ASK MAT - Does a Client in Mauritius Have to Disclose Source of Funds (SoF) for AML/CTF/CPF Compliance?

ASK MAT - Does a Client in Mauritius Have to Disclose Source of Funds (SoF) for AML/CTF/CPF Compliance?

MAT SAYS

• Surprisingly, there is no blanket requirement for SOF. Mauritius uses a strictly risk-based approach (RBA).
• SoF is only legally mandatory on specific "HARD" triggers (e.g., PEPs, three high-risk countries).
• Outside of “HARD” triggers is down to Where Necessary"/"Reasonable" (Regs 3/12/15), the risk-based approach (RABA) of a firm
• The RBA allows a Loophole, for example, in an RBA firm's self-assessment – classify "low-risk" or standard risk and Skip SOF forever.

Key Legal Framework

Mauritius' AML/CTF/CPD regime (Financial Intelligence and Anti-Money Laundering Act 2002 – FIAMLA) mandates Customer Due Diligence (CDD) for FSC-regulated entities (banks, trusts, funds):

Mauritius' AML/CTF/CPD regime Key Distinction:

• SoF: Origin of specific funds (e.g., "salary for this wire").
• SoW: Origins of total wealth (e.g., "inheritance + business").

3 "HARD" TRIGGERS (Automatic EDD + SoF)

Only these three forces, SoF – no wiggle room:

1. High-Risk Countries (3 only): DPRK, Iran, Myanmar.
• Per Gazette No. 360/2023 (current Oct 2025).
• FATF grey list (~25 jurisdictions)? → Enhanced monitoring only – NO auto EDD.
2. PEPs (Politically Exposed Persons): Foreign/domestic + families/associates.
3. Suspicious Activity: Red flags (e.g., sudden large wires).

Triggers: When SoF Kicks In

Reg 12(1) FIAML Regs – 8 categories. RBA means institutions self-classify:

TERMINATE

• Can't get SoF? → Terminate + STR (Reg 12(3)).

SOF LOOPHOLES

1. "Where Necessary"/"Reasonable" (Regs 3/12/15):
• Loophole: Self-assess – classify "low-risk" (salary payer)? Skip forever.
• Issue: No hard thresholds (e.g., no €15k auto-trigger like EU).
2. 90% Low-Risk Hack (Reg 11):
• Simplified CDD – No audit mandate for ratings.
3. Clients? Zero Penalty:
• Refuse SoF? → Firm files STR/closes – you walk free.
4. Deferred/ Ongoing Gap (Reg 9):
• Funds flow first, verify later.
5. Outsourcing Wiggle (Reg 21):
• Rely on foreign banks for ID – but SoF? Institution's call.

ENFORCEMENT?

• The FSC enforces its rules strictly, and the consequences for DTOS Are Penalties: fines of MUR 10M, jail of up to 10 years (FIAMLA s. 19/56), and licence revocation.

EXAMPLES OF SOF ENFORCEMENT