14 March 2018

JTC Lists On Main Market Of London Stock Exchange

Having announced our intention to undertake an initial public offering (IPO) last week and having raised a significant £243.8 million in institutional investment prior to listing, JTC was admitted to the LSE this morning using the ticker JTC and with a market capitalisation of £310 million.

Headquartered in Jersey, JTC has a 30-year track record in providing market-leading services for international private and institutional clients, with the firm having experienced significant growth in recent years through organic growth, mergers and acquisitions. Today, the firm has a presence in 17 different jurisdictions in Africa, Americas, Asia-Pacific, the British Isles, the Caribbean and Europe and employs more than 550 staff.

This latest milestone in JTC’s history represents a move away from being a private equity-backed company, having received investment from CBPE Capital in 2012 to enable its global expansion, to a public company. CBPE have relinquished their shares as part of the IPO.

Meanwhile, JTC’s long-standing commitment to shared ownership, where employees can hold an interest in the firm and benefit from its performance, will be maintained, with its Employee Benefit Trust and Equity for All schemes evolving in line with JTC’s new public company structure.

Highlighting that the listing will position JTC strongly for its next stage of development and provide it with a robust structure for future growth, Nigel Le Quesne, CEO of JTC, said:

This is a fantastic opportunity for JTC. Having grown the business over the last 30 years into a leader in the administration services market for funds, corporate and private clients, this is the next logical step in our strategy and will create a long-term capital base for the business. The IPO will provide us with access to the capital markets, as we look to deliver future growth, both organically and through our targeted acquisition strategy in a sector which we view as ripe for consolidation.

“We would like to thank CBPE for their role in the development of JTC from a Channel Islands focused administrator to a global service provider with a broad client reach. They have provided invaluable support and investment which has facilitated an acceleration in JTC’s growth and success.

Our people are at the heart of everything we do and JTC has always set itself apart through its belief in the value of true shared ownership, which has led to a very high percentage of equity ownership amongst our staff. We have a very clear and proven strategy of investing in our people to enhance the services we provide to our clients and this will remain the case in our life as a public company. We look forward to delivering value for all stakeholders in the business in the years to come.

Mike Liston, Chairman of JTC, commented:

“As JTC’s new Chairman I aim to build on its exemplary reputation for high ethical standards, rigorous governance and respect for its clients and people. These qualities equip it well for success as a substantial Public Company, thriving on the flight to quality in the complex world of international financial services.

Ian Moore, Partner, CBPE Capital, added:

Back in 2012, we saw in JTC a culture that stood out from the crowd and since then we have formed a successful and special partnership. The last six years have been an exciting journey as we have supported JTC in implementing its ‘local to global’ strategy and helped it expand from a Channel Islands centric business to one that now has over 550 colleagues in 17 jurisdictions around the world. We would like to wish everyone at JTC well as the Group embarks on the next stage of its journey.

12 March 2018

AfricaFocus: Charting Where They Hide the Money

This two-part AfricaFocus contains substantive excerpts from the Financial Secrecy Index reports. This first part excerpts overview analyses from the authors covering the global picture and the African continent. The second part provides excerpts from country reports on the United Kingdom, the United States, Kenya, Liberia, South Africa, and Mauritius.

11 March 2018

Interview: Manou Bheenick “Yes, we had political leadership of the highest order when it mattered most”

Manou Bheenick really needs no introduction. However, it is useful to point out that he has had not only a ringside seat on the economic and political stage of the country as from 1968, when he was inducted as an economist into the newly formed Economic Planning Unit, but has also been an active player in the development of the country. He transitioned from being a technician to taking up politics, besides serving as Governor of the Bank of Mauritius. His is therefore an authoritative voice, as he gives his considered views on the major events and forces which shaped the course of the country from even before independence, and outlines the decision areas that can help us get out of the quagmire that we now find ourselves in. Rightly, he stresses enlightened political leadership and policy continuity as the critical underpinning of the polity. Read on…

09 March 2018

Game over for CRS avoidance! OECD adopts tax disclosure rules for advisors

Responding to a request of the G7, today, the OECD has issued new model disclosure rules that require lawyers, accountants, financial advisors, banks and other service providers to inform tax authorities of any schemes they put in place for their clients to avoid reporting under the OECD/G20 Common Reporting Standard (CRS) or prevent the identification of the beneficial owners of entities or trusts.

As the reporting and automatic exchange on offshore financial accounts pursuant to the CRS becomes a reality in over 100 jurisdictions this year, many taxpayers that held undeclared financial assets offshore have come clean to their tax authorities in recent years, which has already led to over 85 billion of additional tax revenue. 

At the same time, there are still persons that, often with the help of advisors and financial intermediaries, continue to try hiding their offshore assets and fly under the radar of CRS reporting. The new rules released today target these persons and their advisers, by introducing an obligation on a wide range of intermediaries to disclose the schemes to circumvent CRS reporting to the tax authorities. The new rules also require the reporting of structures that hide beneficial owners of offshore assets, companies and trusts. 

"Time is up for tax evaders and their advisors that still want to game the rules and continue to hide assets offshore", Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration said today. "With the automatic exchange of CRS information becoming a global reality this year, it is the right moment to get hold of those taxpayers and advisors that attempt to undermine the reporting on offshore assets and that try to play the new global tax transparency framework. The mandatory disclosure rules will be a powerful tool to detect taxpayers that continue to refuse to be compliant with their obligations to declare their assets and income to their tax authorities. They will also have a deterrent effect against the design, marketing and use of schemes to avoid CRS reporting or hide beneficial owners behind opaque offshore structures. This is key both for the integrity of the CRS and for making sure that taxpayers that can afford to pay advisors and to put in place complex offshore structures do not get a free ride."

These model disclosure rules will be submitted to the G7 presidency and are part of a wider strategy of the OECD to monitor and act upon tendencies in the market that try to avoid CRS reporting and hide assets offshore. As part of this work the OECD is also addressing cases of abuse of golden visas and similar schemes to circumvent CRS reporting.

OECD: Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures

This publication contains the Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures. The design of these model rules draws extensively on the best practice recommendations in the BEPS Action 12 Report while being specifically targeted at these types of arrangements and structures.

Part I gives an overview of the model rules. Part II sets out the text of the rules. Part III provides a commentary on those rules.

08 March 2018

Reminisces: A short take on my career with BAI [By Dawood Rawat]

I joined on the 19th January of 1970 the branch of an international insurance company then present in almost 40 countries. I did not apply for a job, but the expatriate manager meeting me only a month after they had opened, offered me a job as his assistant since he had failed to get a work permit for another foreigner. However, he insisted that I should agree to be trained as an agent and work as such for a few weeks. His point was that to understand the job, it was essential that I practiced first to enable me to learn about that position to become proficient to supervise later agents doing the job. I agreed and was confirmed, as promised, as his assistant. Unfortunately, for his family, he died in a car accident by the end of November of that year...

Moody’s cale la croissance à 3,9% en 2018 et souligne les risques liés à l’offshore

L’agence internationale de notation estime une croissance stable à 3,9% en 2018 avec, en toile de fond, une «strong growth» du tourisme et des investissements directs étrangers qui demeureront élevés malgré la renégociation du traité fiscal Inde-Maurice. C’est la conclusion à laquelle arrive Moody’s dans son Banking System Brief sur Maurice daté de ce 7 mars.

05 March 2018

Index of Economic Freedom: Mauritius maintains its first position in Sub-Saharan Africa

Mauritius has maintained its first position as a “mostly free” economy in Sub-Saharan Africa and has been ranked 21st out of 180 countries with a score of 75,1 in the 24th Index of Economic Freedom published by the Heritage Foundation. The country has recorded an increase of 0,4 points with improvements in scores for government integrity and property rights indicators.

The Heritage Foundation has rated Mauritius for its efficient and transparent regulatory environment which supports relatively broad-based economic development, and its competitive tax rates, prudent banking practices and a fairly flexible labour code which facilitates private-sector growth. According to the 2018 Index, in Sub-Saharan Africa most of the 47 graded nations are “mostly unfree”, and more than half of the world’s “repressed” economies, 12 out of 21, are in Sub-Saharan Africa.

The Index of Economic Freedom launched in 1995 studies economies throughout the world and provides in-depth analysis of each country’s political and economic developments. The Index groups the world’s countries into five regions: America, Asia-Pacific, Europe, Middle East/North Africa and Sub-Saharan Africa.

It measures economic freedom on 12 quantitative and qualitative factors, grouped into four broad categories:Rule of Law (property rights, government integrity, judicial effectiveness); Government Size (government spending, tax burden, fiscal health); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). The Index measures the scores on a scale of 100 points classified as “free” ( combined scores of 80 or higher); “mostly free” (70-79.9); “moderately free” (60-69.9); “mostly unfree” (50-59.9); or “repressed” (under 50).

Among the 180 countries ranked, scores improved for 102 countries and declined for 75. According to the Index, Hong Kong and Singapore each logged increases in their Index scores, finishing first and second in the rankings for the 24th consecutive year. Three other frequent top finishers, New Zealand 3rd globally, Switzerland 4th and the United Kingdom 8th also witnessed a rise in their scores.

02 March 2018

FSC issues Press Release –Beaufort Management Services Ltd

The Financial Services Commission, Mauritius (FSC) refers to the alleged fraudulent scheme involving Beaufort Management Services Ltd (BMSL), a company holding a Management Licence.

In this respect, the FSC has, today, suspended the Management Licence held by BMSL and has appointed Mr. Georges Chung Ming Kan as Administrator in relation to the whole business.

The FSC has started an investigation and is working closely with the Federal Bureau of Investigation of the United States of America and the Financial Intelligence Unit - Mauritius in this matter.

The FSC reiterates that it will take all necessary regulatory actions against any of its licensee/approved officer/ Management Company found to be linked with any illegal, harmful and/or fraudulent practices that may cause prejudice to the good repute of Mauritius.

Financial Services Commission
02 March 2018

Six Individuals And Four Corporate Defendants Indicted In $50 Million International Securities Fraud And Money Laundering Schemes

A multi-count indictment was unsealed yesterday, in federal court in Brooklyn, against Panayiotis Kyriacou, Arvinsingh Canaye, Adrian Baron, Linda Bullock, Matthew Green, and Aristos Aristodemou; Beaufort Securities Ltd (“Beaufort Securities”), a brokerage firm located in London, United Kingdom; Beaufort Management Services Ltd (“Beaufort Management”), an off-shore management company located in Mauritius; Loyal Bank Ltd (“Loyal Bank”), an off-shore bank with offices in Budapest, Hungary and Saint Vincent and the Grenadines; and Loyal Agency and Trust Corp. (“Loyal Agency”), an off-shore management company located in Saint Vincent and the Grenadines.

The charges include conspiracy to commit securities fraud and money laundering conspiracy. Canaye was arrested yesterday and is scheduled to be arraigned this afternoon before United States Magistrate Judge Vera M. Scanlon at the federal courthouse in Brooklyn.   

Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and James D. Robnett, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), announced the charges.  

As alleged in the indictment, the defendants engaged in an elaborate multi-year scheme to defraud the investing public of millions of dollars through deceit and manipulative stock trading, and then worked to launder the fraudulent proceeds through off-shore bank accounts and the art world, including the proposed purchase of a Picasso painting,” stated United States Attorney Donoghue. “The charges announced today reflect that this Office, together with our law enforcement partners, is committed to holding accountable those who defraud investors, regardless of the complex schemes they use to hide their ill-gotten gains.” Mr. Donoghue thanked the U.S. Securities and Exchange Commission (SEC), both the New York Regional Office and the Washington, D.C. Office, the City of London Police, the U.K.’s Financial Conduct Authority and the Hungarian National Bureau of Investigation for their significant cooperation and assistance during the investigation. 

As alleged, in a series of unscrupulous and illegal trading practices, the defendants contrived a scheme to defraud investors of U.S. publicly traded companies by manipulating stock prices and masking the true ownership of their clients’ financial interests,” stated Assistant Director-in-Charge Sweeney. “In order to discreetly receive their illegal proceeds, the defendants focused their efforts on laundering the money through a variety of means, including the art world, which they believed was a market free from direct regulation. Bringing to justice securities fraudsters and money laundering facilitators who engage in these types of schemes is and will remain a priority for the FBI and our law enforcement partners worldwide.

Since the Foreign Account Tax Compliance Act has been enacted, the financial expertise of our criminal investigators is needed now more than ever in this global economy,” stated IRS-CI Special Agent-in-Charge Robnett. “These allegations outline an intricate scheme to obscure beneficial ownership and launder illicit proceeds. This behavior harms the financial world abroad and here at home.

Securities Fraud and Money Laundering Scheme

As alleged in the indictment, between March 2014 and February 2018, Beaufort Securities, Beaufort Management, and managers Kyriacou and Canaye, collectively the “Beaufort Defendants,” together with their co-conspirators, engaged in a scheme to defraud investors and potential investors in various U.S. publicly traded companies by concealing the true ownership of various U.S. publicly traded companies and manipulating the price and trading volume in the stocks of those companies. 

Beginning in or about October 2016, an Undercover Agent contacted Kyriacou and stated that he was interested in opening brokerage accounts at Beaufort Securities from which he could execute trades in several multi-million dollar stock manipulation deals.

In furtherance of the scheme, the Beaufort Defendants opened brokerage accounts for their clients in the names of off-shore shell companies with nominee shareholders and directors, and then conducted manipulative trading of stocks of U.S. publicly traded companies listed on U.S. over-the-counter exchanges. Beaufort Securities facilitated at least ten “pump and dump” schemes involving U.S. publicly traded stocks, generating over $50 million in proceeds for its clients. Notably, Beaufort Securities had affirmed to the Financial Conduct Authority (“FCA”) in the United Kingdom in July 2016 that it had taken remedial measures to correct deficiencies in the firm’s financial crime controls and anti-money laundering processes. 

Additionally, between January 2011 and February 2018, the Beaufort Defendants; Loyal Bank; Loyal Agency; Baron, the Chief Business Officer of Loyal Bank and a Director of Loyal Agency; and Bullock, the Chief Executive Officer of Loyal Bank and a Director of Loyal Agency, together with their co-conspirators, devised and engaged in a scheme to launder securities fraud proceeds for their clients. To facilitate this scheme, Beaufort Securities transferred funds to corporate bank accounts at Loyal Bank opened in the names of off-shore shell companies that were controlled by the bank’s clients.  Loyal Bank then provided debit cards to its clients to withdraw funds from those accounts in an untraceable manner to hide the source of the money and facilitate ongoing securities fraud. 

Money Laundering Through Purchase and Sale of Art

Separately, between October 2017 and February 2018, Kyriacou; Aristodemou, the uncle of Kyriacou; and Green, the owner of an art gallery in London, United Kingdom, together with their co-conspirators, agreed to launder £6.7 million, the equivalent of over $9 million dollars, which the Undercover Agent represented to be the proceeds of securities fraud. After initially proposing the use of real estate investments to launder the funds, the co-conspirators devised a scheme to “clean up the money” through the purchase and subsequent sale of art. Aristodemou described the art business as the “only market that is unregulated,” and that art was a profitable investment because of “money laundering.” The defendants proposed the Undercover Agent could purchase from Green a painting by Pablo Picasso entitled “Personnages, Painted 11 April 1965,” and provided paperwork for the painting’s purchase. The money laundering scheme was halted prior to the transfer of ownership of the painting. 

The FCA also took regulatory action yesterday against Beaufort Securities and a related clearing firm, including halting all regulated activities and initiating insolvency proceedings against both firms. The SEC filed a civil complaint today against Beaufort Securities and Kyriacou

The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

The case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys Jacquelyn M. Kasulis, Michael T. Keilty and David Gopstein are in charge of the prosecution. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.

The Defendants:

PANAYIOTIS KYRIACOU, also known as “Peter Kyriacou”
Age: 26
Residence: London, England

ARVINSINGH CANAYE, also known as “Vinesh Canaye”
Age: 30
Residence: Mauritius

Age: 63
Residence: Budapest, Hungary

Age: 57
Residence: St. Vincent/Grenadines

Age: 49
Residence: London, England

Age: 50
Residence: London, England

London, England


Budapest, Hungary and St. Vincent/Grenadines

St. Vincent/Grenadines

E.D.N.Y. Docket No. 18-CR-102 (ENV)

01 March 2018

Tax Avoidance and Evasion in Africa

Nataliya Mykhalchenko asks whether the emerging effort to curb both illicit financial flows and tax avoidance is a global fight and not just another global flight driven by certain powerful entities and interest groups trying to avoid paying tax. Given that the issue has universal significance and undermines the development of many countries in the Global South, more research (and campaigning) is needed in order to understand the nature of these initiatives and the forces behind them.

28 February 2018

IEA releases report on financial services and the benefits they bring to all

The much-maligned financial services industry is a crucial part of everyday life. Contrary to popular misconceptions, its greatest benefits are felt by the less-well-off and middle classes. The economic function of the financial services industry is to reduce transaction costs for saving, for protecting against major risks, providing for an income in old age, acquiring capital to start a business and for making every day transactions. The costs of these things for most people would be prohibitive without the modern financial services industry.

A new report from the Institute of Economic Affairs debunks the commonly held idea that financial services are “socially useless”, and demonstrates that, despite having intangible outputs, the sector is vital to consumers regardless of income. Moreover, the oft-proposed remedy – increased statutory regulation – may heighten rather than mitigate the exposure of taxpayers and households to recessions and speculative bubbles.

The financial services industry is one of the UK’s most productive and the increased regulation of the sector has contributed to the decline in productivity. Half of the UK’s financial services output is exported, thus helping to finance the import of (mainly) manufactured goods.

Key benefits of financial services:
  • The financial sector is a pro-poor industry, making possible everyday activities that in the past were only possible for the wealthiest. Financial institutions exist to reduce the cost to businesses of raising capital and the costs to individuals of saving and protecting against risk. Thanks to the existence of financial markets, households can spread risk across a range of institutions and a range of potential borrowers. Reducing the transaction costs of financial activity enables people to spend their time more productively.
  • The sector embraces innovation. Financial institutions are continually evolving. For example, peer-to-peer lending networks now enable households to diversify their risk while omitting the intermediary partly or entirely.
  • The UK has a huge trade surplus in the financial sector, equivalent to 3 per cent of national income. Even if the financial services output of the economy was socially useless, the fact that much is exported – providing the income to buy other goods and services – significantly reduces the power of that argument.

Debunking criticisms of the sector:
  • Inequality. The much-cited literature linking financial growth and adverse economic outcomes is simply too crude to warrant drawing clear policy conclusions. Studies linking financialisation with inequality are similarly ambiguous: the top ten countries for their share of finance in GDP are a mixture of high-, medium- and low-inequality countries. Three of the OECD’s eight most equal countries are in the top ten of countries with the largest financial sector as a proportion of national income.
  • High salaries. Compensation in the financial sector, at 6.9 per cent of all compensation, is in line with the sector’s contribution to the economy (7.2 per cent of gross added value).
  • Short termism could be tackled by removing the regulations that encourage rapid turnover of shares and short-term metrics in management reporting. Corporate governance codes are overly focused on information provision which may encourage managers to pursue short-term objectives contrary to the interests of shareholders.
  • Duping consumers. It is often argued that consumers are harmed through mis-selling, which is the justification behind a large amount of consumer finance regulation. Yet we cannot know in advance whether regulation will improve a market. The perfectly informed regulator is as much of a fiction as the perfectly informed consumer. The FCA’S recent cap on payday loans costs shrank the market by between three and five times more than the regulator expected. Markets are not perfect, but regulation is often a very poor substitute.

Commenting on the report, Professor Philip Booth, Senior Academic Fellow at the Institute of Economic Affairs, said:

Animosity towards the business of finance is ancient and persistent, but just because its outputs are intangible should not take away from its inherent value. Over-regulation can increase risk in the financial sector as well as reduce competition.

The Government itself should recognise the unintended consequences of legislation and take a more patient approach. A more stable policy framework would help long-term investment and reduce short-termism.

22 February 2018

Taking the Mauritius Route: Of Big Businesses & Crony Capitalism

In their meticulously researched book ‘Thin Dividing Line’, Paranjoy Guha Thakurta and Shinzani Jain highlight the role that Mauritius plays in providing tax shelter for ultra rich Indians and the illicit financial flows in the global context.

20 February 2018

Groupe BPCE announces the signature of an agreement providing for the divestment of 100% of Banque des Mascareignes to Groupe Banque Centrale Populaire and Groupe Sipromad.

The agreement concerns the divestment by BPCE International of Banque des Mascareignes, an establishment based in Mauritius, and its Madagascan subsidiary (Banque des Mascareignes Madagascar), to the Moroccan banking group, Banque Centrale Populaire, and its strategic partner in the region, Sipromad, a diversified Madagascan group and a historic shareholder in the Madagascan subsidiary.

Completion of the divestment remains subject to the usual condition precedents for this type of transaction, and particularly the agreement of the regulatory authorities in Mauritius, Madagascar and Morocco, and should take place by the end of the first half of 2018.

This transaction is part of Groupe BPCE’s strategy of refocusing in priority growth markets and regions.

Le gouvernement évoque la création d’un secteur bancaire offshore

L’express du 20 février 1984 annonce que le gouvernement veut se pencher sérieusement sur le dossier de l’offshore banking. A cette époque, c’est Vishnu Lutchmeenaraidoo qui officie au ministère des Finances dans le gouvernement  (MSM-PTr-PMSD) dirigé par sir Anerood Jugnauth. Le sujet avait déjà été évoqué vers la fin des années 70, dit le journal.  La mise à jour du dossier est confiée aux économistes du ministère du Plan et du Développement, dirigé alors par Rundheersing Bheenick. L’objectif premier du développement de l’offshore est alors de «permettre aux jeunes diplômés chômeurs de trouver un travail qui leur convient.» Il est aussi dit que la création du secteur offshore permettra au pays de disposer des dernières technologies de communication. 

19 February 2018

BIS - Sound Practices: implications of fintech developments for banks and bank supervisors

The Basel Committee on Banking Supervision today published its Sound Practices on the implications of fintech developments for banks and bank supervisors. The paper assesses how technology-driven innovation in financial services, or "fintech", may affect the banking industry and the activities of supervisors in the near to medium term.

The paper is based on the analysis of various potential future scenarios and draws on surveys with bank supervisors. Five stylised scenarios describing the potential impact of fintech on banks were identified as part of an industry-wide scenario analysis:
  • The better bank: modernisation and digitisation of incumbent players
  • The new bank: replacement of incumbents by challenger banks
  • The distributed bank: fragmentation of financial services among specialised fintech firms and incumbent banks
  • The relegated bank: incumbent banks become commoditised service providers and customer relationships are owned by new intermediaries
  • The disintermediated bank: banks have become irrelevant as customers interact directly with individual financial service providers
  • The paper focuses on three technological developments (big data, distributed ledger technology and cloud computing) and three fintech business models (innovative payment services, lending platforms and neo-banks).
Against this backdrop, current observations suggest that although the banking industry has undergone multiple innovations in the past, the rapid adoption of enabling technologies and emergence of new business models pose an increasing challenge to incumbent banks in almost all the banking industry scenarios considered.

In addition, the Committee surveyed its members' frameworks and practices in relation to fintech matters, and carried out a public consultation in August 2017.

Building on the supportive feedback, the Committee has further specified the nature and scope of its contribution and has enhanced its 10 key implications and considerations on the following supervisory issues:
  1. the overarching need to ensure safety and soundness and high compliance standards without inhibiting beneficial innovation in the banking sector
  2. the key risks for banks related to fintech developments, including strategic/profitability risks, operational, cyber- and compliance risks
  3. the implications for banks of the use of innovative enabling technologies
  4. the implications for banks of the growing use of third parties, via outsourcing and/or partnerships
  5. cross-sectoral cooperation between bank supervisors and other relevant authorities
  6. international cooperation between bank supervisors
  7. adaptation of the supervisory skill set
  8. potential opportunities for supervisors to use innovative technologies ("suptech")
  9. relevance of existing regulatory frameworks for new innovative business models
  10. key features of regulatory initiatives set up to facilitate fintech innovation

Cryptocurrencies: The new frontier

The Financial Services Commission of Mauritius has decided instead to take the bull by the horn. It has decided that it would like to develop a market in these exotic assets and have appointed a committee to set up regulatory structures.

16 February 2018

La FINMA publie un guide pratique sur les ICO

Dans le contexte d’une hausse significative des initial coin offerings (ICO) effectués ou prévus en Suisse, la FINMA s’est vue et se voit encore confrontée à de nombreuses questions d’assujettissement. Un ICO permet d’effectuer une levée publique de capitaux sous forme numérique, à des fins entrepreneuriales, sur la base de la technologie de la blockchain. Dans le guide pratique publié aujourd’hui, la FINMA précise en complément de la communication sur la surveillance 04/2017 les modalité selon lesquelles elle traite les demandes d’assujettissement des organisateurs d’ICO, eu égard à une situation juridique sujette à interprétation. La FINMA considère que cette transparence concernant sa méthodologie est importante et appropriée, compte tenu de la dynamique particulière du marché et de la forte demande dans ce domaine.

La prise en compte des particularités de chaque cas est déterminante

Le droit régissant les marchés financiers n’est pas applicable à tous les ICO et l’obligation d’assujettissement n’est pas systématique, car la définition des ICO est extrêmement variable. Les caractéristiques de chaque cas particulier doivent toujours être prises en compte. Ainsi que l’indiquait déjà la communication sur la surveillance 04/2017, le droit général régissant les marchés financiers peut s'appliquer à différents éléments des ICO. Il n’y a, en revanche, pas encore d’exigences réglementaires spécifiques concernant les ICO. Actuellement, il n’y a pas non plus de jurisprudence applicable ni de doctrine juridique uniforme.

Les principes de la FINMA se concentrent sur la fonctionnalité et la transmissibilité des jetons

Dans son évaluation prudentielle des ICO, la FINMA suit une approche qui se focalise sur la fonction économique et le but des jetons, autrement dit des unités basées sur la blockchain qui sont émises par l’organisateur de l’ICO. La classification des jetons et la question de savoir si ces jetons sont négociables ou transmissibles avant même le début de l’ICO sont essentielles. Il n’existe pas actuellement en Suisse ni ailleurs dans le monde de classification universellement reconnue des jetons. D’un point de vue fonctionnel, la FINMA distingue trois types de jetons, des formes mixtes étant également possibles :
  • Les jetons de paiement sont assimilables à des « cryptomonnaies » pures, sans être liés à d’autres fonctionnalités ni projets. Dans certains cas, les jetons ne peuvent développer la fonctionnalité nécessaire et leur acceptation comme moyen de paiement qu’au fil du temps.
  • Les jetons d’utilité sont des jetons qui doivent donner accès à un usage ou à un service numériques.
  • Les jetons d’investissement représentent des valeurs patrimoniales telles que des parts dans des valeurs réelles, des entreprises, des revenus ou un droit à des dividendes ou des intérêts. Sous l’angle de sa fonction économique, le jeton doit être considéré comme une action, une obligation ou un instrument financier dérivé.

Focalisation sur les règles relatives au blanchiment d’argent et au négoce de valeurs mobilières

Lors de son analyse, la FINMA a constaté que les lois régissant les marchés financiers s'appliquent aux ICO le plus souvent dans les domaines de la lutte contre le blanchiment d’argent et du négoce de valeurs mobilières. Les applications qui nécessiteraient un assujettissement à la loi sur les banques ou à la loi sur les placements collectifs sont plus rares.

La loi sur le blanchiment d’argent prévoit pour les intermédiaires financiers des obligations telles que l’identification des ayants droit économiques. Cette loi a pour but de protéger le système financier du blanchiment d’argent ou du financement du terrorisme. Les risques de blanchiment d’argent sont particulièrement élevés dans un système organisé de manière décentralisée sur la base de la blockchain, dans lequel les valeurs patrimoniales peuvent être transmises de façon anonyme.

Les règles du négoce de valeurs mobilières ont pour but de garantir aux acteurs du marché la possibilité de prendre leurs décisions de placement en actions ou en obligations sur la base d’informations minimales fiables. Il s’agit en outre de s’assurer que le négoce peut être réalisé de manière équitable, fiable et avec une formation des prix efficiente.

Sur la base des critères de fonctionnalité et de transmissibilité évoqués, la FINMA parvient à l’évaluation prudentielle suivante des ICO (cf. également le graphique dans le guide pratique, pages 7 et 8) :
  • ICO de paiement : la FINMA considère comme clairement soumis aux dispositions en matière de blanchiment d’argent les ICO dont les jetons remplissent la fonction économique de moyen de paiement et sont déjà transmissibles. La FINMA ne traitera cependant pas ces jetons comme des valeurs mobilières.
  • ICO d’utilité : les jetons d'utilité ne sont pas considérés comme des valeurs mobilières s'ils confèrent uniquement un droit d’accès à un usage ou à un service numériques et qu'ils sont utilisables dans ce sens à la date d’émission. Dans tous les cas où la fonction économique en tant qu'investissement existe également (ou seule cette fonction existe), la FINMA les traite comme des valeurs mobilières (comme des jetons d'investissement).
  • ICO d’investissement : la FINMA considère les jetons d’investissement comme des valeurs mobilières avec les conséquences correspondantes sur leur négoce dans l’optique du droit des marchés financiers. En règle générale, cette approche implique également pour les ICO des obligations correspondantes selon le Code des obligations (par ex. obligations d’établir des prospectus).

Les ICO peuvent également constituer des formes mixtes de ces catégories. Un assujettissement à la loi sur le blanchiment d’argent est par exemple possible lorsqu’un jeton d’utilité est également utilisable de manière généralisée comme moyen de paiement ou doit pouvoir être utilisé comme tel.

La technologie de la blockchain offre un potentiel d’innovation

La FINMA se réserve le droit de publier dans une circulaire l’interprétation des lois régissant les marchés financiers en vigueur concernant les ICO dans des cas concrets, après un approfondissement supplémentaire de sa pratique en matière de surveillance.

La FINMA reconnaît le potentiel d’innovation de la technologie de la blockchain. Elle soutient par conséquent le groupe de travail sur la technologie « blockchain » et les ICOs de la Confédération dédié à ce thème et y participe. La clarté sur les conditions-cadres du droit civil sera une condition déterminante pour l’établissement durable et réussi de cette technologie en Suisse.

Mark Branson, directeur de la FINMA, souligne que « La technologie de la blockchain offre un potentiel d’innovation pour les marchés financiers et bien au-delà. Les projets de blockchain qui fonctionnent de manière comparable aux activités soumises à autorisation ne doivent cependant pas contourner le cadre réglementaire éprouvé. Notre approche équilibrée du traitement des projets et des demandes d'ICO permet aux innovateurs sérieux de trouver leurs marques dans le contexte réglementaire et de lancer leurs projets de manière à respecter les lois existantes, permettant ainsi de protéger les investisseurs et l’intégrité de la place financière. »

Indications pour les investisseurs

La FINMA a déjà attiré l’attention, à plusieurs reprises, sur les risques des ICO pour les investisseurs. Les prix des jetons acquis dans le cadre d’un ICO sont généralement très volatils. De nombreux ICO n’en étant qu’à leurs débuts, il subsiste beaucoup d’incertitudes en lien avec les projets d’ICO à financer et à réaliser. Des incertitudes subsistent par ailleurs dans le droit en vigueur quant à la possibilité de transmettre et de faire valoir, du point de vue du droit civil, des droits annoncés ou susceptibles d’être en relation avec des jetons.

Les clarifications en matière d’ICO se poursuivent

Comme annoncé en septembre 2017, la FINMA procède à des clarifications dans plusieurs cas d’ICO. Si la FINMA dispose d’indices selon lesquels des modèles d’affaires ICO enfreignent le droit de la surveillance, permettent de contourner les lois sur la surveillance ou ont même été mis en place dans une intention frauduleuse, elle engagera des procédures d’enforcement.

FINMA publishes ICO guidelines

FINMA has seen a sharp increase in the number of initial coin offerings (ICOs) planned or executed in Switzerland and a corresponding increase in the number of enquiries about the applicability of regulation. ICOs are a digital blockchain-based form of public fund-raising for entrepreneurial purposes. Given a legal and regulatory framework with partially unclear applicability, FINMA is today publishing guidelines, which complement its earlier FINMA Guidance 04/2017, setting out how it intends to treat enquiries from ICO organisers. Creating transparency at this time is important given the dynamic market and the high level of demand.

Each case must be decided on its individual merits

Financial market law and regulation are not applicable to all ICOs. Depending on the manner in which ICOs are designed, they may not in all cases be subject to regulatory requirements. Circumstances must be considered on a case-by-case basis. As set out in FINMA Guidance 04/2017, there are several areas in which ICOs are potentially impacted by financial market regulation. At present, there is no ICO-specific regulation, nor is there relevant case law or consistent legal doctrine.

FINMA's principles focus on the function and transferability of tokens

In assessing ICOs, FINMA will focus on the economic function and purpose of the tokens (i.e. the blockchain-based units) issued by the ICO organiser. The key factors are the underlying purpose of the tokens and whether they are already tradeable or transferable. At present, there is no generally recognised terminology for the classification of tokens either in Switzerland or internationally. FINMA categorises tokens into three types, but hybrid forms are possible:
  • Payment tokens are synonymous with cryptocurrencies and have no further functions or links to other development projects. Tokens may in some cases only develop the necessary functionality and become accepted as a means of payment over a period of time.
  • Utility tokens are tokens which are intended to provide digital access to an application or service.
  • Asset tokens represent assets such as participations in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds or derivatives.

Focus on anti-money laundering and securities regulation

FINMA's analysis indicates that money laundering and securities regulation are the most relevant to ICOs. Projects which would fall under the Banking Act (governing deposit-taking) or the Collective Investment Schemes Act (governing investment fund products) are not typical.

The Anti-Money Laundering Act contains requirements for financial intermediaries including, for example, the need to establish the identity of beneficial owners. The law aims to protect the financial system against the risks of money laundering and the financing of terrorism. Money laundering risks are especially high in a decentralised blockchain-based system, in which assets can be transferred anonymously and without any regulated intermediaries.

Securities regulation is intended to ensure that market participants can base their decisions about investments on a reliable minimum set of information. Moreover, trading should be fair, reliable and offer efficient price formation.

On the basis of the above-mentioned criteria (function and transferability), FINMA will handle ICO enquiries as follows (see also the diagram in the Guidelines, page 8):
  • Payment ICOs: For ICOs where the token is intended to function as a means of payment and can already be transferred, FINMA will require compliance with anti-money laundering regulations. FINMA will not, however, treat such tokens as securities.
  • Utility ICOs: These tokens do not qualify as securities only if their sole purpose is to confer digital access rights to an application or service and if the utility token can already be used in this way at the point of issue. If a utility token functions solely or partially as an investment in economic terms, FINMA will treat such tokens as securities (i.e. in the same way as asset tokens).
  • Asset ICOs: FINMA regards asset tokens as securities, which means that there are securities law requirements for trading in such tokens, as well as civil law requirements under the Swiss Code of Obligations (e.g. prospectus requirements).

ICOs can also exist in hybrid forms of the above categories. For example, anti-money laundering regulation would apply to utility tokens that can also be widely used as a means of payment or are intended to be used as such.

Blockchain technology has innovative potential

Following further consolidation of this supervisory practice, FINMA may in future decide to publish its interpretation in the form of a circular.

FINMA recognises the innovative potential of blockchain technology and therefore supports the federal government's Blockchain/ICO Working Group in which it is participating. Clarity about the underlying civil law framework will be a decisive factor in establishing this technology sustainably and successfully in Switzerland.

FINMA CEO, Mark Branson comments: "The application of blockchain technology has innovative potential within and far beyond the financial markets. However, blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework. Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system."

Information for investors

FINMA has several times drawn attention to the risks that ICOs can pose for investors. Tokens acquired in the context of an ICO are likely to be subject to high price volatility. Since many ICO projects are at an early stage of development, they are subject to numerous uncertainties. Furthermore, it is uncertain under current civil law whether contracts executed via blockchain technology are legally binding.

Investigations into ICOs will continue

As announced in September 2017, FINMA is conducting investigations into a number of cases involving ICOs. If FINMA becomes aware that ICO business models have breached supervisory law, were intended to circumvent regulation, or were fraudulent in their intent, it will launch enforcement proceedings. 

13 February 2018

India - Authority for Advance Rulings (AAR): ‘AB’ Mauritius

In extraordinary and exceptional circumstances, as noticed in the case of ‘AB’ Mauritius, AAR will interfere with the benefits available to an applicant, under a DTAC between two sovereign states.

06 February 2018

BBC: The Great British Money Laundering Service

New transparency rules designed to reveal the true owners of British companies are being flouted. Billions of pounds of dirty money is alleged to have passed through opaque UK companies in recent years.

How does this square with UK's international reputation for financial probity? A British company at a British address carries an air of legitimacy. But, in reality, some corporate vehicles are being used to fill the pockets of corrupt politicians and deprive people living in poverty of much-needed public funds.

In this edition of File on 4, Tim Whewell investigates the scams designed to circumvent new regulations and untangles the global networks behind the Great British Money Laundering Service.

How Mauritian lender SBM toppled top Kenyan banks in a year

How does one bank enter a market with 0.4 per cent market share and take only one year to grow into a top-tier bank with 95 branches and assets, only second to Kenya Commercial Bank (KCB)?

FSC Mauritius issues Circular Letter with respect to Tax Holidays

This Circular Letter applies to the following licensees:
  1. Global Headquarters Administration;
  2. Global Treasury Activities;
  3. Overseas Family Office (Single);
  4.  Overseas Family Office (Multiple);
  5. Investment Banking;
  6. Global Legal Advisory Services; and
  7. Captive Insurance.

Ocorian to acquire ABAX, a market leading provider of global business services in Mauritius.

Ocorian, a global provider of specialist financial services, announced today that it has entered into a definitive agreement to purchase ABAX, an integrated advisory, corporate and business services provider based in Mauritius.

The acquisition will significantly extend Ocorian’s service range and delivery capability into Africa, Asia and the Middle East and swell its international team to 700+ staff – including additional representation in Côte d'Ivoire, Dubai, Mauritius, Singapore and South Africa.

In turn, ABAX clients will now be able to access a much wider range of specialist alternative investment, corporate and private client services, across both onshore and offshore locations in Europe and North America, including: Channel Islands (Jersey and Guernsey), Cayman Islands, Ireland, Luxembourg, Netherlands, Singapore, UK and the USA. 

Expected to close before the end of March 2018, the transaction realises the next stage of an ambitious international growth strategy for Ocorian, following the management buyout and successful rebrand of Bedell Trust in 2016. All 275 staff currently employed by ABAX will join Ocorian.

Commenting on the acquisition Nick Cawley, CEO of Ocorian, said:

This transaction reflects the sustained expansion and diversification of Ocorian's newly defined business and our commitment to growth in leading jurisdictions. It will further strengthen our position as a leading global financial services provider and give enhanced range and scope across both Africa and Asia.

Richard Arlove, CEO of ABAX added:

“Our priority for this transaction was to find a partner that would truly help us to realise our growth ambitions of being a leading provider of integrated advisory, corporate and business services for Africa while consolidating our offering for Asia. This transaction allows us to create further value for clients through synergies with an increased number of international jurisdictions, particularly within Europe and North America.