I didn’t know it was even possible for a country to exit one international grey list to enter another within the course of one week, but apparently it happens. If that wasn’t enough Morocco was also the subject of a “black report” on its state of corruption that same week.

EU Grey List

Our happiness in Morocco was certainly short-lived. The European Union (EU) announced removing Morocco from its “grey” list of tax havens earlier this week. This decision was meant to recognize Morocco’s efforts to comply with international tax governance standards. We celebrated Morocco complying with the required international standards, that granted it access to the “elite” club of countries that have shown positive developments regarding their tax practices.

We were proud to hear from the EU representative that “Since 2018, Morocco has engaged in actions aimed at ensuring the compliance of its tax system with the global principles of transparency and fair taxation as included in the criteria of the EU list”.

We marveled upon the statement made by the Ministry of Economy, Finance and Administration Reform, “This decision shows that the measures taken are welcomed by the Kingdom’s partners and that the efforts made and the actions undertaken are perfectly in line with good fiscal governance, in accordance with international standards

All seemed to imply Morocco was working hard at fixing its deficiencies.

But then…

FATF Grey List

How quickly that happiness evaporated! Last night, the Financial Action Task Force (FATF), the global dirty money and terrorism financing watchdog announced it added four nations to its ‘grey list’ following an extensive 3-day virtual summit.  

We learned we great dismay that Morocco, the Cayman Islands, Burkina Faso and Senegal were placed on the ‘list of jurisdictions under increased monitoring’ – joining fifteen other territories already there.  Just to put things in perspective, Morocco (my country) has landed on the same level as war torn countries and terror financing concern, Yemen and Syria; on the same level as jurisdictions sadly famous for their financial secrecy like Panama or the Cayman Islands. Morocco landed on this list because among other things, it must strengthen its financial intelligence unit, “one of the core authorities in the fight against money laundering,” the FATF president said.

FATF probably meant to be consoling by reminding us that this was in no way a ‘do-not-approach’ list, but Morocco was merely identified as a jurisdiction that has identified gaps in its AML frameworks and committed to working with FATF to resolve them. Yet everyone knows what this grey-listing means,  the global financial and banking system will now most likely treat us as a country  with heightened money laundering and terrorism financing risks.

Morocco should know these implications, as it is no stranger to being on this grey list: in 2013 it exited FATF’s grey list. FATF welcomed its significant progress in improving its AML/CFT regime and noted that Morocco had established the legal and regulatory framework to meet its commitments in its Action Plan regarding the strategic deficiencies that FATF had identified in February 2010.

So what made Morocco land on this list a second- time around? According to FATF, Morocco made a high-level political commitment to work with the FATF and MENAFATF to strengthen the effectiveness of its AML/CFT regime. We were surprised to learn that among its commitments Morocco will be:

(1) demonstrating effective implementation of the case management system to provide timely responses and prioritization of MLA requests in line with the country’s risk profile;

(2) improving risk-based supervision and taking remedial actions and applying effective, proportionate and dissuasive sanctions for non-compliance;

(3) ensuring that the Beneficial Ownership information is adequate, accurate and verified, including information of legal persons and foreign legal arrangements;

(4) increasing the diversity of STR reporting;

(5) providing FIU with adequate financial and human resources to enhance analytical capabilities in order to fulfil its core mandate of operational and strategic analysis;

(6) prioritising the identification, investigation and prosecution of all types of ML in accordance with the country’s risks;

(7) building capacity of LEAs, prosecutors, and other relevant authorities to conduct parallel financial investigations, use financial intelligence, seize assets, and seek/provide MLA; and

(8) monitoring and effectively supervising the compliance of FIs and DNFBPs with targeted financial sanctions obligations.

What a list! The question is why weren’t we made aware that Morocco was under FATF observation?

As it turns out late last December, the country was rated by FATF to assess the progress made by the country on the 40 FATF recommendations.

In this rating carried out by MENAFATF, Morocco obtained a C (Compliant) rating on two recommendations, an LC rating (largely compliant) for 10 recommendations, a PC rating (partially Compliant) in 24 recommendations and an NC rating (No compliant) for 4 recommendations.

-I don’t know how FATF ratings work, but an NC for 4 recommendations does not sound alarming to the point of Morocco being included in a grey list-

Here we were hopeful that Morocco’s only hurdle on the Money laundering front was simply a question of Bill 12.18 being passed in Parliament. This proposed bill was meant to amend and supplement the Penal Code and Law No. 43.05 on the fight against money laundering. 

The Minister of Justice insisted on the urgency of this law, which concerns the creation of a national financial intelligence institution as well as the establishment of a legal mechanism for the application of sanctions decreed by the United Nations Security Council in matters of financial crimes, money laundering and terrorist financing.

But discussions of the bill by the Justice, Legislation and Human Rights Committee in the First Chamber did not go well apparently.

As we came to find out, the deputies were not happy approving this new legislation.  Among the points of contention: the proposed bill being seen as “dangerous” because, according to deputies, it does not provide the necessary guarantees to protect professionals who are required to report any suspicious activity report when concluding contracts. Lawyers, notaries and adouls are directly concerned by this measure. Yet this practice has been adopted in other countries were these professions were recognized as having a direct link with money laundering and as result were called to become more involved in the fight against money laundering and the financing of terrorism.

Transparency International “black report”

We were also hopeful that law 46-19, empowering the Anti-corruption authority (INPLCC) would soon pass Parliament, but according to Transparency International (TI), the story seems to be different. TI qualified the anticorruption initiatives in Morocco as mere “empty words” as there have been no positive signals of political will to effectively fight against corruption. The National Anti-Corruption Strategy, which was approved in 2015, has not been seriously activated; and no tangible progress has been made on the level of implementing its requirements.

But the report didn’t just stop there, it went on to describe “severe and systemic level of corruption that has led to social services being neglected, increasing the precariousness of livelihoods and worsening the impact of increased poverty” as well as poor human rights record.

Talk about crushing our spirit!

Some personal thoughts

So here we are having to deal with the aftermath of these harrowing reports. I do honestly hope that Morocco pays heed to these reports as they are extremely damaging.

But another hand, in the interest of fairness, I cannot help but question: why did no one from the G-20 or other “massive” money laundering suspects end up on the list? It is no secret after all, that some of those countries’ (which we shall not mention) deficiencies in terms of money laundering make Morocco look like a dwarf in comparison. We note particularly:

  • Morocco doesn’t specialize in anonymous shell companies
  • Morocco doesn’t specialize in financial secrecy
  • Morocco doesn’t operate a myriad of freezones that further increase the risk of attracting funds with links to crime and terror
  • Morocco doesn’t have extremely large and diverse financial and non-financial higher-risk sectors such as a profusion of banks, an international property market, dealers in gold and other precious metals and stones and hawaladars.
  • Morocco doesn’t offer golden visas or golden passports that can be misused.
  • Morocco doesn’t harbor Politically Exposed Persons fugitives, nor sanctioned individuals, nor does it create problems for their extradition to their country of origin
  • Morocco doesn’t hide illicitly acquired assets by the individuals mentioned above, nor does it refuse to return these assets as part of a Stolen Asset Recovery Initiative
  • Morocco, (as far as I’m aware) accepts to cooperate with formal international legal assistance processes to pursue money laundering or the financing of terrorism and proliferation
  • Morocco is not a global leader in oil, diamond and gold exports.
  • Morocco’s geographical location is not in proximity to conflict zones
  • Morocco has been recognized and even applauded time and time again for its help in the fight against terrorism by the US and the EU alike

So hey as I don’t really specialize in this subject, can someone with more expertise explain to me what then warranted Morocco to end up in the grey list?

The Compliance Lady AML, CFT, Corruption, MONEY LAUNDERING, Morocco

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