COMPLIANCE: THE ETHICAL

CONUNDRUM OF A SHOTGUN

MARRIAGE

HERVE DUVAL SC

THIS PRESENTATION IS BROUGHTTO YOU BY AHNEE-DUVAL LAWFIRM. IT HAS BEEN RE-FORMATTED TO FIT YOUR

SCREEN.

COURSE OUTLINE

•PART 1 – SETTING THE SCENCE

•PART II - BASIC TENETS OF THE REGULATORY FRAMEWORK

•PART III- THE ETHICAL CONUNDRUM

Is the communique displayed on the

previous slide compliant?

Quarantine Act 2020

Section 4- Powers of Minister

(2)For the purpose of preventing a spread of a communicable diseasein Mauritius during a quarantine period, the Minister may, byregulations –

(a) Restrict a person from having access to a specified institution, placeor premises unless he satisfies such medical requirements, andcomplies with such conditions, as may be prescribed; and

(b) provide for anything that is required to prevent the spread of acommunicable disease, including the closure of premises, restriction ofactivities and prohibition to attend places.

As lawyers we are not immune...The Law Practitioners Act 19849B. Continuing Professional Development

(1) The Institute shall devise, organise and conduct Continuing Professional Development Programmes for each ofthe three branches of the legal profession with a view to broadening the knowledge of the law practitioners and legalofficers, keeping them abreast of developments in the law, encouraging them to share experiences and enhancingtheir professional skills.

(2) A Programme referred to in subsection (1) may include attendance at such lectures, workshops or seminars, asmay be approved by the Institute.

(3) Every law practitioner and legal officer shall, in every year, participate ina Continuing Professional Development Programme for the prescribed number of hours unless he is excused bythe Chief Justice for reasons such as age or ill health.

(4) Notwithstanding section 13, where a person referred to in subsection (3) fails, without reasonable excuse, tofollow a Continuing Professional Development Programme, the Institute may –

(a) in the case of a legal officer, report the matter to the Judicial and Legal Service Commission; and(b) in the case of a law practitioner, refer the matter to the Chief Justice who may(A) issue a written warning to him; or(B) suspend his right to practise for a period not exceeding one year

PART I – SETTING THE SCENE

THE IMPORTANCE OF WORDS

“The Lawyers' trade is a trade built entirely on words. And so long asthe lawyers carefully keep to themselves the key to what those wordsmean, the only way the average man can find out what is going on isto become a lawyer, or at least to study law, himself. All of whichmakes it very nice -- and very secure -- for the lawyers.” – Fred Rodell

Source: Yale University, By FRED RODELL Professor of Law [Online]: Available from:

Yale Prof: Law As Racket – StopProbateFraud.com ]

ETYMOLOGY FOR ENTREE

ComplianceLegal meaning

DEFINITIONS

Ethical conundrum Shotgun Marriage

Compliance Colloquial meaning

Compliance – Ordinary English/

Colloquial Meaning• As defined by The Cambridge Dictionary [Online]:

➢ The act of obeying an order, rule, or request:

[Examples of application] - It is the job of the inspectors to enforce compliance with the regulations.

- The company said that it had always acted in compliance with environmental laws.

• [mainly disapproving]

➢ the state of being too willing to do what other people want you to do:

• [Example of application] - It's his compliance that amazes me.

• [Source: The Cambridge Dictionary [Online]: Available from: COMPLIANCE | meaning in the Cambridge English Dictionary )]

Compliance – Legal Meaning

➢ The fact of obeying a particular law or rule, or of acting according to an agreement

Source: Cambridge Dictionary [Online] - Law Definition: Available from: COMPLIANCE | meaning in the Cambridge English Dictionary )]

Shotgun marriage - definition

• As defined by Merriam Webster Dictionary [Online]:

➢ a marriage forced or required because of pregnancy

— called also shotgun wedding

➢ a forced union

a spate of brokerage mergers … hastily arranged shotgun marriages— John Brooks

[Source: Merriam Webster Dictionary [Online]: Available from: Shotgun Marriage | Definition of Shotgun Marriage by Merriam-Webster ]

Ethical Conundrum - definition• Ethical Conundrum

• Ethical means relating to beliefs about right and wrong. [...]

• A conundrum is a problem or puzzle which is difficult or impossible to solve.

[Source: Collins Dictionary [Online]: Available From: Ethical conundrum definition and meaning | Collins English Dictionary (collinsdictionary.com) ]

• The Collins Dictionary further defines Ethical as follows:

➢ having to do with ethics or morality; of or conforming to moral standards➢ conforming to the standards of conduct of a given profession or group➢ designating or of a drug obtainable only on a doctor's prescription

[Source: Collins Dictionary [Online]: Available From: Ethical definition and meaning | Collins English Dictionary (collinsdictionary.com) ]

WHY WOULD “COMPLIANCE” GIVE

RISE TO AN ETHICAL DILEMMA FOR

LAWYERS?

THE TENDENCY TO OVERREGULATE V/S BASIC

TENETS OF DEMOCRATIC VALUES

Examples of over-regulation:

1. Mauritius – Requirement for barrister to obtain a police memo is an infringement of the constitutional right of a person to be assisted by a lawyer

2. France – Implication of mandatorily having a health pass to be able to access shopping centres, airplanes, long distance trains, bars – Freedom of movement

3. Italy – laws being passed by the Executive rather than the Legislature !

THE RULE OF LAW

“Effective rule of law reduces corruption, combats poverty and disease,and protects people from injustices large and small. It is the foundationfor communities of justice, opportunity, and peace–underpinningdevelopment, accountable government, and respect for fundamentalrights. Traditionally, the rule of law has been viewed as the domainof lawyers and judges. However, everyday issues of safety, rights,justice, and governance affect us all; everyone is a stakeholder in therule of law.” (Emphasis Added)

[Source: Page 13 of the World Justice Project Index Report 2021]

THE RULE OF LAW IN MAURITIUS

• As per the WJP Rule of Law Index 2021, scores range from O to 1, with 1 indicating the strongest adherence to the rule of law.

• Mauritius had an overall score of 0.61.

• This represents a decrease of 0.01 from 2020 !

• Mauritius is ranked 45 globally.

[Source: page 11 of the WJP Rule of Law Index 2021(https://worldjusticeproject.org/sites/default/files/documents/WJP-

INDEX-21.pdf) ]

Political System

Legal System

Judicial system

“In our country, which has no army, the stability of the Government does not dependupon force, but upon the consensus of the people. And that consensus itself derivesfrom confidence in the rule of law. The rule of law is the citadel which guards thepeople against despotism. It is equally the citadel which guards Government againstanarchy.”

MAHBOOB v GOVERNMENT OF MAURITIUS (1982) MR 135

THE ROLE OF A LAWYER IN A

CONSTITUTIONALLY BASED SOCIETY LIKE OURS

"In questions of power ... let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution.“ –Thomas Jefferson

OUR CHECKED HISTORY WITH OVER-

REGULATION

CPD

LAWYERS

DATA PROTECTION TRADE FEES

E-FILING

PART II – BASIC TENETS OF THE

REGULATORY FRAMEWORK

REGULATORY FRAMEWORK

1. Financial Intelligence and Anti-Money Laundering Act 2002

2. Financial Intelligence and Anti-Money Laundering

Regulations 2018

3. National Risk Assessment Reports

4. United Nations (Financial Prohibitions, Arms Embargo and

Travel Ban) Sanctions Act 2019

5. Guidance notes from the AGO/FIU/MIPA etc.

6. Guidance notes from the Financial Action Task Force

DIFFERENCE BETWEEN AML AND TF

REPORTING PERSON

• FIAMLA 2002 defines “Reporting Person” as a bank, financial institution, cash dealer or member of a relevant profession.

• “member of relevant profession or occupation” means a person specified in Column 1 of Part I of the First Schedule and performing any transaction in manner specified in Part II of the Schedule.

• Law firms, Attorneys and Barristers are included under Rows 3,4 and 5 respectively of the First Schedule

• Part II of Schedule 1 sets out the listed activities

LISTED ACTIVITIESA barrister, an attorney, a notary, a law firm, a foreign law firm, a joint law venture, a foreign lawyer under the Law Practitioners Act, [...], who prepares for, or carries out, transactions for his client concerning the following activities –

(i) buying and selling of real estate;

(ii) managing of client money, securities or other assets;

(iii) management of bank, savings or securities accounts;

(iv) organisation of contributions for the creation, operation or management of legal persons such as a company, a foundation, a limited liability partnership or such other entity as may be prescribed;

(v) creating, operating or management of legal persons such as a company, a foundation, an association, a limited liability partnership or such other entity as may be prescribed, or legal arrangements, and buying and selling of business entities; or

(vi) any activity specified in item (f);

LISTED ACTIVITIES CONTINUED

f) a company service provider who prepares, or carries out, transactions for a client concerning the following activities –

(i) acting as a formation legal professional of a legal person with a view to assisting another person to incorporate, register or set up, as the case may be, a company, a foundation, a limited liability partnership or such other entity as may be prescribed;

(ii) acting, or causing another person to act, as a director, as a secretary, as a partner or in any other similar position, as the case may be, of a legal person such as a company, foundation, a limited liability partnership or such other entity as may be prescribed;

(iii) providing a registered office, a business address or an accommodation, a correspondence or an administrative address for a legal person such as a company, a foundation, a limited liability partnership or such other entity as may be prescribed; or

(iv) acting, or causing for another person to act, as a nominee shareholder for another person

IMPLICATIONS OF LISTED ACTIVITIES

Listed Activity

Yes

CDD to be conducted

Risk assessment

Low RiskMedium

RiskHigh Risk

No

CDD NOT to be

conducted

CONSEQUENCES OF BEING A REPORTING PERSON

• Registration with the FIU

• CDD obligations

• Subject to scrutiny by regulators

• Inspections

• Risk Assessments

• Internal Policies

• Appointment of officers – Compliance Officer

• Independent Audit

• Compulsory disclosure

• Record keeping

• Suspicious Transaction Reporting

• Fines/ Imprisonment in case of non-compliance

SUSPICIOUS TRANSACTIONS

“suspicious transaction” means a transaction which-(a) gives rise to a reasonable suspicion that it may involve

(i) the laundering of money or the proceeds of crime; or

(ii) funds linked or related to, or to be used for, the financing of terrorism or proliferation financing or any other activities or transaction related to terrorism as specified in the Prevention of Terrorism Act or under any other enactment, whether or not the funds represent the proceeds of a crime;

(b) Is made in circumstances of unusual or unjustified complexity;

(c) Appears to have no economic justification or lawful objective;

(d) Is made by or on behalf of a person whose identity has not been established tothe satisfaction of the person with whom the transaction is made; or

(e) Gives rise to suspicion for any other reason.

SUSPICIOUS TRANSACTION

REPORTING MECHANISMCase Originators Analysis Reporting

Requests from Supervisory

Bodies

BOM

FSC

GRA

MIPA

FRC

AG

Requests from Investigatory Authorities

ICAC

MRA

ADSU

CCID

ARID

STRs from

Reporting

Institutions

Foreign FIUs

Others

FIU

Law

Enforcement

Bodies

Supervisory

Bodies

Overseas FIUs

Overseas Law

Enforcement

CUSTOMER DUE DILIGENCE (CDD)

Simplified CDD

Standard CDD

Enhanced CDD

Compliance Functionaries

Compliance is the shared responsibility of everyone in an organization but the main functionaries are:

1. Compliance Officer;

2. Money Laundering Reporting Officer (MLRO); and

3. Deputy MLRO.

Role of the Compliance Officer

Regulation 22(3) provides the functions of the Compliance Officer:

(a) Ensuring continued compliance with the requirements of the Act and regulations subject to the ongoing oversight of the board of the reporting and senior management;

(b) Undertaking day-to-day oversight of the program for combatting money laundering and terrorist financing;

(c) Regular reporting, including reporting of non-compliance, to the board and senior management; and

(d) Contributing to designing, implementing and maintaining internal compliance manuals, policies, procedures and systems for combatting money laundering and terrorism financing.

Role of the MLRO

Regulation 26 provides that:

“A reporting person shall appoint a Money Laundering Reporting Officer to whom an internal report shall be made of any information or other matter which comes to the attention of any person handling a transaction and which, in the opinion of the person gives rise to knowledge or reasonable suspicion that another person is engaged in money laundering or the financing of terrorism”

Role of the MLRO - Continued

• Regulation 29

Subject to Regulation 26(3) on the previous slide, where an internal disclosure has been made, the MLRO shall assess the information contained within the disclosure to determine whether there are reasonable grounds for knowing or suspecting that the activity is related to money laundering, terrorism financing or proliferation financing;.

The MLRO shall forthwith make a report in accordance with section 14 of the FIAMLA to the FIU where he known or has reason to believe that an internal disclosure may be suspicious.

PART III – THE ETHICAL CONUNDRUM

THE DILEMMA

THE LAW

CODE OF

ETHICS

LAWYERS

LAWYERS AND THEIR CODE OF

ETHICS (Barristers)

Barristers are bound by their code of ethics:

3.11 A practising barrister shall not –

(a) permit his absolute independence and freedom from externalpressures to be compromised;

(b) do anything (for example accept a present even from third parties)in such circumstances as may lead to any inference that hisindependence may be compromised or undermined in any way;

(c) compromise his professional standards in order to please his client,the Court or a third party.

LAWYERS AND THEIR CODE OF

ETHICS (Barristers)5. Confidentiality

5.1 It is of the essence of a barrister’s function that he should be toldby his client things which the client would not tell to others, and that heshall be the recipient of other information on a basis of confidence.Without the certainty of confidentiality, there cannot be trust.Confidentiality is, therefore, a primary and fundamental right and dutyof the barrister.

5.2 A barrister shall respect the confidentiality of all information givento him by his client, or received by him about his client or others in thecourse of rendering professional services to his client.

5.3 The obligation of confidentiality shall not be limited in time

Oath of Barrister

“I, (name), swear/solemnly affirm/declare that I will be faithful and bear true allegiance to the Republic of Mauritius according to law and I will well and truly discharge the duties of a barrister/attorney/notary, according to law. (So help me God).

Oath that Barristers and Solicitors in the

Province of Ontario, Canada“I accept the honour and privilege, duty and responsibility of practising law as a barrister and solicitor in the Province of Ontario. I shall protect and defend the rights and interests of such persons as may employ me. I shall conduct all cases faithfully and to the best of my ability. I shall neglect no one’s interest and shall faithfully serve and diligently represent the best interests of my client. I shall not refuse causes of complaint reasonably founded, nor shall I promote suits upon frivolous pretences. I shall not pervert the law to favor or prejudice any one, but in all things I shall conduct myself honestly and with integrity and civility. I shall seek to ensure access to justice and access to legal services. I shall seek to improve the administration of justice. I shall champion the rule of law and safeguard the rights and freedoms of all persons. I shall strictly observe and uphold the ethical standards that govern my profession. All this I do swear or affirm to observe and perform to the best of my knowledge and ability.”

THE INDEPENDENCE OF THE BAR

“The independence of the Bar from the state in all its pervasivemanifestations is one of the hallmarks of a free society. Consequently,regulation of the law profession by the state must so far as by humaningenuity it can be so designed be free from state interference (…), withthe delivery of services to the individual citizens in the state,particularly in fields of public and criminal law. The public interest in afree society knows no area more sensitive than the independence,impartiality and availability to the general public of the members ofthe Bar and through those members, legal advice and servicesgenerally.”

Canada (AG) v Law Society (British Columbia) [1982] 2 SCR 307 at 335-336

ROLE OF THE LAWYER IN AML

• Why have lawyers come under the radar?

• Gatekeeper legislations imposing new obligations on lawyers.

• The consequences of the lawyer as a GATEKEEPER?

• Would there be a threat to the independence of lawyers and ademocratic society?

PRIVILEGE

The principle of privilege is well enshrined in our laws:

1. Section 10(c ) of the Law Practitioners Act;

2. Section 54 of the Competition Act 2007;

3. Section 51 of the Prevention of Corruption Act 2002;

4. Section 52A of the Stock Exchange Act 1988;

5. Section 46(5) of the Asset Recovery Act 2011

6. Section 172 of the Court Act;

7. International Criminal Court Act 2011; and

8. Section 6 of the Mutual Assistance in Criminal and Related Matters Act 2003.

EROSION OF PRIVILEGE BY THE FIAMLA

14. Reporting obligations of banks, financial institutions, cash dealers and members of relevant professions or occupations [Prior to Amendment]

(1) Every bank, financial institution, cash dealer or member of a relevant profession or occupation shall, as soon as practicable, but not later than 15 working days, make a report to the FIU of any transaction which the bank, financial institution, cash dealer or member of the relevant profession or occupation has reason to believe may be a suspicious transaction.

(1A) Where the FIU receives a report under subsection (1), it shall provide feedback in writing on the outcome of the report to the bank, financial institution, cash dealer or member of the relevant profession or occupation and to the relevant supervisory authority.

(2) Nothing in subsection (1) shall be construed as requiring a law practitioner to report any transaction of which he has acquired knowledge in privileged circumstances unless it has been communicated to him with a view to the furtherance of a criminal or fraudulent purpose.

EROSION OF PRIVILEGE BY THE

FIAMLA14. Reporting obligations of banks, financial institutions, cash dealers and members of relevant professions or occupations [Following the Amendment]

(1) Every bank, financial institution, cash dealer or member of a relevant profession or occupation shall, as soon as practicable, but not later than 15 working days, make a report to the FIU of any transaction which the bank, financial institution, cash dealer or member of the relevant profession or occupation has reason to believe may be a suspicious transaction.

(1A) Where the FIU receives a report under subsection (1), it shall provide feedback in writing on the outcome of the report to the bank, financial institution, cash dealer or member of the relevant profession or occupation and to the relevant supervisory authority.

(2) Nothing in subsection (1) shall be construed as requiring a law practitioner to report any transaction of which he has acquired knowledge in privileged circumstances unless it has been communicated to him with a view to the furtherance of a criminal or fraudulent purpose.

FITTING LAWYERS IN THE BIGGER

PICTURERegulation 22 of the FIAMLR 2018 impressed on every reporting person the need to implement internal programmes, controls and procedures such as:

(1) Ongoing training programmes;

(2) Designation of a compliance officer at senior management level;

(3) an independent audit function to review and verify compliance with and effectiveness measures taken in accordance with the FIAMLA.

CASE STUDY FOR

DISCUSSION

CASE STUDYYOU have an established working relationship with Fidelis ManagementCompany Ltd (“Fidelis”), a management company licenced by the FinancialServices Commission (“FSC”). You have provided legal services to Fidelis onmany occasions as well as to the global entities administered by Fidelis.

At a social event recently organised by Fidelis you were introduced to anumber of foreign investors including the flamboyant Congolese billionaireAhman Madouffe.

The Managing Director of Fidelis writes to you as follows:

The Managing Director of Fidelis writes to you

as follows:

Dear YOU,

I trust this email will find you well.

We are busy looking at a new investment structure for avery good client of ours who is setting up a new fund inthe Caymans – See Attached.

Can you free sometime to draw up the usual documents(Constitution, Shareholders Agreement etc) and providethe standard advice as to the regulatory framework?

Case study - continued

If in the affirmative, I will get organised for payment of the usual retainer + an urgency premium.

Best regards,

Bobby Axelrod

Managing Director

Fidelis Management Company Ltd

Please do not print unless it is necessary. Save a tree!

Page 3 of 3

Attachment 1:

Proposed Schema

Principle Fund Cayman

Islands

New Co

GBL1 administered

by FidelisInvestor

Local Co to be

incorporated

Local Partner

80%

20%

CASE STUDY [ctd]

You have accepted the assignment. Your account has been creditedwith RS 172,500- (Your usual retainer X 3 + VAT); It is a bank to banktransaction. The paying account is in the name of Ahman Madouffe.

You also find out that Mr Madouffe’s local partner is the infamous MrKarapat, former Head of a Financial Organisation was asked to stepdown pending inquiry in an allegation that he had engaged in corruptpractices.

Mr Karapat wants you to draw a “contre lettre” to bear testimony tothe fact that Mr Madouffe is the true owner of the shares to be issuedin the new local company to be formed and he, Karapat, will only holdthese shares in trust and will not be responsible for meeting any callmade on those shares.

THANK

YOU