Global Economy

Mauritius exits FATF 'grey list'

In a development that would help Mauritius regain its status as a financial centre, on Thursday the tax haven came out of the ‘grey list’ of the Financial Action Task Force (FATF) — an intergovernmental policy body that sets anti-money laundering standards.

The move, among other things, would enable Indian non-banking and other financial services companies to receive foreign direct investment from funds and vehicles incorporated by international investors in Mauritius. After the US, Mauritius is the second largest route for inflow from foreign portfolio investors.

“At its October 2021 plenary the FATF concluded that Mauritius would no longer be subject to increased monitoring by FATF. The FATF welcomes Mauritius’ significant progress in improving AML/CFT (anti money laundering /counter financing of terrorism regime) regime,” said a statement issued by the country’s ministry of financial services and good governance.

After Mauritius was put on the grey list by FATF in February 2020, Reserve Bank of India (RBI) had blacklisted the tax haven and barred FDI from Mauritius into several non-banking finance companies (NBFCs).

With FATF rerating Mauritius, chances are that the country would exit the European Union blacklist.

ET had reported on October 18 that Mauritius could be out of the grey list this month.

“This is a positive step and we are excited by the incredible work done by the Mauritius Government in substantially completing its action plan within the set time frame. Local managers are thrilled with the outcome as Mauritius provides a robust legal and compliance framework for Indian FDI and new fund set-up,” said Khushboo Chopra, Head of Business Development (India), SANNE, a fund and corporate administrator.

However, while FDI from Mauritius suffered since February 2020, Indian capital market regulator Sebi did not restrict FPI investments from Mauritius, In fact, Sebi had allowed registration of Category 1 funds from Mauritius.

With Mauritius out of the grey list, it is also expected that now there would be less scrutiny by custodian banks on the ‘beneficial ownership’ (BO) of Mauritius vehicles coming in as FPI and FDI.

Even though some of the international investors have relocated to Singapore in recent years with Indian signing a similar tax treaty it has with Mauritius, many offshore funds continue to prefer Mauritius which is comparatively inexpensive and serves as a gateway for investments in African countries. The FATF decision announced Thursday evening is a positive for the island country whose economy depends on its standing as a financial centre.

The FATF watch-list is taken seriously by most global investors with many fund charters prohibiting pooling of money and incorporating investment vehicles in jurisdictions which figure in the grey list. FATF was founded in 1989 on the initiative of the G7 to formulate policies to curb money laundering and subsequently combat terror finance.


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