The Financial Intelligence Unit (“FIU”) has, pursuant to section 10(2)(ba) of the Financial Intelligence And Money Laundering Act (“FIAMLA”), issued “Guidelines on the measures for the prevention of money laundering and countering the financing of terrorism for law practitioners” (the “Guidelines”). Failure to comply with the Guidelines entails a penalty not exceeding MUR 50,000 for each day such breach occurs.
The FIU is already empowered to request a law practitioner to furnish any information or document it may require. The law practitioner is also under a legal obligation to report suspicious transactions to the FIU. Following a Suspicious Transaction Report (“STR”), the law practitioner is prevented from disclosing the contents thereof or even disclosing that a STR has been made or that the FIU has requested for information.
This obligation to report is however subjected to the legal professional privilege which a law practitioner enjoys, namely a duty to keep the affairs of their clients confidential and the circumstances in which they are able to disclose client communications are strictly limited.
The rationale behind the Guidelines is that law practitioners play a key role in the detection of money laundering and financing of terrorism schemes. They are the gatekeepers who are responsible to protect the gates of the financial system in view of the wide range of services they provide in relation to transactions impacting on the financial system. These transactions range from the selling of real estate to managing the client’s assets and savings. Law practitioners can be misused by money launderers and those involved in dubious transactions to give them a legitimate appearance or to channel illicit funds. These Guidelines are intended to assist the law practitioner in the prevention, detection and reporting of money laundering offences.
Law practitioners cannot be expected to detect all wrong doings by clients but are nevertheless required to have in place policies, processes and internal controls which are necessary to ensure that their services are not being misused to commit a money laundering offence. They are therefore required to (i) identify, assess and take effective action to mitigate these risks, and (ii) adopt a risk-based approach whereby the measures and processes in place are commensurate with and proportionate to the risks identified. More efforts should be concentrated on and more resources should be allocated to higher risk areas inasmuch as not all aspects of the law practitioner’s practice present the same level of risks. The measures which are expected of the law practitioner are:
- Verify the true identity of all persons with whom they conduct transactions (customer due diligence – “CDD”) and check on the list of people on whom sanctions have been applied;
- Keep such record and documents and upon a court order, to make them available;
- Put in place appropriate screening procedures to ensure high standards when recruiting employees and further deploy employee training; and
- Monitor suspicious activities and where appropriate make a STR.
The Guidelines further explain the risks associated with the client base. For instance, stable long-term clients present less risk than new clients who may be looking for an opportunity to exploit the law services of a law practitioner to launder criminal property. Similarly, trusts, charities and other such structures may be used to conceal the source of funds and it may be difficult to identify the ultimate beneficial owners. Politically exposed persons, persons whose assets have been frozen under the Dangerous Drugs Act, and non-face-to-face clients, are high-risk clients. Certain business activities are considered as high-risk; they range from casinos to travel agencies and from cash-intensive businesses to dealers in securities.
The law practitioner has to scrupulously apply “know your client” (“KYC”) principles, even for face-to-face clients and endeavour to obtain KYC verification from a reliable and independent source. KYC principles should also be applied whenever the law practitioner has suspicions that a money laundering office might be committed or when the veracity of previous KYC is compromised.
The geographic location of the client is also considered as contributing to the risk level. It is therefore important to assess the jurisdictional risk involved using the risk-based approach. The law practitioner is encouraged to develop (i) a sound program of transaction and activity profiling, (ii) risk grading of clients, (iii) internal reporting systems in relation to the procedures for identifying potential suspicious activities, (iv) a formal procedure to evaluate such suspicious transactions, and (v) to keep a record of all such suspicious and/or unusual transactions whether or not a STR has been filed.
Another feature of the Guidelines is a duty to keep records of all transactions, including KYC documentation for at least 5 years after the business relationship has ended. Lastly, it is necessary to regularly monitor and evaluate the framework in place to ensure that the processes in place are adequate, effective and comprehensive.