Mauritius wrong place for round-tripping: Regulator

Battling a perception of being a place for money laundering activities, Mauritius says it is rather the strictest jurisdiction in the world to check round-tripping of funds and all investment headed towards India needs to go through a stringent due diligence process.

Updated: Jul 21, 2013, 18:54 PM IST

New Delhi: Battling a perception of being a place for money laundering activities, Mauritius says it is rather the strictest jurisdiction in the world to check round-tripping of funds and all investment headed towards India needs to go through a stringent due diligence process.

"As long as India investments are concerned, the regulatory requirements are much more complicated. If someone comes and says we want to invest in India, then we have very stringent licensing conditions," the country's integrated financial services regulator FSC Chairman Marc Hein said.

"Besides, the tax residency certificates that we give, that need to be renewed every year and at the time of every renewal, they need to satisfy the FSC and the MRA (Mauritius Revenue Authority)," the Financial Services Commission (FSC) Chairman said.

"The checks are there to ensure that the licensees continue to meet the special India licensing conditions," said Hein, who was on a visit to India along with other officials and industry leaders from the Indian Ocean island nation.

The issue of Mauritius allegedly being a safe haven for money laundering activities has been a matter of intense debate over the past few years. However, Mauritius on its part asserts that it is one of the most cooperative jurisdictions as far as India is concerned and it has always been very responsive to any concerns from Indian side.

"From Mauritius side, we have done a lot. The Tax Information Exchange Agreement (TIEA) is ready to be signed, and as our leaders have said we have gone extra mile.

"During the board meetings of FSC, I've not seen any single instance when there have been any complaint with regard to Mauritius not having provided any information sought by Indian institutions.

"There have been no cases of Mauritius being accused of adopting delaying tactics or not providing the information demanded by India. There have been absolutely no complaints about Mauritius not supplying the information that India has asked for," Hein said.

Global banking major Standard Chartered Bank's Mauritius unit CEO Sridhar Nagarajan, who was part of Mauritius delegation to India, also said the authorities in the island nation have been very prompt in replying to requests from India.

Nagarajan, who is also vice chairman of Mauritius Bankers Association, said: "From a banker's point of view, I can tell you there have been days when we have been asked to provide full banking information in 10-12 cases.

"There have been a large number of cases where information has been sought from India and we have always responded. In fact, India should think on those lines that Mauritius has been very responsive to the requests made to it," Nagarajan said.

"Our due diligence process is such that we go till the ultimate beneficial owner of the funds and we provide information of the final beneficial owner of the funds being invested in India. We peel the layers of the entity that register with us or do banking transactions through us.

"If we come across a beneficial owner that is an entity registered in some other jurisdiction, as per our KYC requirements, we ask questions about that entity and finally we reach out to the ultimate beneficial owners of the funds.

"We follow a very detailed and sophisticated KYC process where it is impossible to hide the ultimate beneficiaries. I don't think any other jurisdiction in the world has got such deep banking system KYC requirements that require such kind of unwrapping of the beneficial owners," he added.

Rama Sithanen, Mauritius' former Finance Minister and now Chairman of International Financial Services Ltd, also said Mauritius has always responded to Indian requests in a very timely manner.

"Even with TIEA waiting to be signed and the revised DTAA being at discussion stage, our response to information requests from India has been as if these agreements are already in place and we have been providing all the information sought from India.

"We are already fulfilling the provisions of these agreements. In fact, there have been instances when India has actually commended our response," he added.

Deven Coopoosamy of Mauritius-based CIM Global Management said the management companies operating in the country also follow strict due diligence procedures to make sure that no money laundering or round tripping of funds take place through entities registered to do offshore business through Mauritius.

Asked whether the business was being affected due to these perception issues and whether it was time to move ahead, Nagarajan said: "Mauritius is moving very fast to become a Singapore for Africa, an access point for Africa.

"The trend began about one year ago and it is accelerating very fast and even India is participating in this evolution. Mauritius is emerging as the FDI hub for Africa and this is not happening only because of tax purposes.

"As far as India's concerns about round tripping are concerned, Mauritius has gone beyond any other jurisdiction would have gone to address those concerns. We have been providing information even without documentary requirement and only on the basis of goodwill.

"It is time to look at things differently. We are a jurisdiction that has clearly set its eyes to become Singapore of the next decade and it is up to India to decide on how it wants to participate in this process," he added.

"Africa is a really important market and already companies from the US, Europe, China and India have started setting up shop in Mauritius for their African investments. They are not coming to Mauritius for tax reasons, but because of its attractiveness as a genuine global financial centre for doing business in Africa," Nagarajan said.

Mauritius government's investment promotion agency, Board of Investments (BOI) Director Mallam Hassam said: "We have special benefits for the manufacturing companies setting base in Mauritius for investments in Africa. There are benefits like duty waiver for using our ports. We offer benefits for the companies setting up their back office operations for businesses in Africa."

Hein said that Mauritius has a strong legal and regulatory framework in place that would keep their investments in Africa secure.

Nagarajan said there is a need for a place like Mauritius when we talk about Africa.

"Everyone talks about the business opporuntities in Africa, but we must remember that Africa is not a country. It is a continent with 55 countries. The first phase of investments has already taken place with direct investments in some large countries there from Indian companies.

"But the second phase cannot take place directly and that process would need creation of a gateway like Mauritius," he said, while adding that it was similar requirements that led to evolution of global financial centres like London, Dubai, Singapore, Hong Kong and Luxembourg.

"Similarly, you will need a Mauritius for doing Africa business. You cannot do it through one country in Africa, as they have different exchange controls and different problems," he added.