Preparing For A Regulatory Onsite Inspection
The Mauritius Financial Services Commission (the “FSC”) has scheduled a series of onsite inspections of its licensees for the coming months. These inspections will not be a full scope inspection but will be themed base. The inspections will be focussing on reviewing and assessing the AML framework of its licensees.
STAGES OF AN ONSITE INSPECTION
An inspection is generally carried out in four different stages:
- Pre-Onsite inspection
This is an information gathering exercise by the FSC geared towards ascertaining the general profile of its licensees. In its notification to a licensee of an impending inspection, the FSC will require various documents and responses to pre-inspection questionnaires to be submitted on the ODCS platform.
- Onsite inspection
This is the stage where the inspection team from the FSC will be physically present at the premises of a licensee to conduct the inspection. During the onsite inspection, the inspection team will carry out an interview with the principals of a licensee (directors, MLRO and Compliance Officer), carry out file reviews and assess the effectiveness of the systems and controls implemented by a licensee.
- Reporting to the licensee
Following the onsite inspection, a licensee will receive a draft inspection report from the FSC highlighting the findings of the FSC. The licensee will be given an opportunity to comment on the findings of the FSC although the final report of the FSC may not take on board any comments from the licensee. Very often, the findings of the FSC and the comments from the licensee will constitute the final report.
- Post-inspection monitoring
In its findings, the FSC will generally proceed by way of setting-out its observations, making recommendations and directions. Where deficiencies have been noted, licensees would be expected to take corrective measures as soon as possible.
THE DO’S AND DON’TS
Preparing for a regulatory visit is far more complex than just an exercise of “ticking the boxes” or filling a questionnaire on policies and procedures. Licensee should be mindful of all the stages of an onsite inspection and it is important that they address each stage of the inspection with utmost attention. Neglecting one will necessarily impact on the overall rating of a licensee.
The interview with the management of a licensee is an important aspect of the onsite inspection. This can be a daunting exercise and one needs to be fully prepared for this.
A licensee may have the best systems and controls in place but is unable to demonstrate its application in a clear manner and this may lead to an inspection report with negative findings. Licensees should also focus on how to demonstrate compliance. Mauritius found its way into the EU Blacklist not because of instances of non-compliance but mainly as a result of the failure to demonstrate compliance and enforcement.
It is also important for licensees to gauge and manage the expectations of the FSC. It has been noted that many licensees fail to provide information or documentation that are relevant to the queries of the FSC and this because they did not appreciate the purport of the questions of the FSC.
And as always, be courteous and fully cooperative with the FSC inspection team.