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Mauritius May Be Out of FATF Grey List Soon

    17 October , 2021         Fdiindia

Mauritius May Be Out of FATF Grey List Soon

"The addition of Mauritius would be a huge advantage for India-focused funds, particularly those investing in Indian NBFCs," said Wilson Financial Services co-founder Anand Singh.

Global investors and offshore funds entering India via Mauritius are hoping that the tax haven will lose part of its stigma in the coming weeks and be removed off the Financial Action Task Force's (FATF) 'grey list,' which monitors the colour of money by establishing anti-money laundering rules.

Mauritius, which has long been favoured by foreign investors owing to its tax advantages and cheap operating costs, was placed on the FATF's grey list in February 2020, prompting increased scrutiny, European Union blacklisting, and Reserve Bank of India investment restrictions (RBI).

According to three people involved with the talks, the FATF is now contemplating re-rating Mauritius as a result of specific legislative, regulatory, and operational reforms made in the last 20 months to fight money laundering and terror financing. It's possible that Mauritius may be removed off the grey list by the conclusion of the week-long FATF plenary session, which started on October 17.

Harvesh Kumar Seegolam, the governor of the Bank of Mauritius, who has overseen numerous talks with FATF teams, did not reply to ET's questions.

'Mauritius' inclusion is a big plus for India-focused funds.'

'White-listing of Mauritius' is anticipated this month, according to top bankers, attorneys, and officials of market intermediaries and service providers in contact with authorities.

This would have a two-fold effect: first, it could pave the way for the RBI to relax restrictions on Mauritius entities owning and controlling Indian non-banking finance companies (NBFCs) and other payment service providers; second, the 'beneficial ownership' (BO) of Mauritius vehicles coming in as foreign portfolio investor (FPI) and foreign direct investor (FDI) would be less scrutinised (FDI).

"The addition of Mauritius would represent a significant boon for India-focused funds, particularly those who invest in Indian NBFCs...

It would also benefit a lot of investors who are unable to participate in funds headquartered in countries on the FATF Grey List "Wilson Financial Services co-founder Anand Singh said. Since its inclusion in the FATF's Grey list, Mauritius has made progress in addressing strategic deficiencies in AML CFT (counter financing of terrorism) policies and has implemented a "risk-based" supervision for licenced funds and holding companies, according to Singh, who is also a member of a task force of the Financial Services Commission of Mauritius.

According to Richie Sancheti, partner at Algo Legal, if Mauritius is removed off the grey list, its reputation with institutional investors would increase. In India, the Reserve Bank of India (RBI) expressed scepticism about the disclosure of ultimate beneficial owners (UBOs) in assets originating in FATF non-compliant countries.

"The RBI prohibits investors from such countries from gaining'significant influence' in NBFCs, ARCs, Housing Finance Companies, and India-based Payment System Operators (voting power of 20% or more on an aggregate basis) (PSOs). Custodians and other intermediaries should consider a potential re-rating in their risk assessments when scrutinising or requesting KYC information from Mauritius-based companies, according to SEBI "Sancheti said.



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