Mauritius: Business Leaders Encouraged to Take Full Advantage of AGOA

Enterprise Mauritius and the United States Agency for International Development (USAID) jointly organised yesterday a workshop aimed at sensitising business community leaders in the textile, agro-industry and jewellery sectors on opportunities available under African Growth and Opportunity Act (AGOA) for exportation to the US market.

The main focus was on the current situation regarding AGOA and discussions centred on the key issues facing the private sector, strategies for Mauritius and the US market and plans for the coming year with regard to the US market. The workshop was conducted by two resource persons from USAID Competitiveness and Trade Expansion Programme (USAID-COMPETE), Mr Finn Holm-Olsen, Director, East & Central Africa Global Competitiveness Hub; and Mr Jean Claude Mazingue, Senior Apparel Trade Advisor.

Participants were encouraged to increase Mauritian exports to the US under the AGOA initiative so as to diversify their markets and reduce their dependence on the euro while increasing their exports to the US market. AGOA offers tangible incentives for African countries to continue their efforts to open their economies and build free markets.

In his address, the Chief Executive Officer of Enterprise Mauritius, Mr Dev Chamroo, exhorted the participants to export their products to the US. While the European economy is uncertain, the US economy has recorded sustained growth, he said. He recalled that the USAID is very helpful in promoting Mauritian products to the US and appealed to the business community leaders to take advantage of the support offered by the Agency in terms of technical assistance, market linkages, buyer missions and matchmaking sessions.

For his part, Mr Troy Fitrell, Chargé d’Affaires of the US Embassy, said that no country in Africa has taken advantage of AGOA as Mauritius. Figures reveal that Mauritian performance in 2011 was USD 156,768 million for AGOA apparel exports as compared to USD 100, 688 million in 2009. He said that since the past decades the Mauritian brand has been exceptionally good at building value, trust and quality.

The resource persons outlined that local companies can export their products to the US in small quantities and that they can target only a niche market, that is, a State in the US. Following a decision of the United States to extend AGOA till September 2012, it was necessary to sensitise Mauritian enterprises to export more to the US.

AGOA

Promulgated in May 2000, the objective of AGOA is to increase trade between the US and Sub-Saharan Africa and American investments in the sub-region. It also aims to stimulate growth on the continent; assist African countries to improve their economy; transform US-Africa relationships from aid dependency to commercial partnership; foster a high-level dialogue on issues relevant to trade and investment; promote economic integration and facilitate the integration of sub-Saharan Africa into the global economy.

Under AGOA, the trade benefits are considerable and allow almost all products exported to countries eligible under AGOA to enter the US market duty free. The bilateral trade flow between the US and the countries of sub-Saharan Africa has reached a value of USD 82 billion. Imports entering the AGOA totaled USD 44.2 billion.

Under AGOA, 37 countries including Mauritius are eligible to export their products to the US duty free. Almost 6 500 products are concerned. Through AGOA, USAID provides assistance to enterprises and advises governments to improve the environment for trade. The Agency further assists African countries to overcome infrastructure constraints and work to expand access to finance to enhance competitiveness in African trade and investment.

KPMG - IFRS for investment funds: Liability vs equity

IFRS for investment funds: Liability VS equity classification for financial instruments issued by investments funds

Mauritius Subscribes to the IMF’s Special Data Dissemination Standard

Mauritius subscribed today to the International Monetary Fund’s (IMF’s) Special Data Dissemination Standard (SDDS), bringing the number of subscribing countries to 70. Mauritius is the 11th country to graduate to the SDDS from the IMF’s General Data Dissemination System (GDDS), which the country has participated in since September 21, 2000. Mauritius has benefitted from participation in the Department for International Development (DFID) Enhanced Data Dissemination Initiative, financed by the government of the United Kingdom, which aims, inter alia, to assist countries to graduate from the GDDS to the SDDS. Mauritius is the second Sub-Saharan African country to subscribe to the SDDS.

“The subscription to the SDDS of Mauritius represents a major step forward for official statistics in the country and for those who use these data,” said Ms. Adelheid Burgi-Schmelz, Director of the IMF’s Statistics Department. “Subscription to the standards underscores the strong commitment to transparency in Mauritius, as well as a significant achievement in implementing internationally accepted best practices in statistics,” Ms. Burgi-Schmelz added.

The SDDS, established by the IMF in March 1996, is intended to guide members in the provision of their economic and financial data to the public. Subscription to the SDDS is expected to enhance the availability of timely and comprehensive statistics, thereby contributing to the pursuit of sound macroeconomic policies and the improved functioning of financial markets. The SDDS identifies four dimensions of data dissemination—the data coverage, periodicity, and timeliness; access by the public; the integrity of the disseminated data; and the quality of the disseminated data. Although subscription is voluntary, a subscribing member commits to observe the standard and to provide information (metadata) to the IMF about its data dissemination practices. This information is made publicly available on the IMF's Dissemination Standards Bulletin Board (DSBB).

The DSBB now provides comprehensive documentation in English on the statistical practices of Mauritius for SDDS data categories, hyperlinked to actual country data included in the mandatory National Summary Data Page, maintained by the Statistics Mauritius.

UK: Treasury Committee calls for further changes to rectify shortcomings of legislation on FCA

The Treasury Committee publishes today a short report identifying four areas where there appears to be confusion, defects or other weaknesses in the Government’s approach to reform of the Financial Conduct Authority (FCA). The report should be read alongside the Government's response to the Committee's earlier report on the FCA, also published today.

Chair's Comments

The Chair of the Treasury Select Committee, Andrew Tyrie MP, commented:

"The Committee remains deeply concerned that this legislation is being rushed.

The structure and objectives of the FCA will sit at the heart of this new regulatory system.

Unless sufficient time is given to getting these reforms right, we could end up, once again, with a defective regulatory framework."

Areas of concern

The report highlights four main areas of concern (Quotations are from Andrew Tyrie MP):

1. On accountability

The Committee has called for the accountability of the FCA to be enhanced in four main areas:

The board of the FCA should publish full board minutes of each meeting

The CEO of the FCA should be subject to pre-appointment scrutiny by the Treasury Committee

The FCA board should be responsible for responding to requests for factual information and papers from Parliament

Parliament, through the Treasury Committee, should be able to request retrospective reviews of the FCA’s work

"The FCA has been given huge powers. It is not enough, as the Government has proposed, merely to match the weak, pre-existing accountability arrangements of the FSA; they must be substantially strengthened if the FCA is adequately to be accountable to Parliament and, through Parliament, to the public.

It was only as a result of intensive Treasury Committee pressure that the FSA published an account of the UK’s biggest ever banking failure, at RBS. It should not be necessary for the Treasury Committee to engage in such protracted exchanges with the regulator in order to ensure transparency.

Without a statutory base for Parliamentary involvement the temptation will always exist for the relevant authorities to try and brush matters under the carpet.

The Treasury Committee, on behalf of Parliament, must have the authority to require retrospective reviews of the FCA’s work."

2. On the objectives of the FCA

The Committee remains concerned about the effect that an overarching objective is likely to have on the operation of the FCA. Indeed, the Government appears confused about whether it wants to impose a strategic objective or a "mission statement." These are not the same thing.

"A strategic objective is not the same as a “mission statement.” The Government must provide far greater clarity about what it is trying to achieve. A mission statement should have no place in primary legislation.

We need the Government to explain whether it is intended as a supplement to the primary objectives, now called operational objectives, or to act as a check and a balance on them.

The case has not been made for it"

3. On the PRA veto over the FCA

The Committee believes the Financial Policy Committee (FPC) – rather than the Prudential Regulation Authority (PRA) as suggested by the Government - should be granted a veto over the FCA in areas relating to financial stability.

"Financial stability is the responsibility of the FPC. If anyone is to wield a veto over the FCA, it should therefore be the FPC and not the PRA".

4. On cost-benefit analysis

The Committee has called on the Government to include in the Financial Services Bill requirements for far more extensive cost-benefit analysis to take place and for greater consultation with firms, representative bodies and panels prior to the introduction of new regulations.

"Regulatory and cost burdens on the financial services sector often seem to rise inexorably. It is consumers who have to foot the bill for these costs.

Too often the FSA has treated cost-benefit analyses on new regulations as a box-ticking exercise.

Worse still, the growth of the regulatory burden from existing regulation over time has been neglected. Periodic cost-benefit reviews of existing regulations are essential."

Report: Financial Conduct Authority: Report on the Government Response

Inquiry: Financial Conduct Authority

SEI Study: Hedge Fund Managers Must Prove Their Performance And Transparency Mettle Or Suffer Reputational Risk

With significant dollars poised to flow into hedge funds in 2012, managers must address investor transparency and liquidity concerns to take advantage of new funding opportunities, according to the fifth annual global study released today by SEI in collaboration with Greenwich Associates. The second report in the two-part series, entitled “The New Dynamics of Hedge Fund Competitiveness,” indicates a need for hedge fund managers to move beyond portfolio transparency to provide investors with consistent and insightful communications along with direct access to investment teams. Liquidity and the inability to control exit strategies have also emerged as key concerns for hedge fund investors.

“Transparency has been the focus for managers in recent years, but we’re seeing clients look for increased personal interaction and dialogue. This Era of the Investor™ is pushing managers to look beyond standard expectations,” said Philip Masterson, Senior Vice President and Head of Business Development, Europe, for SEI’s Investment Manager Services division. “The environment is shifting and while managers are showing improvements in reporting, the study shows that portfolio transparency is simply not enough to satisfy investors anymore.”

Beyond communication, the survey shows that investors want greater detail in terms of security-level disclosure, including leverage detail, valuation methodology, and risk analytics. The study also showed that liquidity has emerged as a key area of concern among investors. Nearly a third of respondents (31 percent) cited ongoing liquidity risk among their biggest hedge fund investing worries, while “an inability to control exit strategy” was named by 46 percent of respondents.

“Evaluating and selecting fund managers has always been a top-of-mind concern for investors,” said Rodger Smith, Managing Director of Greenwich Associates. “What this study brought to light is that, as long as they can articulate their value proposition and differentiate themselves from their peers, there is a place for smaller and newer funds in institutional portfolios. In fact, one in five investors polled said they have no asset minimum requirements in order to invest, and while a majority of those surveyed said they seek hedge funds with a history of at least three years, roughly a quarter would consider less, and 14 percent would not eliminate a fund without a track record at all.”

Highlighting the increasing inability of investors to distinguish among strategies, 17 percent of respondents said manager selection is the single most important challenge facing hedge fund investors today. While 95 percent of respondents said clarity of investment philosophy is important or very important in the selection process, more than half of respondents (61 percent) said there are too many look-alike strategies in the hedge fund industry. Given that challenge, more than half of respondents (51 percent) said hedge funds are too complex to evaluate without a consultant’s help. Respondents were decidedly mixed on the importance of brand in the selection process, while operations are clearly a critical aspect in selecting managers, with 80 percent of those polled agreeing that operational strength is a hallmark of an institutional-quality fund.

The white paper is published by the SEI Knowledge Partnership, which provides ongoing business intelligence and guidance to SEI’s investment manager clients. To request the full paper, visit http://www.seic.com/HedgeResearch2012

J.P. Morgan: Countdown to the Foreign Account Tax Compliance Act

Enacted in March 2010, the Foreign Account Tax Compliance Act (FATCA) was conceived as a means to ensure the collection of tax revenues for U.S. persons holding offshore accounts with foreign financial institutions (FFIs). Broadly, this law imposes a new withholding and reporting regime upon all FFIs that invest directly or as an intermediary in U.S. assets. These withholding and reporting requirements add another layer of rules to the existing withholding and reporting rules, including the Qualified Intermediary regime.

Countdown to the Foreign Account Tax Compliance Act

With Which Countries do Tax Havens Share Information?

In recent years tax havens and offshore financial centres have come under increasing political pressure to cooperate with other countries in matters of taxation and efforts to crowd back tax evasion and avoidance. As a result many tax havens have signed tax information exchange agreements (TIEAs). In order to comply with OECD standards tax havens are obliged to sign at least 12 TIEAs with other countries. This paper investigates how tax havens have chosen their partner countries. We ask whether they have signed TIEAs with countries to which they have strong economic links or whether they have systematically avoided doing this, so that information exchange remains ineffective. We analyse 555 TIEAs signed by tax havens in the years 2008-2011 and find that on average tax havens have signed more TIEAs with countries to which they have stronger economic links. Our analysis thus suggests that tax havens do not systematically undermine tax information exchange by signing TIEAs with irrelevant countries. However, this does not mean that they exchange information with all important partner countries.

Jersey: DTA with Hong Kong Can Help Build Business with the Region

Jersey Finance has welcomed the signing of a Double Taxation Agreement (DTA) between Jersey and Hong Kong as another key step in growing business with the Far East.

Signed by Jersey’s Chief Minister Senator Ian Gorst and Hong Kong’s Secretary for Financial Services and the Treasury Professor K C Chan, the agreement reinforces the focus Jersey’s finance industry has on building business in the region and supports Jersey Finance’s strategy of maintaining a strong presence in the Far East. Jersey Finance has had a permanent office in Hong Kong since 2009 and facilitates visits for Members regularly, with the next visit due in the second half of the year.

As well as strengthening the ability to exchange requested tax information with Hong Kong, the agreement is expected to bring significant commercial benefits to Jersey’s finance industry, resolving issues relating to potential double taxation of both corporate and personal incomes, such as business profits, dividends, interest, royalties, income from employment and pensions.

Investment from Hong Kong and China in Jersey remains substantial, with nearly £7 billion of banking deposits emanating from the Far East. The first Chinese company was registered in Jersey in 1994, whilst more recently a number of influential deals have been listed using Jersey companies following approval in 2009 for Jersey holding companies to list on the Hong Kong Stock Exchange. In addition, a quarter of the Chinese companies that have listed in London have done so through Jersey.

Geoff Cook, chief executive, Jersey Finance said:

“That China’s GDP is expected to continue to grow at around 8% reaffirms that there are clear opportunities for Jersey to grow its private wealth management business through its specialist trust and foundation structures and popular expat banking services. Jersey’s flexible company structures also continue to be attractive as capital market activity in Hong Kong accelerates. In all these areas, this DTA will add significantly to the reasons for investors and institutions to have confidence in and choose Jersey as their preferred European financial centre to invest in Western markets.”

Zhaoan Li, Jersey Finance’s Head of Business Development Greater China, added:

“The signing of the agreement comes at a time when a number of Jersey legal and financial services firms are opening offices in Hong Kong, which is fantastic news. Demonstrating a commitment like this to doing business is absolutely vital in the Hong Kong market, so this agreement is really important not just in a technical sense but also because it underpins Jersey’s commercial relationship with Hong Kong too.”

FSC Mauritius signs a MoU with Capital Markets Authority of Kenya

The Financial Services Commission and the Capital Markets Authority of Kenya (CMA) have signed a Memorandum of Understanding (MoU) in Nairobi on Thursday 23 February 2012.

This MOU will promote the integrity, efficiency and financial soundness of the financial institutions in the financial services industry by enhancing the supervision of cross-border transactions and through the fight against money laundering. It also establishes a framework of cooperation to promote mutual assistance in capacity building and to facilitate the exchange of information.

The FSC Mauritius and CMA Kenya have already collaborated in the past. A delegation of CMA Kenya was in Mauritius in 2010 as part of an attachment programme and both organisations are also members of the International Organisation of Securities Commissions (IOSCO) and the Africa Middle East Regional Committee (AMERC). The signing of this MOU will provide a framework to reinforce this collaboration.

The FSC exchanges information on a regular basis with foreign and local authorities to maintain the good repute of the Mauritius jurisdiction– in 2011 more than 100 requests for information were entertained by the FSC from 40 regulatory authorities.

The MoU was signed by Mrs Stella Kilonzo, Chief Executive of CMA Kenya and Ms Clairette Ah-Hen, Chief Executive of the Financial Services Commission, Mauritius.

According to Ms Clairette Ah-Hen, “The FSC is really pleased to sign this MoU with CMA Kenya. This is a step further in terms of our collaboration with our Kenyan counterparts and it will certainly prove to be beneficial for both our organisations in terms of information exchange and capacity building. We hope that collaboration between the regulators will also encourage capital market operators to look at the investment potential offered by our two countries”.

Following this signature, The Financial Services Commission Mauritius now has MoUs with 22 Counterparts. They are as follows:

1. Securities and Exchange Board of India

2. Committee for Insurance, Securities and Non-bank Financial Authorities

3. Financial Services Board of South Africa

4. Malta Financial Services Authority

5. Pensions and Insurance Authority of Zambia

6. Capital Markets Authority of Uganda

7. Namibia Financial Institutions Supervisory Authority

8. Securities and Exchange Commission of Zambia

9. Insurance Supervisory Department of Tanzania

10. Isle of Man’s Financial Supervision Commission

11. Reserve Bank of Malawi

12. South Asian Securities Regulators Forum

13. Central Bank of Lesotho

14. Jersey Financial Services Commission

15. Bank of Mauritius

16. Financial Intelligence Unit, Mauritius

17. Guernsey Financial Services Commission

18. Labuan Financial Services Authority

19. Mauritius Revenue Authority

20. The Competition Commission of Mauritius

21. Statistics Mauritius

22. Capital Markets Authority

The Lawyer: Offshore top 30

Offshore law firms had a strong - and in some cases exceptional - 2011, the results of The Lawyer’s annual offshore survey have revealed.

Profiles of the offshore top 30

Mauritius: Speech of FSC Chief Executive - GIIF Forum Discussion

Global Business Sector in Mauritius: What Orientations?

Regulator’s perspective

16 February 2012, Hennessy Park Hotel, Ebene

Honourable Xavier Luc Duval, Vice-Prime Minister and Minister of Finance and Economic Development

Honourable Dr. A. Boolell, Minister for Foreign Affairs

Mr. Nikhil Treeboohun, CEO GIIF

Mr. Ben Lim, GIIF Chair of Technical Committee on GBC 2

Mr. Sridhar Nagarajan, CEO, Standard Chartered Bank

Industry Partners

Ladies and Gentlemen

Introduction

I am pleased to address you this afternoon on the orientations of Global Business Sector from a regulator’s viewpoint.

Challenges - International context

Yes, there are challenges ahead – some of us may be better prepared and will thrive while many others will be fighting for survival. The financial landscape has been subject to transitions from the aftermath of the financial crisis. Various initiatives were adopted and Global standards of what is considered to be best practice will continue to emerge. Following the call of G20 to strengthen the global financial system by fortifying prudential oversight, improving risk management, promoting transparency and reinforcing international cooperation, we have seen the increased demands for compliance by international standard setters and institutions – OECD, FSB, Basel, IOSCO, IAIS, IOPS etc...

G20 & OECD

Since 2008, the G20 has been the main political driving force behind action to counter tax havens and non cooperative jurisdictions. There were serious concerns that IFCs lack transparency and exchange of information.

President Obama said in May 2009: "On the campaign, I used to talk about the outrage of a building in the Cayman Islands that had over 12,000 business -- businesses claim this building as their headquarters. And I've said before, either this is the largest building in the world or the largest tax scam in the world. And I think the American people know which it is. It's the kind of tax scam that we need to end."

The tax returns of Mitt Romney, the likely Republican Party candidate for US president, which were released last month (January 2012) showed that he had funds in the Cayman Islands, Ireland and Luxembourg.

With US Presidential campaigns in full swing, issue of Tax Haven – IFCs will be back in the limelight.

The declaration that followed June’s 2010 G20 Summit in Toronto stated:

"We are addressing non-cooperative jurisdictions based on comprehensive, consistent, and transparent assessment with respect to tax havens, the fight against money laundering and terrorist financing and the adherence to prudential standards”.

Mauritius has however, according to the OECD peer review report, over the years developed a legal and regulatory framework that gives its competent authority broad access to the full range of foreseeable relevant information. Mauritius has been categorised since 02 April 2009 as a jurisdiction which has substantially implemented the internationally agreed tax standard.

The OECD report further highlights the fact that Mauritius being a small and open economy is dynamic, diversified and fully integrated into world markets; and confirms the status of Mauritius as a trusted, transparent and well-established International Financial Centre.

Despite such positive report, Mauritius Jurisdiction runs the risk of bad publicity, if all of us (operators - professionals and regulators) do not demonstrate the highest level of competence and compliance with standards.

India DTC

The Mauritius-India treaty has been in the limelight for many years, but more so in the last year and we have seen wide swings in the mood of operators – doomsday pessimism or reassured optimism. (Our Ministers have already given you a fair account of the situation and I am not going to spend too much time on the agreement between the two countries). But this limelight means that the global business sector in Mauritius is being brought under additional scrutiny. The FSC as a regulator will need to strengthen its supervision in order to ensure that the Indian conditions are complied with.

RFI

The FSC attended 109 (From India - SEBI: 5 and RBI: 7) and 12 requests for information from foreign and local counterparts for the period ending December 2011 and the period January 2012 respectively.

Management Companies will also be called upon to strengthen their procedures and internal control and demonstrate compliance.

Other Challenges

There are several other challenges such as:

1.	ensuring that Mauritius retains its good repute as a jurisdiction and ensuring a level playing field.
2.	meeting international norms and standards and upgrading our rankings on international platform. This also requires responsibilities from Management Companies in terms of performing CDD and fit and propriety of clients.
3.	maintaining close collaboration and fostering dialogue between the industry and the regulator

1. Good repute of the Jurisdiction

This is not just a question of making changes to legislation, but also a question of implementation (Walk the talk). We need to show that we are taking appropriate steps to increase transparency of our global business sector – be it by providing accurate and timely information to IMF-SDDS exercise – so as to ensure that Mauritius data is available to the public and thus provide better information to international financial markets or through the sharing of Information with other regulatory agencies.

The memorandum of understanding between the FSC and BOM has recently been amended to enable Mauritius to comply with one of the requirements of IOSCO and to become a signatory of the IOSCO MMOU.

Level playing field

We, in Mauritius, need to accept that we do have a monopoly on knowledge and there are a number of other countries in the Indian Ocean (Seychelles) or on African Continent (Botswana, Rwanda and Ghana – to name a few) fast developing their financial services sector (taking on board what we have developed over the last 20 years and implementing same within 2 years). While accepting that increased competition is good, we have to recognise that our strategy and policy should not be one based on “cost” which often leads to downgrades, but one which is based on global standard of best practice and which depends on expertise, professionalism as well as institutional and capital systems to support it. Using a regulated firm and jurisdiction brings a degree of comfort to investors.

The FSC too has forged a robust regulatory framework with the right balance between the need for regulation and business development.

• • Efficiency – improved process and infrastructure
• • Cut Red Tape – take away defunct and archaic rules that hinder development
• • Better information for faster decisions
• • Boost financial literacy and business skills

In line with business facilitation, the FSC presented the Global Business Guide in January 2012 to facilitate the application by the service providers for a global business licence and thus further improve the licensing process.

2.Meeting international norms and standards and upgrading our rankings on international platform.

Financial markets today are innovating at a rapid pace with the evolving investor needs and profiles. Regulators therefore adapt the rules in response to changing conditions in the global marketplace to prevent new products escaping the proper regulatory scrutiny.

Adherence to international norms and standards will be used as a benchmark to assess the degree of regulatory development and compliance with international requirements. These international initiatives include those of FATF, Basel, IOPS, IOSCO and IAIS.

Meeting Standards in the global business sector

• Risk Based Supervision framework (IAIS,IOSCO,IOPS, FSB)

• Code of Corporate Governance (IAIS,IOSCO,IOPS)

• Revised AML/CFT Code (FATF)

• Submission of statutory documents (OECD, IASB)

– IFRS standards

– GBC2: Financial summaries, business plan & beneficial owners

• Joint Supervision - BOM/FSC Committee (FSB)

• Tax Residence Certificate (MRA/FSC)

Being a member of such international organizations and the FSC being a member presence of Mauritius on such forum would allow the FSC to inter alia:

o participate and positively influence regional/international policies in favour of the financial services sector in Mauritius;

o strengthen the image of Mauritius as an IFC of substance and good repute;

o work towards its strategy of positioning Mauritius as a Hub for Africa; and contribute towards the recognition of Mauritius as an important player in the region

3. maintaining close collaboration and fostering dialogue

We also recognise that the importance of financial services sector to the overall economy has been growing over the past decade. This sector is poised to develop into a sustainable, responsible and profitable industry which will become a vital pillar of our economy.

Contribution of Global Business Sector to the Mauritian economy includes:

a. more than 70% of financial services

1. Important pillar of the economy

b. Direct/Indirect employment possibilities

c. Recognition of Mauritius on international fora

d. propels Mauritius into the increasingly liberalised and globalised world economic environment

Licensees

• •154 Management Companies licensed as at 31 December 2011
• •As at 31 December 2011, total number of licensed GBC’s stand at GBC 1’s: 10,510; GBC 2’s: 16,956
• •Number of newly licensed GBC’s in 2011 for period from January to December 2011: GBC 1’s: 1101; GBC 2’s: 1231.

Through collaboration with other government agencies, service providers and stakeholders in the sector, FSC can contribute to

• • creating value by being a hub beyond being just a gateway
• • diversifying product base and encouraging market penetration of new products;
• • maintaining the good repute of Mauritius as a safe jurisdiction.

Conclusion

The challenges are here and will continue to grow. I am confident that with frank dialogue and mutual efforts by all stakeholders, the global business sector will develop further and will continue to be a contributor to the Mauritian economy.

FATF steps up the fight against money laundering and terrorist financing

The Financial Action Task Force, the global standard-setter in the fight against money laundering and terrorist financing, has revised the Recommendations after more than two years of efforts by member countries. The Recommendations are used by more than 180 governments to combat these crimes. The revisions, made with inputs from governments, the private sector, and civil society, provide authorities with a stronger framework to act against criminals and address new threats to the international financial system.

The cost of money laundering and underlying serious crime is very large, estimated between 2 and 5% of global GDP. The revision will enable national authorities to take more effective action against money laundering and terrorist financing at all levels - from the identification of bank customers opening an account through to investigation, prosecution and forfeiture of assets. At the global level, the FATF will also monitor and take action to promote implementation of the standards.

The revised FATF Recommendations now fully integrate counter-terrorist financing measures with anti-money laundering controls, introduce new measures to counter the financing of the proliferation of weapons of mass destruction, and they will better address the laundering of the proceeds of corruption and tax crimes. They also strengthen the requirements for higher risk situations and allow countries to take a more targeted risk-based approach.

Giancarlo Del Bufalo, the President of the FATF, said:

“Adoption of the revised Recommendations demonstrates countries’ shared commitment to fight money laundering, terrorist financing and the financing of the proliferation of weapons of mass destruction.”

“The revised Recommendations include requirements for stronger safeguards in the financial sector, strengthened law enforcement tools and improved international cooperation.”

The main changes are:

• Combating the financing of the proliferation of weapons of mass destruction through the consistent implementation of targeted financial sanctions when these are called for by the UN Security Council.
• Improved transparency to make it harder for criminals and terrorists to conceal their identities or hide their assets behind legal persons and arrangements.
• Stronger requirements when dealing with politically exposed persons (PEPs).
• Expanding the scope of money laundering predicate offences by including tax crimes.
• An enhanced risk-based approach which enables countries and the private sector to apply their resources more efficiently by focusing on higherrisk areas.
• More effective international cooperation including exchange of information between relevant authorities, conduct of joint investigations, and tracing, freezing and confiscation of illegal assets.
• Better operational tools and a wider range of techniques and powers, both for the financial intelligence units, and for law enforcement to investigate and prosecute money laundering and terrorist financing.

Diamonds: A good deal for Zimbabwe?

Global Witness is publishing a report raising concerns that diamond purchases may help fund the Zimbabwean military. The report, Diamonds: A Good Deal for Zimbabwe?, reveals that several directors of one of the largest mining companies operating in Zimbabwe’s controversial Marange diamond fields are drawn from the Zimbabwean military and police, and highlights the risk that off-budget funding of the security sector could be used to finance violence in any future election.

The report also reveals that 25% of another diamond firm has been given to a company linked with a man widely reported to be President Mugabe’s former personal pilot, and which has an opaque company structure based in tax havens.

“Zimbabwe desperately needs diamond revenues for health and education services, not AK 47s and flash cars for the elite,” said Nick Donovan, senior campaigner at Global Witness, “Zimbabwe must ensure that diamond mining companies are not used as an off-budget cash cow by ZANU PF loyalists in the military and police. If the next election is accompanied by violence there’s a real risk that any bloodshed will be funded by diamond revenues.”

In 2008, the Zimbabwean army took control of the Marange diamond fields using troops and helicopter gunships, killing and wounding many small scale miners in the process. Since then diamond concessions have been allocated to several companies in questionable circumstances.

The report profiles two such companies, Anjin Investments and Mbada Diamonds:

• Anjin Investments claims to be the world’s biggest diamond miner. Anjin is a joint venture between an obscure Zimbabwean firm called Matt Bronze and a Chinese construction company. Anjin’s Zimbabwean board members include senior serving and retired military and police officers, and the Permanent Secretary at the Ministry of Defence.
• Mbada Diamonds. Global Witness’s investigation reveals the company has a complex structure, with associated companies located in secrecy jurisdictions including Mauritius, Hong Kong, British Virgin Islands and Dubai.

“Corporate anonymity and the use of secrecy jurisdictions can be used to hide the true beneficiaries of business deals and have the potential to conceal corruption, tax avoidance or off-budget government spending. The Zimbabwean Government and Mbada should immediately publish all contracts and details of revenue flows to allay such fears,” said Donovan.

The Kimberley Process (KP), the intergovernmental diamond certification scheme, recently approved unlimited diamond exports by Mbada and is considering giving the same endorsement to Anjin. Over the past three years the scheme, which was set up to stop the trade in blood diamonds, has failed to address state-sponsored violence in the Marange diamond fields and resisted calls for reform. Global Witness left the KP in December 2011.

“Given the failures of the KP the diamond industry urgently needs to implement a system of ‘supply chain due diligence’ in order to give consumers the confidence to buy diamonds without any risk that they fund human rights abuses,” concluded Donovan.

Global Witness is recommending that the Zimbabwean Government should:

• Pass legislation that bans serving members in Zimbabwe’s security sector from exerting any control over mining companies – including being the beneficial owners of subsidiaries of companies operating in the country’s sector.
• Immediately audit every concession granted so far in Marange and publish details of the beneficial owners of Mbada and Anjin.

Publication to focus on Guernsey’s qualities as a business centre

A compendium advocating the strengths of Guernsey’s diverse business community is to be published in March.

The Guernsey Review 2012 follows on from the ‘Global Threats and Opportunities’ live debate which was hosted in Guernsey last October by financial news service WealthBriefing.

Lighthouse Media are responsible for compiling the Guernsey Review with assistance from Guernsey Finance who have guided the publishers in selecting appropriate content for an international audience.

The digital edition utilises software that delivers an e-publication in real-time with unlimited reach to any web connected device, it is search engine friendly, fully interactive and will accommodate video content, along with audio or animation, click through links and online response forms, will be distributed globally to subscribers of wealth management media and there will also be a printed version available locally and within the UK’s wealth management sector.

“Following the 2011 Guernsey Review event, hosted by WealthBriefing, it was observed that the island lacks a convenient resource that concisely explains exactly what Guernsey is about. There are plenty of associated websites and periodicals about the island and our diverse finance sector but nothing that presents the facts about the current economic climate, statistical information and government infrastructure,” said Rosie Allsopp, Managing Editor at Lighthouse Media.

The publisher has engaged the services of Guernsey’s leading business practitioners to provide expert commentary about the various business sectors and topics of current interest.

“We have approached experts in both the financial and business support sectors who wish to contribute to the editorial coverage. We are also interested to hear from those who can provide expert commentary on their chosen field,” said Mrs Allsopp.

“It appears that Guernsey will remain under increasing external scrutiny for the foreseeable future. We feel that the Guernsey Review represents an opportunity for the island to dispel some of the myths associated with offshore finance. We are very much targeting those professionals and institutions who possess an interest in Guernsey and its finance sector but the publication will be broad enough to appeal to governments and the larger national and international business communities,” said Jon Taylor, Managing Director of Lighthouse Media.

US: Treasury and IRS Issue Proposed Regulations Under the Foreign Account Tax Compliance Act to Improve Offshore Tax Compliance and Reduce Burden

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today issued comprehensive proposed regulations implementing the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, these provisions target non-compliance by U.S. taxpayers using foreign accounts. The regulations announced today lay out a step-by-step process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions (FFIs), other foreign entities, and U.S. withholding agents.

The proposed regulations implement FATCA’s obligations in stages to minimize burdens and costs consistent with achieving the statute’s compliance objectives. The rules and implementation schedule are also adjusted to allow time for resolving local law limitations to which some FFIs may be subject.

“When taxpayers overseas avoid paying what they owe, other Americans have to bear a disproportionate share of the tax burden. FATCA is an important part of the U.S. government’s effort to address that issue, and these regulations implement FATCA in a way that is targeted and efficient . We believe these efforts will serve as a complement and catalyst to the ongoing global efforts to combat offshore tax evasion.” said Acting Assistant Secretary for Tax Policy Emily S. McMahon.

The proposed regulations will:

• Reduce the administrative burdens associated with identifying U.S. accounts by calibrating due diligence requirements based on the value and risk profile of the account and by permitting FFIs in many cases to rely on information they already collect, including information received to comply with anti-money laundering/“know your customer” rules;
• Expand the categories of FFIs that are deemed to comply with FATCA without the need to enter into an agreement with the IRS, in order to focus the application of FATCA on higher-risk financial institutions that provide services to the global investment community; and
• Phase-in the reporting and withholding obligations of FATCA over an extended transition period to provide sufficient lead time for financial institutions to develop necessary systems and maximize the number of financial institutions that will be able to comply with FATCA.

After many months of intensive discussions with foreign governments, the Treasury Department today also jointly issued a statement with France, Germany, Italy, Spain and the United Kingdom expressing mutual intent to pursue a government-to-government framework for implementing FATCA – an important step toward addressing legal impediments to financial institutions’ ability to comply with the regulations.

The statement does not contemplate an exemption from FATCA for any jurisdiction, but instead offers a framework for information sharing pursuant to existing bilateral income tax treaties and allows FFIs to report the necessary information to their respective governments rather than to the IRS. The joint statement will serve as a model for the United States’ work with other countries, as Treasury officials continue to engage in discussions with foreign governments about the effective and efficient implementation of FATCA by their financial institutions.

FATCA was enacted in 2010 by Congress as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA requires FFIs to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. In order to avoid withholding under FATCA, a participating FFI will have to enter into an agreement with the IRS to:

• Identify U.S. accounts,
• Report certain information to the IRS regarding U.S. accounts, and
• Withhold a 30 percent tax on certain U.S.-connected payments to non-participating FFIs and account holders who are unwilling to provide the required information.

Registration will take place through an online system that will become available by Jan. 1, 2013. FFIs that do not register and enter into an agreement with the IRS will be subject to withholding on certain types of payments relating to U.S. investments.

Treasury and IRS will continue to work closely with businesses and foreign governments to implement FATCA effectively. Updates and further information on FATCA can be found by visiting the FATCA page on www.IRS.gov

Mauritius: FSC and BOM sign Protocol to Reinforce Exchange of Information

A Protocol to amend the existing Memorandum of Understanding (MoU) regarding the exchange of information between the Financial Services Commission (FSC) and the Bank of Mauritius (BOM) was signed on February 8, at the BoM Tower in Port Louis.

The MoU was originally signed in December 2002 to set out the framework for co-operation between BoM and the FSC in their common pursuit to maintain a safe, efficient and stable financial system in Mauritius.

The amendments will help reinforce the framework for effective exchange of information between the two organisations and will position Mauritius on the same level as other internationally recognised financial centres and reaffirm the two organisations' commitment to collaborate further to safeguard the stability of the domestic financial system.

Moreover it will enable Mauritius to comply with the requirements imposed under the International Organisation of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding (MMoU).

The International Organisation of Securities Commissions is a global organisation and standard setter for Securities Regulation worldwide with around 175 members. Its core objectives are: protecting investors, ensuring that markets are safe, efficient and transparent and reducing systematic risk.

The IOSCO MMoU sets an international benchmark for cross-border co-operation which is critical in combating violations of securities and derivatives laws. The MMoU also spells out the specific requirements and modalities on the type of information to be exchanged within legal abilities.

The FSC has been complying with the IOSCO's principles for the past years in matters of exchange of information with its counterparts but some amendments were deemed necessary within its legal framework to enable Mauritius to fully subscribe to the IOSCO Multilateral Memorandum of Understanding (MMoU).

It will be recalled that the reputation of the Mauritius International Financial Centre lies in compliance with standards set by international standard-setting organisations and international norms relating among others to the disclosure and exchange of information.

MOU with Statistics Mauritius

The FSC also signed yesterday an MOU with Statistics Mauritius regarding the exchange of information and collection and compilation of statistics. The MOU which sets the framework of cooperation between the two organisations will help ensure a better coordination for data dissemination and improve the national statistical system based on international norms.

So far the FSC has signed 20 such MOUs with its counterparts which consist of both local and international authorities.

IoM: Minister sets out economic vision for the future

Economic Development Minister John Shimmin MHK has set out his vision to establish the Isle of Man as the world’s leading small international business centre.

He said that delivering further dynamic growth and economic diversity remained at the heart of efforts to secure the future prosperity of the Island.

The Department of Economic Development, which draws together the various revenue generating strands of Government, is driving forward a range of proposals in support of the Chief Minister’s recently announced ‘agenda for change.’

It will continue to work in close partnership with the private sector to develop the Island’s business base, create new employment opportunities, and boost Government income to assist the rebalancing of public finances.

Work will focus on helping existing industries to flourish and identifying new opportunities in order to strengthen the Island’s economic offering and build on the success of the past 25 years.

Minister Shimmin said:

"Our ambition to be seen as the best small international business centre in the world is entirely achievable with the skills and resources we have available in the public and private sectors. We must continue to provide a nimble, responsive and business-focused environment to create the foundations for a prosperous and caring society."

The Minister highlighted the Department of Economic Development’s four main priorities:

• To promote the Isle of Man as a location for international business and finance;
• To seek out and encourage new businesses to establish in the Isle of Man;
• To identify and pursue the development of new business sectors, sub-sectors and markets;
• To support existing businesses in the Island to ensure their continued presence and development.

He described the diversity of the Island’s economy as its "overriding strength" which provided great resilience against a backdrop of ongoing uncertainty in international markets and crisis in the Euro Zone.

While sounding a warning against the dangers of complacency, the Minister said the Island could draw strength and encouragement from its recent economic successes, including:

• Economic performance: growth in Gross Domestic Product (GDP) of 2%;
• E-Gaming: providing nearly 10% of GDP and employing approximately 700 people;
• TT Festival: 2011 visitor numbers up 21% on 2010; sponsorship income up 34%; global TV coverage secures; strong demand for 2012;
• Ship Registry: second fastest growing yacht register in Europe;
• Aircraft Registry: seventh largest business jet register in the world (by volume);
• Entrepreneurship: 47 new businesses established since April 2011 through Small Business Start-Up Scheme.

Minister Shimmin added that his Department was continuing to target overseas markets, with a co-ordinated strategy in place to capitalise on opportunities in countries including China, the Middle East, India, Japan and Korea, in addition to the United Kingdom.

In tandem with these efforts to attract new inwards investment, is a drive to equip the local workforce with the skills and training necessary to meet the employment demands of emerging sectors.

The Department of Economic Development is working collaboratively with the Department of Education and Children and a broad range of industries to ensure future generations can fill jobs in sectors such as hi-tech manufacturing and aerospace engineering.

Minister Shimmin concluded:

"There is no doubt that there are huge challenges ahead, but I am confident that the Isle of Man can adapt to its new realities and embrace the changes required to survive, and indeed, prosper. The Department of Economic Development will continue to work with the private sector to deliver the can-do culture that will underpin our nation’s future success."

Signature of MoU between FSC and Statistics Mauritius

The Financial Services Commission (‘FSC’) has signed a Memorandum of Understanding (‘MoU’) with Statistics Mauritius on 09 February 2012 for cooperation with regards to the collection and compilation of statistics and exchange of information. The MoU sets out a framework of cooperation between Statistics Mauritius and the FSC in their common pursuit to ensure:

• coordination in collecting and processing of data by means of modern technologies, methodology of statistics on the basis of international standards, utilisation of most efficient methods of data dissemination; and
• improvement of the national statistical system based on international norms and standards to increase the reliability and analytical value of data, international comparability of core indicators of financial services statistics.

The MoU was officially signed by the Chief Executive of the Financial Services Commission, Ms. Clairette Ah-Hen and the Director of Statistics Mauritius, Ms. L. F. Cheung Kai Suet.

Ms. Ah-Hen highlighted, in her address, the FSC’s commitment to collaborate in the exchange of information and sharing of data to ensure that Mauritius meets international norms and sustains its reputation as a jurisdiction of substance. The Chief Executive expressed her wish for a continued collaboration with Statistics Mauritius to provide information to investors and promote confidence in Mauritius.

Ms. Cheung Kai Suet said that the MoU provides for a formal structure to collect timely statistics between the two institutions. The Director of Statistics Mauritius highlighted the contribution of the FSC in the SDD initiatives and concluded that the MoU is an additional step to strengthen the existing fruitful collaboration between the Statistics Mauritius and the FSC.

Mauritius: BoM & FSC reinforce framework for effective exchange of information

The Financial Services Commission (FSC) Mauritius and the Bank of Mauritius (BoM) have signed a Protocol to amend the Memorandum of Understanding (MoU) between BoM and the FSC at the Bank of Mauritius Tower, Port Louis, on Wednesday 08 February 2012. The signatories of the Protocol are Mr Yandraduth Googoolye, First Deputy Governor of the Bank of Mauritius and Ms Clairette Ah‐Hen, Chief Executive of the Financial Services Commission.

The MoU was originally signed in December 2002 to set out the framework for cooperation between BoM and the FSC in their common pursuit to maintain a safe, efficient and stable financial system in Mauritius.

The reputation of the Mauritius International Financial Centre, however, lies on compliance with standards set by international standard‐setting organisations and international norms relating, inter alia, to the disclosure and exchange of information.

While the FSC has been complying with the International Organization of Securities Commissions (IOSCO) principles for the past years in matters of exchange of information with its counterparts, there were a few amendments that were required within our legal framework to enable Mauritius to fully subscribe to the IOSCO Multilateral Memorandum of Understanding (MMoU).

The present amendment to the MoU reinforces the framework for effective exchange of information between BoM and the FSC and enables Mauritius to comply with one of the requirements imposed under the IOSCO MMoU.

BoM and the FSC are pleased that the signature of this Protocol will bring Mauritius on the same level as other internationally recognized‐financial centres and reaffirm their commitment to collaborate further to safeguard the stability of the domestic financial system.

Background Information

The International Organization of Securities Commissions, commonly known as IOSCO, was first established as an association of securities regulators in America. In 1983, it started accepting members from around the world. Today, it is considered as a global organization and standard setter for Securities Regulation worldwide and it regroups around 175 members.

The three core objectives of IOSCO are:

1) Protecting investors;

2) Ensuring that markets are fair, efficient and transparent; and

3) Reducing systemic risk.

• IOSCO is now recognised as a global organization, the leading international policy forum for securities regulators, and the standard setter for Securities Regulation.
• The organization's membership regulates more than 95% of the world's securities markets in over 100 jurisdictions and aims to establish and maintain worldwide standards for efficient, orderly and fair markets.

IOSCO Multilateral Memorandum of Understanding (the “MMoU”)

The IOSCO MMoU sets an international benchmark for cross‐border co‐operation which is critical in combating violations of securities and derivatives laws.

The MMoU represents a common understanding amongst its signatories on how they will consult, cooperate, and exchange information for securities regulatory enforcement purposes.

The MMoU itself sets out the specific requirements for what information can be exchanged and how it is to be exchanged: legal ability to compel information; types of information that can be compelled; legal ability to share information; and permissible uses of information.

It also sets out specific requirements regarding the confidentiality of the information exchanged, and ensures that no domestic banking secrecy, blocking laws or regulations prevents securities regulators from sharing this information with their counterparts in other jurisdictions.

UK: Delivering a twin peaks regulatory model within the FSA

In a speech to the British Bankers’ Association, Hector Sants, chief executive of the FSA, gave an update on the progress of the regulatory reform programme. He announced a major milestone in the regulatory reform programme, namely the introduction of a ‘twin peaks’ model operating within the FSA from 2 April 2012.

The new model will mean that banks, building societies, insurers and major investment firms will, from this date, have two groups of supervisors, one focusing on prudential and one focusing on conduct. All other firms (i.e. those not ‘dual regulated’) will be solely supervised by the conduct supervisors.

He explained that the FSA could not completely replicate the approach proposed by the Government in the Financial Services Bill published on 26 January, but he emphasised that the changes would go as far as possible to ensure that the cutover to the new regulatory structure in early 2013 will be seamless.

The key characteristics of the model include:

• Two independent groups of supervisors for banks, building societies, insurers and major investment firms, covering prudential and conduct;
• Supervisors making their own, separate, set of regulatory judgements against different objectives;
• ‘Independent but coordinated regulation’ designed to allow internal coordination between both conduct and prudential supervisors to maximise the exchange of information relevant to their individual objectives, but with supervisors still acting separately when engaging with firms; and
• Retaining the principle of seeking to ensure that regulatory data is only collected once.

He emphasised that the change will embed the forward-looking, judgement-based approach and accelerate the move away from the old reactive style of regulation. He stressed that the changes must not just be structural but must involve behavioural shifts from both supervisors and firms.

Hector Sants said:

“The move to twin peaks is an opportunity to drive home and further embed the move to forward-looking, proactive, judgement-based supervision. It is an opportunity that must not be missed. We must crystallise the change from the old style reactive approach to the new style proactive approach.

“The most important change that will occur at twin peaks, in my judgement, is not the introduction of a new operational framework, but the opportunity to accelerate the process of behavioural change that the FSA embarked on when we began the reform of the supervisory process in the spring of 2008.”

He argued that if this new approach is to work effectively, firms would need to change the way they thought about regulation. Firms will be expected to:

• recognise the importance of aligning their goals with those of the supervisors and society as a whole;
• show a greater willingness to proactively comply with supervisory judgements. “We are not asking firms to forgo their right to challenge their supervisor if their decisions have not been properly made. But we are suggesting that dragging their feet in complying with requests when it is obvious to all that the outcome is in the best interest of society as a whole is not a behaviour which should survive in the new world”; and
• Recognise that this new approach will require greater resources and expertise and thus costs more than the old reactive model which existed prior to the crisis.

Hector Sants concluded:

“It is really important that we must use this opportunity to accelerate the behavioural and cultural change needed in both regulators and firms. The new world of judgement-based regulation needs to be embraced by us all.”