applicants have to notify the FSC in the event of changes within 30 days. Moreover, the FSC has the authorisation to make further enquiries and seek any information it deems appropriate while conducting the assessment and verifying the information disclosed in the questionnaire.

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