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EU ‘blacklisting’ takes shine off Mauritius – report

European Commission says the island has ‘strategic deficiencies’ in its anti-money laundering and counter-terrorism financing regimes.
Journalists, like these Associated Press staffers, have always worked hard to report election results quickly – and accurately. Image: AP Photo

The European Union’s move to put Mauritius on a money laundering ‘blacklist’ has cast a cloud over its reputation as a domicile for local fund managers looking to invest in projects on the continent.

This development has left local fund managers apprehensive about doing business in the island nation, according to the ‘South African Fund Managers: Trends in Fund Domiciliation and Capital Raising’ report put out by Jersey Finance in partnership with African Business magazine.

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The matter arose in early May when the European Commission said it had come up with a new methodology for defining countries that had “strategic deficiencies in their anti-money laundering and counter-terrorism financing regimes”.

This saw it put Mauritius on a blacklist, along with The Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mongolia, Myanmar, Nicaragua, Panama and Zimbabwe.

Serious concerns 

The Mauritian government responded quickly. In a statement, it pointed out that the EU did not speak to it about its concerns and that this move could have far-reaching implications for the economy.

“Placing Mauritius on the blacklist will cause irreversible damage to our reputation. This will undermine investor confidence, reduce cross-border investment flows and lead to a severe disruption of our banking system. As a result, further harm will be caused to our economy.”

Mauritius’s ministry of financial services and good governance has since said it was working closely with the Financial Action Task Force (FATF) to address its concerns.

It says it remains confident that Mauritius will be removed from the blacklist, and very soon –  possibly by the end of this year or February 2021 by the latest.

Read: The African island that stamped out the virus now needs tourists

The concerns over the blacklisting should be taken seriously, as Mauritius has ambitions of becoming an important financial centre. Its favourable tax regime and increasingly sophisticated financial sector has seen it grow from a tax haven into a hub for investors to distribute funds around the continent over the past few years.

Aside from the impact on Mauritius, the blacklisting also looms over South African fund managers that have set up offshore operations on the island.

Jersey Finance’s survey of over 60 investors and fund managers operating in jurisdictions worldwide and with a connection to South African managers found that local funds were not shy when it came to setting up there.

“For our sample, fund managers with a base in South Africa and raising capital globally, we found that the vast majority, currently around 75% to 80%, have a preference for and presence in Mauritius, given the exposure to Africa.”

Read: Financial markets in Africa still underdeveloped

There is now, however, a growing concern that the blacklisting could have a notable impact on their operations.

In the survey, some advisors said it had taken them years of convincing the European Investment Bank (EIB) to approve the domiciliation of funds in Mauritius. But after finally succeeding, this might now be all for nought, they said. “EIB might now prefer structures based in the EU.”

Shoddy work

The report noted that aside from the blacklist, there are also concerns about the performance of its regulator, the Financial Services Commission.

“One lawyer surveyed said they actively advise their clients not to use Mauritius given the problems with the quality of some service providers and the regulator. The regulator, for example, has often made mistakes where funds are thrown out because of shoddy paperwork. The result of some of these issues has been Mauritius ending up on the blacklist.”

Another issue noted in the survey is that though Mauritius sells itself as a ‘gateway to Africa’, in some respects it falls short. The tax treaties that Mauritius has in place with African countries are not comprehensive and it does not have a treaty in place with Nigeria, Africa’s largest economy – which seems a significant oversight.

Not committed?

There are also questions over its commitment to becoming an International Financial Centre (IFC) in terms of the International Monetary Fund’s classification.

“One should not discount the importance of politics in the background to some of these issues. The attitude to IFCs is still antagonistic in many quarters and apparently half of the government in Mauritius does not support the vision of it becoming a financialised state,” according to the report.

“If not everyone in the government is pulling together in the same direction the lack of political will to continue making it the leading IFC for Africa hangs in the balance.”

But even if the government fully commits to it becoming a financial centre and gets it off the blacklist, doing so could come at a steep price as it could end up pushing up costs for fund managers.

Despite the blacklisting, the report notes that not everyone in Mauritius is despondent.

“The Mauritius route for investing into Africa is also very much entrenched and another respondent remarked that he gets daily emails from service providers soliciting for Mauritius.”

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COMMENTS   31

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They may as include the Cayman Islands, UK, Guernsey, Panama, certain states in the US and some others.

EU knows where their bread is buttered. These choose to bully the smaller countries to keep the loot for themselves. Also add Cyprus and Dubai (the infamous Gupta brothers are living there without a worry)

Nothing compared to the USA.

They rattle, shake and break everyone so that the scared sheep buy Dollars.

Even the EU has fallen prey of the USA game.

The same old game play, rattle Europe from the west by Trump and on the east by Putin and they run to the USA.

Then Trump can buy a new Airforce one worth iver $4 Billion Dollars.

Yes … they left out The City of London …. long known as a home for Russian and Arab oil oligarchy funds. Especially in buying up half of the West End property.

Whahahaaa!!!

These guy’s!!

So what about The Channel Islands, Switzerland, Monaco,………?????

What to Stifel the competition a bit???? Hypocrites.

In addition.

Sometime ago I sent a query via email to the Mauritian Government. I had a response within 10 minutes!! You wont get that out of the EU. That’s if you get a response at all.

I also had quite complicated queries with the Mauritian Tax authority. Everything was resolved PROPERLY within a few hours.

They are tops.

Just mention of the IMF in the article makes me cringe and probably is the origin of this “fake news” blacklisting.

Comment removed

I am just kidding, by the way. Magnus Heystek was very wise to invest in Mauritius way back in the day. Kudos to him.

Very Bad joke. Flirting with if not outright defamation.

Suggest you ask the admins to remove this posting. The other comment is correct, this is borderline defamation. Not a very intelligent comment. As usual.

@ Incorrectus, still feeling a buthurt after Orange Man lost ??

LOL !!

My Comment was removed too. Magnus Complained!

@LuluAlert Did you read my second post below the first post ????

Bad joke.

Admin please remove the original comment made by Danie

Too late- already had it done.

How about Tbilisi, Georgia?

TBC Bank…
Bank of Georgia…
ProCredit Bank…

(some of Georgia’s leading banks are listed on the London or Frankfurst Stock Exchange)

https://thewanderinginvestor.com/offshore-banking-for-individuals/the-pros-and-cons-of-opening-a-bank-account-in-tbilisi-georgia/

https://tbilisi-property.com/can-foreigners-open-a-bank-account-in-tbilisi-georgia/

All tax heavens are dodgy – Every single one of them – Some are just slightly more “posh” than others.

”Learn all the rules, every one of them, so that you will know how to break them”

Irvin S. Cobb 91876-1944)

I saw that SARS wants to crack down on ”tax avoidance” schemes!
My view and from my experience of the ”mystical millions” that came out of Mauritius, in my old Treasury working days – this tax move is massively important, albeit decades too late.

SA has now reached the ”Financial Cliff” (this point is reached when civil servants’ salaries, social grant payments, and debt-service costs soak up all government revenue), and the chips are down.

The Taxman should focus on banks like Investec, and all other SA banks with branches in Mauritius, that have been operating there and advertised the ”tax haven” status of funds that flowed into and out of Mauritius, for decades.

The crackdown and repatriation of these funds should be made retrospective from the days that each SA bank opened a branch there. Sunny SA will recover billions, of lost tax money!

…recover ‘lost’ billions from Mauritius, and then it get ‘lost’ again amongst the connected elite of the African National Corruption?

(..what about South Africans’ funds that were legally transferred directly abroad the the past decades using the Single Discretionary Allowance, etc.?)

Nope, Magnus did not complain. I will only complain and lay a charge at the Press Ombudsman if it’s true…..
After so many years on MW, I have a somewhat thick skin.

sê hulle Magnus, sê hulle. Ek lees jou al sedert die 90’s en volg jou raad. Dit het vir ons gewerk.

There are none so deaf as those who choose not to hear.

Also listened to Magnus way back when, very happy with every cent we have taken out over the years, as opposed to the dismal performance of money we left/continued to invest in local EUA’s. Should have cashed in and taken every cent out, as he suggested.

Cool Man!

I do follow you on Twitter. Appreciate your insights and views on Twitter and your push for Mauritius. I have also followed up with your staff regarding a bank account in Mauritius as you mentioned it on twitter. So thanks.

All I said was that you may be guttered by this news… and they removed it.

Would like to know if this news would be a hinderance? From the above comments there are plenty other countries that are doing the same.

Magnes, this is a challenge to Brenthurst Health, and I need your reply here if you Can.

During May this year, transferred most of my pension funds offshore, in line with a plethora of marketing material that your company released in the mainstream media.
It was done at an average spot rate of USD/ZAR 18.80 (bid/offer spread and margins included).
The Dollar Rand is now trading at 15.60 and with Biden winning the election, IMF relief fund flows, the Junk grading that eventuated, and with seasonal inventory import flows drastically down – I now expect that the Dollar Rand could strengthen to 14 in the coming year.
My offshore investment (that carried a 100 % exchange rate risk), has already lost 3.20 % as a result of a net open exchange rate position. which could double in the next year – what type of ”stop loss” products do you recommend (sell), that I could use to hedge myself in the meantime? I just cannot leave it unchanged and rely on your exchange rate views, which clearly lost me a lot of money, already.

Disclosure up front – I’m not in the financial industry.
1) Your pension fund is a long term investment. You haven’t lost a cent until you cash it in. In the meantime, go for the minimum draw-down.
2) Your transaction was when the Rand was significantly oversold. That was your choice.
3) In 2004 the Argentinean Peso was ± 4 to the USD. A sovereign dept crisis or two later and 16 years later its 79 to the dollar. Similarly, the Turkish Lira is in free-fall, losing 30% this year.
4) Shorting and hedging are difficult and expensive.
Why not wait for our inevitable sovereign debt default and then send Magnus a thank you for getting your investments offshore ?

I wonder how long before the off shore money starts running back to the good old safe South Africa.

Maybe it is already in progress, hence why the Rand is improving so fast.

Maybe the upcoming Biden win had nothing to do with the Rand strength at all.

That will be: when hell freezes over,

When Cyril get his head out of his …

With Biden winning, the USD is toast much faster than is currently the case. Socialism and Green Deals need to get paid for.

Magnes Hestek – I have lost more money today on your advice – the USD/ZAR is en route to 14!

I used the Regulation 28 as you suggested, and now I am ”moer-toe” – what now – are you going to compensate me as your bad advice is costing me money?

End of comments.

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