The United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act 2019 (the Sanctions Act) was enacted on 29 May 2019 to enable the Government of Mauritius to implement targeted sanctions and other measures imposed by the United Nations Security Council (UNSC) under Chapter VII of the Charter of the United Nations (UN) in response to threats to the peace, breaches of the peace and security, including terrorism, the financing of terrorism and the proliferation of weapons of mass destruction.
As a result of this Act, reporting persons are required under Section 41 of the Sanctions Act to implement internal controls and other procedures to effectively comply with the obligations under the Act. The Guidelines on the Implementation of Targeted Financial Sanctions Under The United Nations (Financial Prohibitions, Arms Embargo And Travel Ban) Sanctions Act 2019 (the Guidelines) gives more context on the obligations. Of these obligations, we are going to focus on the obligation to conduct sanctions screening.
Screening is defined as the comparison of one string of text against another to detect similarities which would suggest a potential match. Section 43 of the Guidelines dictates that screening for potential matches not only applies to all customers but is also extended to transactions. Therefore, there is neither a minimum financial limit not a threshold to take into account when conducting sanctions screening.
Reporting persons must have in place a system to screen potential customers during onboarding and clients during their lifecycle. Customer screening, as per Section 44 of the Guidelines, includes the screening of directors, beneficial owners and other related parties with access to the account. In addition, sanctions screening must also be conducted in the following cases:
- When there is a trigger event that is change in the customer information, such as a change in shareholding information or the appointment of new controlling persons; and
- When there is a change in the sanctions list or update in the sanctions regime.
As for transaction screening, Section 45 of the Guidelines provides that each incoming and outgoing transaction should be screened for a potential match with sanctions lists. It is recommended that screening of transactions be carried out in real time, that is ex-ante, and the payments are checked to ensure that ongoing restrictions related to any sanctions regime are not being violated. Screening ex-post, that is after the transaction has been processed is not recommended as this method fails to ensure that the reporting person stops a payment to a sanctions target.
A transaction generally consists of a series of codes, figures, predefined texts and free texts. Screening the whole payment message against sanctions lists might yield a high number of false positives. Section 46 of the Guidelines therefore sets out the most following common screening data points in a transaction:
- Parties involved such as remitter, beneficiary, intermediaries and other financial institutions involved in the transaction to verify if they appear on any sanctions lists;
- Vessels, to verify if they are sanctioned or if their registered owners are sanctioned;
- Bank names and bank identifier codes, to check if they related to any sanctioned bank; and
- Free text in the payment message.
Reporting persons are invited to pay strict attention to those parts of the payment instruction from the client where information could be modified or removed to trick screening controls and go undetected. Particular attention is to be given to the free text fields due to the heightened risk that the information in those parts are voluminous and can be mixed with nonsensical texts intentionally to mislead the screening tool or the verifier of the transaction.
To conduct the screenings, reporting persons may or may not use an automatic screening software. Where a reporting person opts for manual screening against designated persons lists, its compliance officers may download the publicly available lists from the website of the United Nations, the Financial Intelligence Unit or the National Sanctions Secretariat (NSSEC) and manually check for matches. Each time the list is accessed, it is recommended that a copy is downloaded and saved as sanctions lists are living documents and information available at the time of screening might not be available after, for example, a year. In addition, it is also recommended to take note of the date and time the list was accessed.
Where an automatic screening system is utilized, reporting persons are required to ensure that the system is capturing the correct list to screen against. Here, reporting persons are to demonstrate that they are actively screening against the UN Consolidated List and the List of the NSSEC. They also need to ensure that automated systems are adequately tested for accuracy, properly calibrated and that the parameters that are set for screening within those systems are appropriate for the nature and size of their business. The legal obligations and liability are not abrogated simply because they may rely on third party automated screening systems. Risk ownership cannot be outsourced. Even if the vendor did not incorporate a country-specific sanctions list, the liability remains with the reporting officer to have the screening conducted against the lists recommended by the regulatory or supervisory bodies. To overcome this situation, financial institutions and reporting persons may chat to their vendor to verify if they are providing the latest updates, and to have them include any country-specific list they require. Likewise, financial institutions and other reporting persons should also receive technical guidance and assistance in operating the automated screening system as well as training to understand and make use of all its functionalities and system calibration. Leaving an automated as it is since bought might prove to be quite ineffective since it might not only yield a high number of false positives due to improper calibration and not making use of fuzzy logic. On this note, the compliance personnel are reminded of the need to record the basis false positives are discarded.
When a true match with a listed/designated person is identified by a reporting person, the match and the ensuing asset freezing should be reported immediately to the NSSEC and the supervisory authority. The same report should be submitted to both competent authorities.
The report is submitted using the template available on the NSSEC website.
The template is the Template for Reporting on Positive Name Match under section 25(2) of the United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act 2019 which is filled in and filed. A suspicious transaction report (STR) should also be filed with the FIU as per the obligation set out under Section 39 of the Sanctions Act which provides:
Any information related to a designated party or listed party which is known to –
(a) a reporting person, shall be immediately submitted by the reporting person to FIU in accordance with section 14 of the Financial Intelligence and Anti-Money Laundering Act; or
(b) any other person, transmitted forthwith by that person, in writing, to FIU.
To end, as per Section 25(3) of the Sanctions Act, when a reporting person fails to make a report to the NSSEC about a true match and report same to its supervisory authority, he commits and offence and shall, on conviction, be liable to a fine not exceeding 5 million rupees and to a term of imprisonment not exceeding 10 years.
How Can Temple Consulting assist you?
With a team of professionals with niche expertise, Temple Consulting can assist reporting persons in conducting sanctions screening, enhanced due diligence and ongoing monitoring reports on high risk and parties with potential sanctions exposure. Get in touch with us for more information on (+230) 210 3588 or templeconsulting@templegroup.mu
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