yandraduth googoolye : combatting financial crime in mauritius speech by mr yandraduth googoolye, first deputy governor of the bank of mauritius, at the training workshop for senior management of law enforcement agencies in collaboration with the commonwealth secretariat, ebene, 6 december 2017. * * * ladies and gentlemen, good morning. i am delighted to be here today to address such a distinguished and expert audience. i will try to be short as it is said that it is better that you leave your audience before your audience leaves you. the country should be one and unified. we are all servants of the state. having different factions within the state inhibit progress. building fictitious walls arise sometimes out of ego. pulling in different directions does not help. it is with concerted action and co - ordination that progress can be achieved. co - operation within the different organs of the state is therefore imperative. we need to put our heads together for our common benefit. a piece of information standing alone is like being part of a puzzle. it is when different organisations fighting for a common goal put whatever information they have together that a bigger picture can emerge and better preventive action can be taken. the bank of mauritius has been in the forefront of the war against financial crime for around 15 years now. it issued its first guidance notes on aml / cft setting out the minimum standards to be applied by all financial institutions under its purview, on 19 december 2003, thus setting the stage for a credible banking sector. a strong legal and regulatory framework is the basis of any effective regime. the guidance notes is a dynamic document which over the years, has been updated to reflect the latest global developments, as well as to incorporate emerging best practices recommended by international standard setters, namely the fatf and the bank for international settlements. the guidance notes have been revamped in 2017 to include, amongst others, the following, ( i ) proliferation financing regarding the transfer and export of nuclear, chemical or biological weapons. ( ii ) duty of financial institutions to identify and assess ml / tf risks on an enterprisewide level. ( iii ) information to be collected by financial institutions for natural, legal person and legal arrangements with a view to developing an initial customer risk profile. ( iv ) enhanced due diligence to be performed by financial institutions in respect of wire transfer transactions to ensure that wire transfer systems are not used by criminals as a means to break the audit trail. in the

subordinated debt, we should carefully study how the existing market functions and the degree to which current practices may already be fulfilling many of the objectives of a mandatory system. in addition, we will be focusing increased research effort on topics related to market discipline in general and subordinated debt in particular. we must get a reasonable estimate of how much additional market discipline would be imposed by forced issuance of risk - sensitive debt. how much more effective would subordinated debt holders be than uninsured deposit holders when they raise funding costs for a risky bank? does the strength of penalties associated with bank debt issuance vary systematically across bank liabilities or with the business cycle? this research may also help us understand how to strike a balance between supervision, regulation, and market discipline in order to most effectively achieve the safety and soundness of our financial system. conclusion i hope my review of the difficulties and challenges associated with developing an operationally feasible market discipline policy has not been disheartening. such has not been my intention. rather, i have sought to realistically review the practical issues and tradeoffs that need to be resolved. when all is said and done, however, it seems clear that market discipline remains our first line of defense. it is perhaps the most flexible option for maintaining bank safety and soundness in a rapidly evolving environment and has the potential to strengthen and complement bank supervision and regulation, particularly on the outside chance that the market knows best. while i believe that more research is needed to make the case for a policy to enhance market discipline through subordinated debt, and to pin down the design features of a specific policy for such instruments, we should not ignore the abundant evidence that highlights the promise of market discipline in general and – perhaps – subordinated debt in particular.