The Honourable Prime Minister, Pravind Kumar Jugnauth, in its recent declaration, affirms all stakeholders that Mauritius International Financial Centre (‘IFC’) is substance driven and fully supports the application of best practices recommended by globally recognized institutions. He stated that Mauritius is being transformed from a treaty centric to a substance driven jurisdiction with the full support the Mauritian Government in setting up the new regulatory framework and legislations to accommodate these changes.
The Government of Mauritius is setting the theme in line with achieving the second economic miracle and vision 2030. The focus is largely on boosting the Mauritius Financial Services Sector, which currently stands at 8% of the GDP and is expected to be 12% in the next 10 years. It is also expected to move from USD 976 million level to USD 2 billion by 2030.
To achieve those objectives, there is a need to bring innovation to three broad pillars, namely Cross Border Investments, Corporate Banking and Private Banking and Wealth management.
The Factors to consider:
- Keeping pace with Finance related technology such as blockchain, mobile payments and Artificial Intelligence is the next turn around in the Financial Services Sector.
- Educating the population on basic Fintech concepts such as E-signature, digital KYC and smart contract.
- Branding of Mauritius to raise awareness on the various financial products that the country has to offer to investors.
- Emphasis on Mauritius as a gateway for investment into Africa.
Cryptocurrencies such as bitcoins and block chains technologies are now classified as digital assets in Mauritius. However, the Financial Services Commission (‘FSC’) and the Bank of Mauritius (‘BOM’) have warned the public that dealing and trading digital currency is considered as high risks and careful consideration should be taken,
The FSC, in collaboration with the BOM and the Ministry of Financial Services and Good Governance have set up the National Regulatory Sandbox Licence Committee. The committee is responsible for assessing Regulatory Sandbox Licence (‘RSL’) applications of Fintech firms. The first committee meeting was held on 21st September 2018. An application for the RSL is made through the Economic Development Board.
New Regime for Global Business
Following the enactment of Finance (Miscellaneous provisions) Act 2018, the category 1 Global Business Company (GBC 1) has been replaced by Global Business Company (GBL). GBC 2 will be abolished with effect from 1 January 2019 and instead Authorised Companies have been introduced. As of date, 12,039 GBC1 and 10,400 GBC 2 have been licensed in Mauritius. Significant concerns have been raised, that GBC 2 companies will move to other jurisdictions. However, according to the FSC, around 60 % of these companies are expected to remain despite these forthcoming changes. The Deemed Foreign Tax credit (‘DTFC’) available to GBC 1 will be abolished with effect from 1st January 2018 and partial exemption will be introduced and available to a very limited category of foreign-sourced income, so as to prevent tax erosion on certain type of business.
The introduction of new financial products and services such as Cryptocurrencies and blockchain gives rise to a high-risk environment. Reliance is placed on the FATF to set the standard for AML/CFT with necessary guidelines and recommendations. A risk-based approach mitigates risk factor. The Bank of Mauritius is working on the implementation of a centralized ‘Know Your Client’ registry to create a balance between the burden of KYC and risk factors. A National Risk Assessment has been carried out with the banking and non-banking financial services sectors to identify vulnerable sectors and products and to develop new strategies to address these concerns.
Another aspect that is being taken into consideration is to train compliance officers in the banking institutions to promote a highly efficient system for onboarding new clients. It has been criticized that opening of bank accounts in Mauritius take enormous time, which weighs far too much on businesses.