Blacklist: Twisting the knife in the face of an ailing Mauritian economy.
By Mahish Patny
The world is in sheer distress. The health pandemic, identified as the Covid-19, has sluggishly left its mark in across roughly 180 nations to date, the domino effect of which is likely to plunge the economy into a global recession. Mauritius has not been outwitted from this sad realism.
The pricey, yet necessary imposed lockdown in the island, has been beneficial in curtailing a wider disaster. The causal nexus however, in form of production halts and rising unemployment, particularly in the Travel and Tourism sector, in addition of higher cost of living on a nation-wide level is a challenge, that the economy is still struggling to recover from.
Amidst this economic predicament, the EU has seemingly fanned the flames further, with the addition of Mauritius, to its blacklist on money laundering and terrorist financing. While the ultimate decision will be taken in October of 2020, the aberrant proclamation came as a complete bolt out of the blue, the unfolding of which will lead to severe consequences to be borne by the current and future generation to follow.
Global Business Sector Outlook
Built on multiple DTAs since the 1980s, Mauritius poised itself as a pioneer offshore jurisdiction providing an array of investment opportunities and tax restructuring services to corporate and commercial clients, expanding its reach across countries over the last two decades. The multi-time award winning financial hub has concurrently had its fair share, in easing finance management outside the EU for private clients, while gaining preferential access to international markets. Benefits affiliated with operation of the global business sector has played a vital role in inflating GDP figures, and in creating multiple job opportunities for years within the island.
Exacerbating the darker picture
Commended for its tropical atmosphere, Mauritius has long gained in terms of high revenue and employment creation within its travel and tourism industry, resultant of increasing yearly tourist arrivals. The unprecedented turn of events has nevertheless driven underperforming hotels out of business, concurrently causing massive job redundancy within the sector.
The lockdown knock-on effect, on its part has led to gigantic production halts across the country, rendering small business failing to sustain losses, to closure, while lowering the income per capita of those in employment.
Instant, but necessary measures, on the part of the government, in form of support schemes, in view of harmonizing the flow of funds and stabilizing the economy, is and will in all likeliness impact heavily on the rupee, in addition of propelling local inflationary consequences. In the same vein, rising unemployment, compounded with high cost of living and subsequent social instability woefully paints a dark picture for the future, and portrays Mauritius’ ability to sustain another economic blow dubious.
Mauritius’ incapability to indicate its allegiance with the EU, by subsequent compliance with its rules in favor of combating money laundering and financial terrorism by October of 2020, will indefinitely cause the island to be tagged under the Blacklist. The chain of events to follow, will be at the detriment of sector and the economy as a whole. First and foremost, revenue from foreign sources, emerging from key financial markets players ranging from management companies, banks to audit firms will be drained down, the domino effect of which will only worsen National Accounts’ figures. An upsurge in unemployment rate is equally inevitable, which may resultantly lead to social unrest, hindering both the present and future generation. Being linked to terrorism financing, will also deter international relations, setting Mauritius as an outcast for foreign aid and trade. Such may impact negatively on domestic entities holding a high dependency on imports. Disruption in the flow of funds, may lead to annihilation of financial sector operations, propelling banks to influence interest rates, inflation rates, and devalue our currency vis a vis foreign currency.
Immediate call to action
With the consequences in all likelihood, seem to cause massive damage to the island, governmental bodies and associated regulatory bodies are doing the needful at their end, to eradicate the matter. Agents of government bodies have recently expressed their resentment to being inclusive with the EUs blacklist, backing their claims of Mauritius being a neat jurisdiction notably due to its excludability on the FATF’s watchlist, and for being in line with the OECD and EU’s Tax criteria. The Minister of Finance has recently announced his intent to initiate a dialogue with the EU, to ensure Mauritius’ elimination from the list.
Regulatory bodies, in form of the FSC and the MRA, are equally adopting a more diligent, yet strict approach in view of first and foremost, ensuring that procedures are being abided by, without any trace of affiliated money laundering processes. The local authorities are ensuring that the rules and protocols as set by the EU in view of anti-money laundering are adhered by, by companies incorporated within our jurisdiction, in view of portraying Mauritius as a neat, and secure financial hub. Recent events, post FSC investigations may however cause the reverse to be true and may cause further damage to Mauritius, when perceived from an international perspective.
Sustained Measures for the greater good
While immediate protocols as set by the FSC may allow for graves to be dug and resultantly draw corrupted and money laundering affiliated businesses out of businesses, such may not entirely eradicate the dirty money issue that we’re exposed to in the long run. Hence, adequate frameworks and/or measures ought to be defined, in view of adopting good practices and ensuring that operations are conducted fully in compliance with international rules and regulations.
From an authority stand-point, cross-communication amidst the FSC and market players need to be more frequent and clearer. Documentary evidence tend to paint a good picture on any given company as and when requested on a normal basis. Surprise physical compliance checks should nevertheless be encouraged, in view of comprehending companies’ ability to react to prompt authority demands. Such will not only eliminate a ‘laissez-aller’ way of doing things, but equally cause companies to perform more diligently and efficiently. A standardized regulatory framework, ought to be abided across companies will also ease up the process in determining and eradicating firms which fail to fit in the mold.
From a company stand-point however, it is first and foremost of much essence to promote a transparent and open working culture, where a defined framework allows for employees to spot criminally affiliated activities and report them on the spot. Regular up-to-date awareness programs should also be entertained, in light of educating employees about the consequences of money laundering, financial terrorism, data breach, privacy breach and other protocols that need to be abided by. Compliance measures, such as PCI DSS is equally essential to protect data and in the same vein, evade aspects of corruption and bribery. Likewise, due diligence and customer checks, should be conducted regularly, to make sure that clients are unaffiliated with suspicious connections.
While we await a final verdict from the EU by October, the advent of artificial intelligence, if adopted successfully through data analytics and affiliated fintech features can be of much help, in not only tracing suspicious cases of money laundering, but in equally setting a standardized protocol, to help both companies and authority figures in harmonizing the financial services process. Companies ought to hold their fair share of responsibility, and abide by rules and regulations as laid down by the regulatory authority while the latter on its part has a duty of ensuring that the companies, under its wings are complying with the stated protocols. It has and always will be about connecting the dots in an upmost efficient and credible manner, in view of minimizing risk, failure of doing which can lead to the collapse of an entire financial sector and be at the detriment of the economy.
(Editor’s note: Ki News does not necessarily endorse the views or opinions expressed by collaborators).