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Asset Manager sanctioned over breach of anti-money laundering laws

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The Mauritius operation of Bao Asset Managers Ltd (www.baofinancialgroup.com) has been slapped with an administrative penalty after it was found in breach of numerous anti-money laundering laws.

Bao Asset Managers Ltd holds a Global Business Licence and a Collective Investment Scheme Manager Licence issued by the Financial Services Commission on December 16, 2010. 

Following an on-site conducted on the premises of the Bao Asset Managers, the Financial Services Commission issued a deficiency letter detailing the Inspection findings and the matter was referred to the Enforcement Directorate.

The EC observed that the company had been operating in breach of the Financial Intelligence and Anti-Money Laundering Act 2002 (FIAMLA), the Financial Intelligence and Anti-Money Laundering Regulations 2018 (FIAML Regulations) and the United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act 2019 (UN Sanctions Act).

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,” the FSC said in a report just made public.

The EC noted that, as part of its remedial plan, Bao Asset Managers had undertaken 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,” it said.

It also noted that the company had been operating without an MLRO and Deputy MLRO since 2018 – in. breach of regulations of 22(1), 26(1) and 26(2) of the FIAML Regulations. 

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. 

The EC considered that the most appropriate way to sanction the breaches committed by the Company was through the imposition of an administrative penalty pursuant to section 7(1)(c) (v) and 52(3) of the FSA. 

In assessing the level of seriousness of the breaches, the EC formed the opinion that the level of seriousness of these breaches was Moderate and imposed a penalty of 8% of the gross income of the Company for the period 01 October 2018 to the date of the Inspection in June 2020, representing USD 31,313. 

The prompt remedial actions taken by the Company were nonetheless considered as mitigating factors by the EC, which agreed to decrease the penalty from 8% to 6% of the Company’s gross income for the duration of the breaches – amounting to USD 19,571.

Read full report by the Financial Services Commission on https://www.fscmauritius.org/media/105830/publication-notice-bao.pdf

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