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Mauritian firm fined for AML failures


Bao Asset Managers Ltd (BAO), which has held a Global Business Licence and a Collective Investment Scheme Manager licence since around 2010, was handed a USD 19,571 fine (approximately MUR 836,000) by the Enforcement Committee of the FSC for failing to adhere to various AML provisions.

The fine followed an on-site inspection (the “Inspection”) conducted by the FSC on the premises of the Company revealed that it was in breach of numerous statutory obligations.

Breaches committed by the Company

The Enforcement Committee [EC] observed that the Company has been operating in breach of

  • The Financial Intelligence and Anti-Money Laundering Act 2002 (the "FIAMLA"),
  • The Financial Intelligence and Anti-Money Laundering Regulations 2018 (the "FIAML Regulations") and
  • The United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act 2019 (the "UN Sanctions Act")

The breaches were in relation to the following:

    • 2.2.1. The Inspection revealed that the Company failed to conduct a risk assessment in relation to its business and that it was using that of its Management Company, namely Harel Mallac Global Ltd.
      • While the Company had risk-assessed its clients in 2018, this exercise was not conducted while considering all risk factors provided under section 17 of the FIAMLA.
      • In addition, the client risk assessment has not been periodically updated since 2018.
    • 2.2.2. The EC noted that thereafter, as part of its remedial plan, the Company undertook a risk assessment in relation to its business, its clients and all funds under its management.
      • Yet, as at the date of the Inspection, the Company was in contravention of section 17 of the FIAMLA since it failed to take appropriate steps to identify, assess and understand the money laundering and terrorism financing risks for customers, countries or geographic areas, as well as, products, services, transactions or delivery channels and to consider all relevant risk factors before determining the level of overall risk and the appropriate level and type of mitigation to be applied.
    • 2.3.1. The EC observed, according to the Inspection findings, that the Company’s policies, controls and procedures pertaining to Anti-Money Laundering and Countering the Financing of Terrorism (“AML/CFT”) were not approved by its senior management.
      • Also, steps taken to internally communicate those policies, controls and procedures, or any changes thereto, were not recorded, resulting into the Company being in contravention of sections 17A(l)(c)(iii) and 17A (2) of the FIAMLA.
    • 2.3.2. The EC also took note that post Inspection, the Company initiated appropriate actions to prepare and submit its AML/CFT policies and procedures for its senior management approval.
    • 2.4.1. The EC further noted that as at the Inspection, the Company’s policies and procedures did not cover its obligations under the UN Sanctions Act to undertake TFS screening.
    • 2.4.2. While this shortcoming was thereafter addressed by the Company through its updated AML/CFT policies and procedures, it was found by the EC to be in breach of section 41 of the UN Sanctions Act at the time of the Inspection.
    • 2.5.1. The EC took note that the Company had failed to appoint a Compliance Officer.
    • In addition, following the resignation of the Deputy MLRO and the then MLRO on 29 January 2018 and 11 September 2018 respectively, the Company was operating without an MLRO and Deputy MLRO
    • 2.5.2. By operating without a Compliance Officer, an MLRO and a Deputy MLRO, the EC concluded that the Company was in breach of regulations of 22(1), 26(1) and 26(2) of the FIAML Regulations.
    • 2.5.3. The EC duly observed that these positions have now been filled with the FSC’s prior approval.
    • 2.6.1. The Inspection showed that the Company did not implement an ongoing training programme for its directors, officers and employees to maintain awareness of the legislative provisions relating to money laundering and terrorism financing (“ML/TF”) to assist them in recognising transactions and actions that may be linked to ML/TF and did not instruct them on the procedures to be followed where any links have been identified.
    • 2.6.2. Despite the remedial steps taken thereafter, the EC concluded that the Company failed to abide by regulation 22(1)(c) of the FIAML Regulations at the time of the inspection.
    • 2.7.1. The Inspection revealed that the Company did not have an independent audit function to review and verify its compliance with and effectiveness of the measures taken in accordance with the FIAMLA and the FIAML Regulations.
    • 2.7.2. The EC took due note of the Company’s undertaking to carry out the required AML independent audit at a later stage. However, the EC formed the opinion that as at time of the Inspection, the Company was in contravention of regulation 22(1)(d) of the FIAML Regulations.

Read the public statement here -