IFC Review - Impact of the G20 BEPS Project

Richard Collier and Philip Greenfield examine how the effect the OECD and G20 BEPS project has had on the international tax environment.

Richard Collier, Tax Partner and Philip Greenfield, Tax Expert , Global Tax Policy, PWC

IFC Review - Incorporation in Offshore Centres: Naughty or Nice

Warren Bailey and Edith Liu examine firms that select a particular legal, regulatory, and disclosure environment by incorporating in an offshore financial center and the implications this decision has on a business and for its shareholders.

Warren Bailey, Professor of Finance, Samuel Curtis Johnson Graduate School of Management, Cornell University, and Edith Liu, Assistant Professor, Charles H Dyson School of Applied Economics and Management, Cornell University

BIZweek Edition 23 – Samedi 29 Novembre 2014

Ponzi Schemes: En avons-nous tiré des leçons?

Vasant Bunwaree, ancien ministre des finances: «Sithanen est un bon technicien, pas forcément un bon ministre»

Biz Alert: Revoilà Ali Mansoor

Kee Cheong à la SBM?

BIZweek Edition 23

FSC Mauritius issues Circular Letter and FAQ on IFRS for SMEs

The Financial Services Commission ("FSC") issues Circular Letter and FAQ on International Financial Reporting Standards ("IFRS") for Small and Medium Entities ("SMEs")

UK: Feasibility Study for the Resettlement of the British Indian Ocean Territory (draft report)

Publication of independent draft feasibility study on resettlement of the British Indian Ocean Territory (BIOT) by its former inhabitants. KPMG were appointed as independent consultants commissioned to carry out this study. Today KPMG will publish its draft final report in full.

In line with its Terms of Reference, the Feasibility Study has examined the full range of options for resettlement on each of the islands of the Territory, including Diego Garcia with its vital military base. Final views are now sought from the Chagossian community and all those with an interest. The study will conclude and issue its final report to Ministers in January 2015.

Infotech 2014: Mauritius reckoned as right ICT investment destination

Mauritius is now reckoned as the right ICT investment destination and outsourcing location and has successfully attracted key ICT players of international repute to do business on the island, the Minister of Information and Communication Technology, Mr Tassarajen Pillay Chedumbrum, said at the opening of the 21st edition of Infotech last night at the Swami Vivekananda International Convention Centre, in Pailles.

Infotech 2014, extending over four days, brings together 32 operators in the ICT sector to showcase their technology and ICT products and services.  The 61 stands booked are expected to attract over 100,000 visitors.

In his address, Minister Pillay Chedumbrum stressed that the development of the ICT sector is high on the agenda of Government and no effort is being spared in promoting and facilitating the development of the ICT industry. ‘Government has wisely and proactively identified Africa as an opportune pole of growth for Mauritius to tap.  The Mauritius-Africa Fund has been established to provide support to local investors to invest in and export to Africa’, he pointed out.

Our ICT sector is steadily strengthening with the setting up of more state-of-the-art technology parks, the availability of outstanding telecommunication services at more competitive rates and the proper harnessing of human resources, said the Minister.  He quoted latest figures indicating that the sector continues to soar with the value added rate to the economy rising by 6,6%, from Rs 19,226 million in 2012 to Rs 20,487 million in 2013.

Speaking about measures to further the development of the ICT sector specifically as regards enhanced internet connectivity, the Minister mentioned the reduction of the International Private Lease Circuits tariffs by 16 % which adds up to a total cut of 80 % since 2005.  In addition, 50,000 houses will be connected to fibre cable by next year compared to 8,000 houses connected this year, he said.  The fibre optic will offer a speed up to 30 Megabytes per second, among the best in the Southern Hemisphere, added Mr Pillay Chedumbrum.

Infotech 2014

Organised by the National Computer Board, Infotech is a major annual event on the ICT calendar.  The aim is to create awareness on emerging technologies and facilitate commercial exchanges in the ICT sector. Entrance is free of charge.

Infotech 2014 includes the following components:

• ICT Exhibition;
• ICT Career Guidance Corner to sensitise secondary school students, school leavers, parents and the public in general on career opportunities and prospects in the ICT-BPO sector.  The Career Guidance Corner will consist of two sections namely a Presentation Section and a Counselling Section;
• Cybersecurity conference to mark Computer Security Day 2014;
• Smart Home Corner to showcase ‘intelligent’ home products and appliances;
• Technopreneurship Corner, a dedicated space to allow technopreneurs increase their visibility by promoting their products/service.  The aim is to promote entrepreneurship in the ICT sector.
• Gaming Zone - a modern technology-driven entertainment platform for young people as well as adults.

FAC payment gateway and Travolutionary booking platform announce integration

First Atlantic Commerce (FAC), a global online payment solutions provider, and Travolutionary, a comparison and booking platform for the travel industry, today announced their affiliation and technical integration.

FAC is a Bermuda-based, feature-rich payment gateway that was established in 1998 to deliver customized and flexible online credit and debit card processing to international corporations across the globe. The company also provides card storage functionality and risk mitigation solutions to its merchants, banks and other gateways.

Travolutionary was designed to allow travel and travel related companies to access disparate travel product sources, intelligently compare, and book them. Their capabilities apply to hotels, flights and car hire products — creating a unique combination of content diversity and rate availability.

Empowering some of the leading travel companies worldwide, the cloud based Travolutionary platform has been integrated to FAC’s gateway, which means that its customers can accept online credit and debit card payments through FAC.

Max Chertkov, Commercial Director of Travolutionary said: “We are happy to add First Atlantic Commerce to our list of payment providers, which offers our customers even more choice. FAC’s merchants will be able to gain instant access to OTA, published and wholesale rates should they choose to use Travolutionary.”

“We are pleased to be working with this highly flexible comparison and booking platform”, said FAC COO, Ronnie Viera. “Travolutionary empowers some of the leading travel companies worldwide and we are happy to be part of that offering.”

FAC is based in the Latin America Caribbean Region and specializes in serving merchants and banks across the Caribbean, Panama and Bermuda as well as in Mauritius, the EU and the UK.

AFRINIC - Careers - Chief Executive Officer (CEO) [Reference: afjob-ceo2014]

AFRINIC seeks to engage a Chief Executive Officer (CEO) who will lead a team of dedicated staff, and work with the Board of Directors to execute the strategic plans of the Company. The CEO will be stationed in Ebène, Mauritius.

ABOUT THE ORGANISATION­

The African Network Information Centre (AFRINIC) is the Regional Internet Registry (RIR) for Africa.  It is responsible for the distribution and management of Internet number resources - IPv4, IPv6 addresses and ASN (Autonomous System Numbers) - for the African region.

AFRINIC’s mission is to provide professional and efficient distribution of Internet number resources to the African Internet community, to support Internet technology usage and infrastructure development across the continent and to strengthen Internet self-governance in Africa by facilitating and encouraging participatory policy development.

AFRINIC operations are overseen by a Board of Directors (BoD) elected by members on a regional or independent representation basis, as defined by Article 11 of its bylaws. Once appointed to the Board, each Director represents and works for the whole region and not their organisations, country or sub-region.

THE ROLE (Ebène Cyber City, Mauritius)

The details of the job and the expectations are fully described in the document “Chief Executive Officer (CEO) Role” available for download here

How to Apply

To apply you should:

1. Submit a full C.V. and a personally signed cover letter that clearly documents your relevant experience in line with the appointment criteria.
2. Include details of expected salary and benefits package in your cover letter.
3. Please also include names, positions, organisations and telephone contact numbers for at least two references, one of who should be your current/most recent employer. If you specifically do not wish referees to be contacted without your permission, please indicate thisWe will only approach referees if you are invited to attend the final interview round and will only do so with your permission.
4. Finally, please ensure that you include your mobile telephone number and email address as well as any dates when you will not be available for interview.

Please email your application to  ceorole@afrinic.net with the reference afjob-ceo2014 in the subject line.

All applications must be received by 17:00 UTC Friday 19th December 2014

UK: High Court holds husband to separation agreement

In L v M [2014] EWHC 2220 (Fam), the High Court held a husband to the fundamental terms of a separation agreement despite his submissions of insufficient disclosure when the agreement was signed, lack of legal advice about the implications of the agreement and that he was no longer financially able to make the agreed payments.

Mauritius Foundation

A previous Trust E in the Channel Islands was wound up and its assets migrated to Foundation E in Mauritius. The wife made an application before Moor J for the Mauritian Foundation to be ordered to disclose the information she requested as husband said he had no control whatsoever over the Foundation which was analogous to a Liechtenstein Anstalt and claimed that he could not therefore obtain the information requested, even if he wished to do so. Moor J granted her application, and recited that it was likely that the judge hearing this case will draw adverse inferences against the husband as to his financial circumstances if this information was not provided.

Mr Bruce Blair QC (sitting as a Deputy High Court Judge):

I have said sufficient to demonstrate the fundamental duty of the Husband to assist the Court in giving chapter and verse about his precise status in and entitlement pursuant to Foundation E (previously trust) structure. It is an elementary principle of English law that the Court will look beneath and beyond the veneer and formality of trust (and analogous) structures so as to identify the extent to which their assets may properly and in reality be considered a marital financial resource. There is a plethora of authority for this proposition. It is, for example, neatly put by Lewison J in Whaley v Whaley [2012] 1 FLR 735 at 761:-

"[113] As I have said, a discretionary beneficiary has no proprietary interest in the fund. But under s 25 of the 1973 Act the court looks at resources; not just at ownership. Thus whether a beneficiary under a discretionary trust has a proprietary interest is not relevant. The resource must be one that is 'likely' to be available. This is the origin of the 'likelihood' test. No judge can make a positive finding about the future: the best that can be done is to assess likelihood. What is relevant is the likelihood of the trust fund or part of it being made available to him, either by income or capital distribution. If the husband were to ask the trustees to advance him capital, would the trustees be likely to do so: Charman v Charman [2005] EWCA Civ 1606, [2006] 2 FLR 422; A v A [2007] EWHC 99 (Fam), [2007] 2 FLR 467?. The question is not one of control of resources: it is one of access to them.

[114] In deciding that question the court must look at the facts realistically. The court will not put 'undue pressure' on trustees to exercise their discretion in a particular way, but may frame an order which affords 'judicious encouragement' to provide one spouse with the means to comply with the court's view of the justice of the case: Thomas v Thomas [1995] 2 FLR 668. The cases do not say what amounts to 'undue pressure'. But in Thomas Glidewell LJ said what would not be undue pressure (viz if:

(a) the interests of other beneficiaries would not be appreciably damaged; and

(b) the court decides that it would be reasonable for the husband to seek to persuade trustees to release more capital to enable him to make proper financial provision for his former wife).

Even if the court makes such an order the trustees are not bound to comply with the husband's request; but it is 'plainly proper for the trustees to take it into account … and commonly it will be decisive': Lewin onTrusts (Sweet & Maxwell, 18th rev edn, 2007), at para 29¬157."

As I have said, the Council of Foundation E consists of the Husband's mother and a person who may well be a figurehead Council member without a true decision-making function. The Husband could clarify such matters if he wished to do so. As Appendix A demonstrates, the Wife asserts that Foundation E holds assets possibly exceeding £20,000,000. The Husband's failure to assist the Court with regard to E is a grave omission, as Moor J. predicted it may prove to be.

TJN: "The end of bank secrecy”? Bridging the gap to effective automatic information exchange

An Evaluation of OECD’s Common Reporting Standard (CRS) and its alternatives

Final Report

SGSS extends South African custody hub to Mauritius

Societe Generale Securities Services (SGSS) has extended its South African custody hub to Mauritius by becoming the first remote participant to receive approval from the Mauritius Financial Services Commission (FSC) to provide comprehensive custody services in the country.

These services will be provided in Mauritius through SGSS’ custody hub in Johannesburg, backed by dedicated teams with extensive experience and expertise in the 11 African markets in which SGSS is present.

SGSS’ pan-African integrated custody platform has been successfully connected to Mauritius’ Central Depository & Settlement Co. Ltd (CDS), the result of close cooperation between SGSS and the Mauritius regulatory authorities to amend local legislation and allow a remote custodian to participate in the market. This initiative enables SGSS to offer domestic and international investors in Mauritius first-class services that are fully compliant with international industry standards.

SGSS offers a full range of securities services in South Africa to a broad client–base of asset managers, global custodians, investment banks and broker dealers. The overall offering in the country now includes both local and global custody, clearing and settlement services across all asset classes, as well as securities lending and treasury solutions.

Extending its custody hub to Mauritius underlines SGSS’ continued commitment to sub-Saharan Africa and represents a further step in its strategy to expand its wider presence across Africa, a continent which is undergoing rapid growth, and to provide domestic and international clients with reliable and quality products and services for their operations and development.

Press Release

New City Agenda - Culture of Banking Report

This report on the culture of British retail banking is the first comprehensive study of what British retail banks have done, and are doing, to tackle the cultural shortcomings which led to the financial crisis and subsequent other scandals. Produced in collaboration with Cass Business School, it has come to the following conclusions:

• Poor Culture has cost customers and banks dearly: Scandals stemming from poor culture in retail banking have cost banks and building societies at least £38.5 billion in fines and redress. Banks have received 20.8 million complaints since the financial crisis, and Which?’s annual aggregated analysis of the results of customer satisfaction surveys – which ask consumers from the general public about their providers – sees Britain’s biggest four banks outranked by smaller, mutual banking providers.
• At the current rate, it will take the entire sector a generation to completely overhaul its culture and practices: The sector is currently dominated by four big banks. Given the current rate of change, a radical overhaul will take a generation. An entire generation of staff have been raised, and some instances promoted, in an aggressive sales culture. There outlooks must be changed. The ‘tone from the top’ is more positive, but many outside observers were sceptical that the ‘tone from the top’ has trickled down to branch level. There was concern about ‘the message getting lost in the middle’, and some staff reported the pressure to sell products persisted in subtler forms.
• Banks are trying to change, with some progress made: Most banks have implemented top-down culture change initiatives, with performance frameworks significantly altered. As a result, banks report that frontline staff are no longer incentivised purely on sales, and some major banks tell us they are training their staff to only sell products they’d be happy selling to their grandmothers. A lot of time has been spent on changing the outlooks and actions of senior executives.

Mauritius: Speech of FSC Chief Executive - Initiatives under the Consumer Education and Financial Literacy Programme

Ladies and Gentlemen

Good Afternoon

It is with great pleasure that I welcome you all to the FSC House today in the context of our Consumer Education and Financial Literacy Programme.

For the soundness and stability of our financial system, FSC Mauritius believes in promoting initiatives that create an enabling environment to make the on-boarding process of all consumers of financial services and products simpler.

As the financial marketplace constantly evolves, investment products are becoming increasingly complex and financial services increasingly diverse. Information is considered as a public good, yet because of increased information asymmetries, I quote Mr David Wright, SG of IOSCO, 'Consumer education has become more important – in fact vital - than ever in order to better balance the huge differences between consumers – dispersed and fragmented – and the financial industry'.

The recent financial crisis has questioned how well businesses deliver consumer financial services and how good regulatory institutions address problems in financial markets – i.e. whether they were fit-for-purpose? Unfortunately the crisis has shown that many were not.

Today, consumers need to have a better understanding of key financial concepts to better comprehend and evaluate the choices available to them as well as to avoid frauds. According to the IMF, “Effective consumer protection and market conduct regulations are key aspects of a responsible finance agenda.”

FSC Mauritius is mandated under Section 6 (f) of the Financial Services Act (FSA) 2007 “to promote public understanding of the financial system including awareness of the benefits and risks associated with different kinds of investment and to take measures for the better protection of consumers of financial services.”

Research and new behavioural economics show that consumer protection can work only if we have long term and sustainable programmes. Given the complexity of today’s financial products, investor education requires a multitude of tools to be a successful and efficient undertaking. Thus those running the financial education programmes must also be innovative, dynamic, flexible and with tremendous staying power.

Section 32 (1) of the FSA 2007 stipulates that the FSC Mauritius “may develop and promote such programmes and initiatives, where it deems it necessary in collaboration with financial institutions or bodies representing the financial services industry, to inform and educate consumers or potential consumers of financial products and financial services.”

At FSC Mauritius, we believe that informed consumers make better financial decisions. Since 2011, when we launched the FSC Young Talent Competition, we chose to adopt an incremental approach to our Consumer Education and Financial Literary Programme. Today, this programme has become an important part of the FSC Mauritius initiatives, leveraging on diverse means and methods to be able to reach out to a maximum number of consumers and potential consumers of financial services and products.

I would like to this opportunity to thank our stakeholders, industry associations and professionals who have provided valuable support as members of the jury panels or entertaining queries from students and also, of course, schools and students for their participation.

FSC Mauritius will continue to enhance these initiatives and ensure that we deliver on our objective of better consumer protection.

The choice of the appropriate media for delivering investor education and financial literacy programmes usually depends on the target audience. In order to achieve the widest exposure, many regulators use all available media.

To reach a wider audience, the FSC Mauritius has created a series of Consumer Education Posters - with our own, specially created characters and Kreol as the chosen language. The first in this series of posters was launched on 12 December 2013 and was on how to protect yourself against financial scams. Since then, other posters have sensitised people on licensing and investing. We distributed these posters in secondary schools, community centres and had them displayed in public places and on our website.

Today, we thank you for being in our midst as we unveil the latest developments under our Consumer Education and Financial Literacy Programme.

To start with, we are launching ProtectYourFinance.com, the dedicated FSC Mauritius consumer education website, to reach out to current and potential consumers of financial services of all ages and income groups, in a medium which is becoming more popular (incontournable) day by day. As pointed out by the IMF 'Technological innovation is perhaps the most promising way to advance financial inclusion.'

Other initiatives we will be sharing with you today include:

• A Financial Literacy Snake and Ladders Game – we have customised the Snake and Ladders Game concept to pass on key messages on financial terms and what to do and not to do, in particular in respect of investment (more traditional but still as enjoyable and fun - for all ages); and
• The Launch of our fourth poster on how to deal with Insurance Complaints (connaissance pour empêche li faire la liane)

Going back to www.protectyourfinance.com, we believe that the website’s simplicity, ease of use and most importantly, our friendly mascot whom we refer to by the initials:- O.W.L. will appeal to the public. Our Mascot's initials O.W.L. stand for (you have probably already guessed since it is very intelligent) One Who Learns. It is worth noting that the website is not intended to give legal or  professional advice but to provide general guidance so that consumers can make informed decisions about their finance.

We hope you will add www.protectyourfinance.com to your ‘favourites' as well as regularly provide us with your feedback.

On this note, I would like to thank the whole team - the staff at FSC, our trainees, the young IT specialists (Aeris and CodeVigor) and artist Laval Ng (Aztlan) - behind the initiatives that we are launching today. I wish you a nice browsing on protectyourfinance.com and Be Wise with Your Money.

Clairette Ah-Hen

24 November 2014

Sebi reprimands HSBC Securities, India Star in Global Offshore case

The Securites and Exchange Board of India (Sebi) reprimands a Mauritius GBC 1 for failing to reach the standards of disclosures expected under the SEBI Circular dated March 08, 2004. 

UK NAO: The effective management of tax reliefs

HM Treasury and HMRC have not established a framework or principles to guide the administration of tax reliefs, according to today’s report from the National Audit Office.

This reflects the Exchequer Departments’ view that tax reliefs do not have administrative implications that differentiate them from other parts of the tax system. The NAO concludes that the Departments’ defence of this principle, coupled with the desire not to be more accountable for reliefs, is costing the exchequer money.

Tax reliefs are diverse in nature, serving a variety of needs. Some are structural parts of the tax system, to improve ‘progressivity’ or to ensure the correct calculation of profits. Other reliefs, sometimes described as ‘tax expenditures’, are designed to encourage a particular behaviour towards a social or economic policy objective.

The NAO today reveals that HM Treasury and HMRC have not identified which tax reliefs are intended to change behaviour in order to deliver targeted policy objectives. They also do not monitor or report their costs and benefits in a way that would allow wider government, Parliament or the public to know if such reliefs are working as intended. Not all reliefs lend themselves to such analysis, but some do. The NAO believes this creates a significant gap in accountability to Parliament for administrating public finances effectively.

This also means that significant risks can go undetected: that tax reliefs cost more than expected; that they are used in ways not intended by Parliament; or that they do not bring about intended behaviour change.

The spending watchdog looked specifically at how HMRC administers 10 tax reliefs, and found that in three of those cases the Department responded with varying degrees of urgency to the evidence of abuse.

HMRC detected large-scale abuse of share loss relief in 2006-07 but did not check the total amount of claims in 2006-07 or subsequent years to check whether there were other unexplained surges. In 2006-07, the cost of claims against income tax for share loss relief rose from £385 million to £1,206 million in real terms. HMRC is investigating 80% of the 2006-07 claims by value (£964 million). Avoidance activity has continued and HMRC has detected 20 undisclosed schemes between 2005-06 and 2011-12. It has opened investigations into 60% of all claims. The amount of relief that HMRC is considering in tax terms over that period is £780 million.

HMRC has carried out only limited analysis to investigate why the cost of entrepreneurs’ relief has significantly outstripped its forecast, increasing over 500% from £500 million in 2008–09, to an estimated £2.9 billion in 2013-14 and whether the cost increase might be influenced by misuse of the relief.

Business culture in banking industry favors dishonest behavior

Bank employees are not more dishonest than employees in other industries. However, the business culture in the banking industry implicitly favors dishonest behavior, as an economic study at the University of Zurich indicates. A change in norms would thus be important in order to improve the battered image of the industry. 

In the past years, there have often been cases of fraud in the banking industry, which have led to a considerable loss of image for banks. Are bank employees by nature less honest people? Or does the business culture in the banking sector favor dishonest behavior? These questions formed the basis for a new study by Alain Cohn, Ernst Fehr, and Michel Maréchal from the Department of Economics at the University of Zurich. Their results show that bank employees are in principle not more dishonest than their colleagues in other industries. The findings indicate, however, that the business culture in the banking sector implicitly favors dishonest behavior. The results suggest that the implementation of a healthy business culture is of great importance in order to restore trust in the banking industry.

Occupational norms implicitly favor dishonest behavior in bankers

The scientists recruited approximately 200 bank employees, 128 from a large international bank and 80 from other banks. Each person was then randomly assigned to one of two experimental conditions. In the experimental group, the participants were reminded of their occupational role and the associated behavioral norms with appropriate questions. In contrast, the subjects in the control group were reminded of their non-occupational role in their leisure time and the associated norms. Subsequently, all participants completed a task that would allow them to increase their income by up to two hundred US dollars if they behaved dishonestly. The result was that bank employees in the experimental group, where their occupational role in the banking sector was made salient, behaved significantly more dishonestly.

A very similar study was then conducted with employees from various other industries. In this case as well, either the employees’ occupational roles or those associated with leisure time were activated. Unlike the bankers, however, the employees in these other industries were not more dishonest when reminded of their occupational role. “Our results suggest that the social norms in the banking sector tend to be more lenient towards dishonest behavior and thus contribute to the reputational loss in the industry,” says Michel Maréchal, Professor for Experimental Economic Research at the University of Zurich.

A change in norms is needed in the banking industry

Social norms that are implicitly more lenient towards dishonesty are problematic, because the people’s trust in bank employees’ behavior is of great importance for the long-term stability of the financial services industry. Alain Cohn, who recently joined the Booth School of Business at the University of Chicago as a postdoctoral scholar, suggests concrete measures that could counteract the problem: “The banks could encourage honest behavior by changing the industry’s implicit social norms. Several experts and supervisory authorities suggest, for example, that bank employees should take a professional oath, similar to the Hippocratic Oath for physicians.” If an oath like this were supported with a corresponding training program in ethics and appropriate financial incentives, this could lead bank employees to focus more strongly on the long-term, social effects of their behavior instead of concentrating on their own, short-term gains.

Literature:

Alain Cohn, Ernst Fehr, and Michel André Maréchal. Business culture and dishonesty in the banking industry. Nature. November 19, 2014. doi: 10.1038/nature13977

2016 Mercedes-Maybach S600

With the world premiere in Guangzhou and the presentation in Los Angeles, the new Mercedes-Maybach S-Class will be unveiled almost simultaneously in its two key markets of China and the USA. At 214.6 inches long and with a wheelbase of 132.5 inches, the flagship of the Mercedes-Benz model range is 8.1 inches larger in both dimensions than the S-Class Sedan. Rear passengers benefit from this increased size as well as from standard equipment that includes executive seats on both the left and right sides and other exclusive details. In the rear, the Mercedes-Maybach S-Class is also the world's quietest production sedan.

Press Release

Appleby Mauritius selects Linedata to support growth in fund and private equity administration

Linedata (NYSE Euronext: LIN), the global solutions provider dedicated to the investment management and credit industries, today announced that Appleby Management (Mauritius) Ltd (Appleby) has selected Linedata Admin Edge to run its administration services in Mauritius as it gears up for expansion into new markets.

Appleby chose to switch to Linedata for its superior client service and excellent ROI, as well as a need for platform flexibility and breadth of coverage to enable it to meet its growth plans.

Appleby is one of the world’s largest providers of offshore legal, fiduciary and administration services, with a presence in twelve jurisdictions around the world. Appleby Mauritius has increasingly expanded into private equity funds and closed-end vehicles, with a focus on Africa, whilst retaining and growing its current administration business. The firm sought an integrated fund administration platform which could cover traditional, hedge and private equity funds, with sufficient breadth of instrument coverage, flexibility and scalability to meet its immediate and future needs. The fact that Linedata Admin Edge had a record of being regulation-ready well in advance of deadlines, including for FATCA, was important, as was the flexible, multi-lingual investor reporting and web portal.

Malcolm Moller, Managing Partner – Mauritius of Appleby commented, “Although changing systems can potentially be an onerous task, we took a strategic view. Linedata Admin Edge can support us in our current business and our immediate future needs as we expand our fund administration services. Not only that, but the flexibility, scalability, web-readiness and automation capabilities of the platform mean that we are confident of Linedata’s ability to continue to support us as we further expand Appleby’s client base in the region.”

Linedata and Appleby worked together to ensure that Linedata Admin Edge was fully implemented and live within eight weeks for Appleby’s fund accounting and transfer agency business.

Thierry Soret, Head of Back Office Asset Management at Linedata, remarked, “We are delighted to welcome Appleby as a client. We are seeing many more fund administrators taking on private equity business as they broaden their portfolios in line with changing client requirements. This previously niche market is growing, moving more into the mainstream and Linedata is well placed to serve it. Linedata Admin Edge can handle traditional, hedge and private equity funds, coupled with excellent client support in all time zones and great cost effectiveness.”

NYDFS Announces Bank Of Tokyo Mitsubishi UFJ To Pay Additional $315 Million Penalty For Misleading Regulators, Individual Bank Employees Will Resign And Accept Bans

BTMU Pressured its Consultant, PwC, to Remove Key Warnings to Regulators on Bank’s Transactions with Sanctioned Countries, Including Iran, Sudan, Myanmar

PwC Previously Received 24-Month Consulting Ban, Paid $25 Million for Misconduct in This Case Under August 2014 DFS Order

Benjamin M. Lawsky, Superintendent of Financial Services, today announced an enforcement action – including an additional $315 million monetary penalty, and disciplinary action for individual Bank employees – against Bank of Tokyo Mitsubishi UFJ (BTMU) for misleading regulators regarding its transactions with Iran, Sudan, Myanmar, and other sanctioned entities. A year-long New York State Department of Financial Services (DFS) investigation uncovered that BTMU employees pressured the Bank's consultant, PricewaterhouseCoopers (PwC), into removing key warnings to regulators in a supposedly "objective" report that the Bank submitted to DFS. That report related to the extent of BTMU’s illicit conduct on behalf of those sanctioned countries and entities.

Superintendent Lawsky said: "BTMU employees pressured PwC into watering down a supposedly objective report on the Bank's dealings with Iran and other sanctioned countries, thereby misleading regulators. It is clear that we – as a regulatory community – must work aggressively to reform the cozy relationship between banks and consultants, which far too often has resulted in shoddy work that sweeps wrongdoing under the rug."​

Under today’s DFS order, BTMU will pay an additional $315 million monetary penalty – beyond a $250 million penalty BTMU paid in a previous June 2013 DFS agreement over its sanctioned transactions. As such, the total monetary penalty that BTMU has paid in this case is $565 million. Additionally, at the direction of DFS, the Bank will also take disciplinary action against individual BTMU compliance personnel involved in the watering down of the PwC report.

• After demands from DFS that BTMU terminate his employment, Tetsuro Anan (Manager, Anti-money Laundering Compliance Office, Compliance Division) has resigned from BTMU. On multiple occasions, despite being responsible for anti-money laundering compliance, Tetsuro Anan asked PwC to remove from its report specific issues of material concern to regulators about the Bank's misconduct.
• Additionally, two former Bank compliance employees who now work at BTMU affiliates – Akira Kamiya (Deputy President, Mitsubishi UFJ Securities Holdings) and Tetsuji Kamisawa (Executive Deputy President, Defined Contribution Plan Consulting of Japan)  – will be banned from conducting business involving any New York banks (or other financial institutions) regulated by the Department, including BTMU's New York branch.

Superintendent Lawsky continued: “We continue to believe that fines – while often necessary – are not sufficient to deter misconduct on Wall Street. We must also work to impose individual accountability, where appropriate, and clearly proven, on specific bank employees that engaged in wrongdoing.”

BTMU Pressured PwC to Alter Report Bank Submitted to Regulators

PwC – under pressure from BTMU executives – improperly altered an "historical transaction review" (HTR) report submitted to regulators on wire transfers that the Bank performed on behalf of sanctioned countries and entities. During the last month of a year-long engagement, PwC found that BTMU had issued special instructions to Bank employees to strip wire messages of information that would have triggered sanctions compliance alerts – after the Bank denied having such a policy only weeks before in a meeting with regulators. PwC understood that this improper data manipulation could significantly compromise the HTR’s integrity and PwC inserted into an earlier draft of the report an express acknowledgement informing regulators that "had PwC know[n] about these special instructions at the initial Phase of the HTR then we would have used a different approach in completing this project." Specifically, PwC would have conducted a more in-depth, forensic investigation into the Bank's scheme – rather than simply a more rote, mechanical review of the transactions provided to it by the Bank. In other words, the discovery of the Bank's scheme to falsify wire transfer information cast doubts on whether PwC had a complete set of data to review (among other issues).

However, at the Bank’s request, PwC ultimately removed the original warning language from the final HTR Report the Bank submitted to regulators and, in fact, inserted a passage stating the exact opposite conclusion: "[W]e have concluded that the written instructions would not have impacted the completeness of the data available for the HTR and our methodology to process and search the HTR data was appropriate." Moreover, also at the Bank’s request, PwC removed other key information from drafts of the HTR Report, including:

• deleting the English translation of BTMU’s wire stripping instructions, which referenced the Bank doing business with "enemy countries" of the U.S.;
• deleting a regulatory term of art that PwC used throughout the report in describing BTMU’s wire-stripping instructions ("Special Instruction") and replacing it with a nondescript reference that lacked regulatory significance ("Written Instruction");
• deleting most of PwC’s discussion of BTMU’s wire-stripping activities;
• deleting information concerning BTMU’s potential misuse of OFAC screening software in connection with its wire-stripping activities;
• deleting several forensic questions that PwC identified as necessary for consideration in connection with the HTR Report; and
• deleting a section of the HTR Report that discussed the appearance of special characters (such as "#" "-" and ",") in wire transfer messages, which disabled PwC’s filtering system from detecting at least several transactions involving Sudan and Myanmar. (e.g. SUD#AN).

BTMU Violations of Law 

In today’s order, BTMU admits that it misled DFS and that it:

• failed to maintain or make available at its New York Branch true and accurate books, accounts and records reflecting all transactions and actions in violation of Banking Law § 200-c; and
• knowingly violated the Department’s regulation 3 NYCRR § 300.1, which requires BTMU to submit a report to the Superintendent immediately upon the discovery of fraud, dishonesty, making of false entries and omissions of true entries, and other misconduct, whether or not a criminal offense, in which any BTMU employee was involved; and
• knowingly made or caused to be made false entries in its books, reports and statements and omitted to make true entries of material particularly pertaining to the U.S. dollar clearing business of BTMU through its New York Branch or other New York-based financial institutions, misleading the Superintendent and examiners of the Department who were lawfully appointed to examine BTMU’s conditions and affairs.

Extension of Independent Consultant

Under the previous June 2013 settlement, DFS ordered BTMU to install an independent consultant (IC) to conduct a review of the Bank’s sanctions compliance programs, policies and procedures. Under today's order, at the conclusion of the IC’s engagement in March 2015, the Department shall in its sole discretion, determine if an extension of the engagement is required for a period of up to 18 months. This consultant has and will adhere to the code of conduct, anti-tampering provisions and other reforms that DFS has outlined for consulting engagements following the Department’s June 2013 enforcement action against Deloitte. That code of conduct is designed to help ensure the independence and autonomy of the consultant from the bank, and to make explicit that the consultant works for DFS rather than BTMU.

The Bank further agrees to relocate its U.S. Bank Secrecy Act/Anti-money Laundering Compliance (BSA/AML) and Office of Foreign Assets Control (OFAC) sanctions compliance programs to New York, and agrees that these programs will have U.S. compliance oversight over all transactions affecting the New York Branch, including those transactions performed outside the U.S. that affect the New York Branch.  The IC will oversee, evaluate, and test the implementation of those programs, as well as the BSA/AML and OFAC sanctions compliance programs that operate outside the U.S. and relate to transactions affecting the New York Branch. 

View copy of NYDFS order today regarding BTMU

FCA: The vital relationship between the regulator and the advisory industry

Speech by John Griffith-Jones, Chairman of the FCA, at The Association of Professional Financial Advisers (APFA) Annual Gala Dinner delivered at Banking Hall, London. This is the text of the speech as drafted, which may differ from the delivered version.

Ladies and gentlemen, it’s a great pleasure and privilege to join everyone this evening.

A pleasure because I am a great believer in the importance of APFA and the advisor community and a privilege because, as I’ve discovered to my cost over  the last year and half or so, when you become a regulator, good dinner party invitations are rather few and far between.

The relationship between the FCA and the advisory industry is a vital one, and has arguably never been more important than now to get right.

For consumers to access wisely such a competitive market it is essential that there are experts available to help them navigate the array of complex decisions that face them.

When I first arrived at the FCA, I made it my business to find out how the organisation was viewed not only by the largest firms, but also by the smaller ones, which include many, many advisory practices.

The most mentioned messages I got back from the advisory community around the country were threefold.

We want to do the right thing, we certainly don't want to get into trouble with you or the FOS, but your rules are complicated.

We want to have access to you when we need to understand something, particularly new rules.

And, the commonly understood meaning of the words "advice" vs "guidance" and "restricted" vs "independence" has been severely stressed.

I have appreciated the first, worked at the second, and have to acknowledge the third is an issue we have sought to address.

The message I did not get was a rejection of RDR overall.

Having said that I also rather vividly recall my first meeting with a senior politician who rather forcefully suggested to me that the whole thing should be delayed by a year for fear of the industry being unable to cope, and that we risked some kind of market failure.

Eighteen months on, and you all look remarkably alive and well.

And as it has turned out, the reforms to the at-retirement market that will come into play next year will only increase the need and value of quality financial advice from you.

Out of potential adversity comes opportunity. So, we both share the common and urgent aim of helping consumers to achieve their financial goals and to plan for their long term futures.

For many people, the best way to do this will be through the assistance of an advisor.

It is perhaps because the industry is so important that we have been talking about ways it could be improved for so long, and that so much well intentioned (and for the most part good natured) debate has been generated.

It is now over 8 years since my predecessors (officially) began talking about the need for a collective shift away from product and provider bias, toward an appropriately regulated distribution system.

In the past 5 years we have seen significant change - in the main for the better – from an industry where there was reliance by many advisory firms on product providers for remuneration by commission, for training and for other support, to one that is more resilient, and more transparent with its customers in terms of price and services.

In many respects the early days of change were all about distribution, hence the name, Retail Distribution Review, however alongside these changes we have seen an equally significant shift toward an industry with increased standards of professionalism.

This is important, because the old FSA always saw the RDR as creating the framework for the industry to turn itself into a profession.

We are seeing this transformation happening in practice, and we want to support and encourage this transformation.

And for us, when we talk about professionalism, we mean something more than just professional qualifications and certificates.

Rather we mean a state of mind that dictates how you conduct yourself and how you conduct your firm when dealing with customers.

We have all learnt somewhat painfully from the banking sector that tone at the top is no substitute for tone at the till in the eyes of the public.

I am sure the same is true for financial advisors.

The questions we therefore ask ourselves in conducting our work are:

• What is the firm’s business model? 
• What is the culture of the firm?
• How does it run its business?
• And does it keep the client at the heart of its business, in practice as well as in theory?

This is our focus and this is very different from what you may have seen in the past. It is a focus that permeates the whole of the firm, from advisers through to office managers, compliance and senior management.  

Less on what compliance boxes the firm ticks, more on whether it is putting professionalism into practice at the interface with the client.

And we see it as very much our role to facilitate this transition from industry to profession.

The message from me is that we very much want you to succeed in this journey.

Indeed, we can only fully meet our objective if you do.

So just like firms we must be open and transparent.

In this spirit of openness, we recently published the outcomes of our work on the perceived ‘expectations gap’ between regulators and industry.

This work considered how any differences in understanding between regulators and industry might affect the quality of products and services that consumers receive, or inhibit consumer-friendly innovation.

We have asked the industry whether market development was being held back by uncertainty around our rules, or concerns over retrospection.

We have launched Project Innovate, and we are consulting on guidance on what is, and what is not, a personal recommendation.

We have carried out two 'cycles' of thematic work looking at how firms are adapting to the post-RDR rules. A third cycle is currently under way.

So is our post-implementation review which I look forward with some combination of nervousness and optimism.

After all RDR has not been cost free. It will be important to make as thorough an assessment as we can of whether the exercise has been worthwhile at this stage of its journey.

We as your regulator must be big enough to admit that we may not always get it completely right, and that when we don’t, we make sure we listen to common sense.

In this vein and in response to industry feedback, we have recently clarified our rules on independent financial advisers using internal specialists, and have made our data reporting less burdensome.  

Equally, there remains much talk of the number of people who do not have access, for one reason or another, to advice.

The reasons for this are well rehearsed, if not universally agreed.

We are very sensitive to this point, not least because our objective is to make markets work well, not just to stop them working badly, which can be achieved by preventing them from working at all!

We are particularly interested in the use of technology to lower the cost of appropriate advice or guidance to those whose assets are insufficient to meet economically current typical charges.

The FCA was born just after the RDR came into effect and I would be understating the case if I were to say that the RDR did not receive universal support among advisers, when first discussed.

Given the scale of these reforms, it is hardly surprising that they elicited what I will generously describe as a "mixed response".

However, it is difficult to disagree with the reforms’ broad aims.

Indeed, over the coming years MiFID II will help embed the principles of transparency, bias-free investment advice and professionalism, which were central to our RDR reforms, across Europe.

While we have come a long way, we still have a way to go yet. While we will not always agree on everything, I can assure you that we will always listen and that our door is always open.

It is through discussions with bodies like APFA that allow us to hear from the industry and to sense check our thinking.

Taxing across Borders: Tracking Personal Wealth and Corporate Profits

This article attempts to estimate the magnitude of corporate tax avoidance and personal tax evasion through offshore tax havens. US corporations book 20 percent of their profits in tax havens, a tenfold increase since the 1980; their effective tax rate has declined from 30 to 20 percent over the last 15 years, and about two-thirds of this decline can be attributed to increased international tax avoidance. Globally, 8 percent of the world's personal financial wealth is held offshore, costing more than $200 billion to governments every year. Despite ambitious policy initiatives, profit shifting to tax havens and offshore wealth are rising.

Taxing Across Borders: Tracking Personal Wealth and Corporate Profits, Journal of Economic Perspectives, 2014, 28(4): 121-148. [Appendix]. [Data].

Mauritius: FSC Mauritius issues FAQ on Funeral Plan

FREQUENTLY ASKED QUESTIONS (‘FAQs’)

FUNERAL PLAN

1. Why is the Financial Services Commission, Mauritius (the ‘FSC Mauritius’) issuing an FAQ on Funeral Plan?

The FSC Mauritius is issuing this ‘FAQ on Funeral Plan’ following several requests received from members of the public enquiring as to whether the FSC Mauritius regulates Funeral Plans.

The FSC Mauritius wishes to inform the public that Funeral Plans, as currently being offered in Mauritius, do not fall under the definition of financial services. Therefore, Funeral Plans are not regulated and/or supervised by the FSC Mauritius.

2. What is a Funeral Plan?

A Funeral Plan is a method used for planning and paying in advance for a funeral.

Funeral Plans may be proposed under different names. Some Funeral Plans available on the market are known as ‘Memorial Service’, ‘Burial Plan’, ‘Funeral Scheme’, ‘Funeral Insurance Plan’ and ‘Life Celebrations’.

A Funeral Plan is a legally binding contract between the funeral service provider and the planholder. Generally, in the Funeral Plan, the funeral service provider undertakes to perform the funeral of the plan-holder upon his/her death, as per terms and conditions specified in the contract.

Payment for a Funeral Plan is usually made through a series of instalments.

3. Why do people opt for a Funeral Plan?

a. A Funeral Plan allows the person (plan-holder) to bring a personal touch to his own funeral with regards to the choice of hymns, coffin, and hearse amongst others. 

b. By fixing the cost of funeral at the current price, the person (plan-holder) may avoid the increasing cost of funerals.

c. It brings peace of mind to the plan-holder who, having already catered for the

organisation of his funeral, relieves his family of stress and hassles upon his death.

4. What are the possible remedies, in the event that the services provided by the Funeral Service Provider are not satisfactory?

Some of the possible remedies may be as follows:

a. to refer to the Funeral Plan contract with regards to the Terms and Conditions (in terms of what has been agreed; avenues for claims if any);

b. to refer to the Laws of Contract;

c. the surviving spouse/ heirs to lodge a civil suit against the funeral service provider and/or seek legal advice; and

d. to liaise with the Police in case there is suspicion of any fraudulent activity or misleading information.

5. Are Funeral Service Providers licensed by FSC Mauritius?

The FSC Mauritius is the independent regulator for the Non-Bank Financial Services and Global Business sectors in Mauritius.

Funeral Plans, as currently offered in Mauritius, do not fall under the definition of financial services. Therefore, Funeral Plans are not licensed nor regulated/supervised by the FSC Mauritius. 

Financial Services Commission

18 November 2014

FSC Mauritius issues FAQ on Funeral Plan

The Lawyer - Offshore special: Singapore focus

Offshore players have high hopes of Singapore but for now the work is limited, so increased competition could stymie firms’ growth

Mauritius: Post Office Round Trips

As a reforming Mauritius promises to help India hunt black money, other laundering sources open up

Which offshore financial centre is the best?

The traditional use of offshore centres as a way of enabling better tax planning – and even tax evasion – has all but fallen away. An increasing desire for countries to share tax information to ensure they are not missing out on any revenue has led to a tightening of legislation in offshore financial centres, which has given depositors more security than ever

U.S. SEC Announces Charges Against India-Based Operators of High-Yield Investment Scheme Using Social Media

The Securities and Exchange Commission today announced charges against two India-based operators of an alleged high-yield investment scheme seeking to exploit investors through pervasive social media pitches on Facebook, YouTube, and Twitter.

The SEC’s Enforcement Division alleges that Pankaj Srivastava and Nataraj Kavuri offered “guaranteed” daily profits as they anonymously solicited investments for their purported investment management company called Profits Paradise.  They invited investors to deposit funds that supposedly would be pooled with money from other investors and traded on foreign exchanges as well as in stocks and commodities.  They created a Profits Paradise website and related social media sites to describe the profits as “huge,” “lucrative,” and “handsome,” and they characterized the risk as “minimal.”

The SEC’s Enforcement Division alleges that the guaranteed returns were false, and that the investments being offered bore the hallmark of a fraudulent high-yield investment program.  Srivastava and Kavuri attempted to conceal their identities by supplying a fictitious name and contact information when registering Profits Paradise’s website address.  They also communicated under the fake names of “Paul Allen” and “Nathan Jones.”  After the SEC began its investigation into the investment offering, the Profits Paradise website was discontinued.

“Srivastava and Kavuri used excessive secrecy in their effort to swindle investors through social media outreach and a website that attracted as many as 4,000 visitors per day,” said Stephen Cohen, Associate Director of the SEC’s Division of Enforcement.  “Our investigation stopped the constant solicitations once the website disappeared, and successfully tracked down the identities of the perpetrators behind those fraudulent solicitations.”

According to the SEC’s order instituting administrative proceedings, Srivastava and Kavuri used the Profits Paradise website and YouTube videos to detail three investment plans with terms of 120 business days.  The first plan purportedly yielded daily interest of 1.5 percent on investments of $10 to $749.  The second plan purportedly yielded 1.75 percent on investments of $750 to $3,499.  And the third plan purportedly yielded 2 percent on investments of $3,500 and above.  Postings on Profit Paradise’s Facebook page promised investors they could “Enjoy Hassle Free Income” and advertised a “5% Referral Commission.”  The scheme also utilized a Profits Paradise Twitter account to steer potential investors to the Profits Paradise website, and Srivastava and Kavuri created a Google Plus page to promote the investment opportunity.

The SEC’s Enforcement Division alleges that Srivastava and Kavuri violated Sections 17(a)(1) and (3) of the Securities Act of 1933, and will litigate the matter before an administrative law judge.

The SEC’s investigation was conducted by Carolyn Kurr and Daniel Rubenstein, and the case was supervised by C. Joshua Felker.  The SEC’s litigation will be led by Kenneth Donnelly.  The SEC appreciates the assistance of the Securities and Exchange Board of India as well as the Autorité des Marchés Financiers in Quebec, the Ontario Securities Commission, and the Securities and Futures Commission in Hong Kong.

The SEC today updated an investor alert educating investors about how social media may be used to promote so-called high-yield investment programs and other fraudulent investment schemes. 

“We urge investors to exercise extreme caution if they are approached to invest in a website promising incredible returns with minimal or no risk.  So-called high-yield investment programs are often frauds,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy.