Kamal Hawabhay: …of Global Business, BEPS, DTAs, Panama Papers etc…

Beware of the campaign of skewed information or misinformation (…out of sheer ignorance or by design?) that is being meted out by so called investigative journalists & certain writers internationally and unfortunately reinforced by our very own local Jacks of All Trades! The target is one of the economic sectors of Mauritius which the IMF itself, on page 61 of its 2015 ARTICLE IV CONSULTATION—PRESS RELEASE (the “Report”) dated March 2016, describes as an “enormous Global Business Companies (GBC) sector”!

L'Express

The good and not-so-good in the Mauritius tax treaty

A little after Prime Minister Narendra Modi visited Mauritius in March 2015, India’s negotiators were at work on redrawing a historic agreement signed over 30 years ago between the two governments. That was the Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion, relating to taxing income and capital gains, which was signed in August 1982, and notified by the Indian government in December 1983, when Indira Gandhi was Prime Minister and Pranab Mukherjee her Finance Minister. The double taxation avoidance agreement, which provides for exemption from capital gains tax in Mauritius, has been at the centre of negotiations between the two countries for close to two decades — with concerns over the abuse of the treaty, and round-tripping of funds of Indians through Mauritius back to their home country in the form of foreign investment.

Mauritius International Financial Centre: This time is different?

Mauritius is at the cornerstone of significant changes domestically and internationally. Since 2 years, the country experienced a change in government, a major financial scandal, uncertainty on the double tax agreement with India, and a slowing down of overall productive activity. As I write this paper, the Honourable Minister of Financial Services is on the forefront explaining the accord which has been signed with India, which will comprise a sharing of taxation on capital gains from 2017 till 2019. India offered as grant around Rs 12.7 Billion to help Mauritius to grow its financial sector and its economy at large.  Much of the political and economic debate is about the future development of Mauritius, which from what I can understand will gravitate around smart cities, the transformational change of the financial sector, the port and the marine economy. Whether these reforms will work or not will depend on the attractiveness (rate of return) of the country and how adaptable Mauritius will be in view of these changes. This paper will underline the main opportunities/difficulties Mauritius will face in developing its financial centre and how important it is to adopt an extremely open strategy towards the core parameters of this sector.

Davin Appanah studied in Paris. He worked as a Quant/Structurer/Trader on Interest Rate and Exotic Derivatives within the investment banking sector for more than 10 years in Paris and some time in New York.  His areas of interests are financial mathematics modelling, interest rate derivatives, quantitative hedge fund strategies, Python and MATLAB, market microstructure and financial microeconomics.

L'Express

India-Mauritius Tax Protocol Marks a Changing Zeitgeist

India has taken full advantage of the current tax zeitgeist. But it will do well to remember that in all developed jurisdictions of the world, greater scrutiny of taxpayers has gone hand in hand with fair, clear and predictable tax systems. The question now is whether India will ensure that there are adequate safeguards in place to meet the expectations of a fair tax regime. If the Indian revenue is perceived as arbitrary or worse, tyrannical by the taxpayers, India might have won the Mauritius battle but would have lost the tax war.

The emergence of lawfare

The security of individual nations and the wider world is protected through many means, force or diplomacy, culture or environment. Law is increasingly deployed as an alternative to military force, although its use dates back as far as international law itself. Even private sector and other non-governmental attorneys play a leading role in lawfare.

• Analyzes the benefits and practices of "lawfare"-a security maneuver countries can use instead of armed force in international disputes
• Examines how private attorneys can come to play a large role in these international maneuvers
• Illustrates the concept with real-world examples of lawfare use by the US, China, Iran, Israel, Palestine, and others

Rama Sithanen: ‘We are in deep trouble. We are in a hole... ... and Bhadain keeps digging with conceited fury and arrogant zeal’

Following the signing of the revised Mauritius-India Double Tax Avoidance Agreement (DTAA) the mood among economic and financial players is definitely gloomy. The consequences for Mauritius as regards investment and our economic future are likely to be severe and impact several sectors negatively. Our guest is economist and former Minister of Finance Rama Sithanen, who gives our readers a no-holds barred view of the negotiations and the expected fallouts, in a semi-technical language that will make it accessible to the understanding of our readers.

Mauritius Times

Managing the Global Business Sector post 10/5

We will have to give something more to get over the substance of the DTAA which now has shifted away to India

-- Anil Gujadhur

Many have been shocked by the news about the amendment effected on 10th May to the India-Mauritius Double Tax Avoidance Agreement (DTAA). The advantages Mauritius was deriving as a global business centre looked suddenly withdrawn. We conceded at one stroke all that India has been insisting upon for long.

Mauritius Times

A Gradual but Continuing Hit against the economy

This week saw the signing off of a significant amendment to our Double Tax Avoidance Agreement with India dating back to 1983. Mauritius’ Global Business sector is still reeling from the unexpected concession made by us in this regard. The ‘coup’ is programmed to start hurting the sector immediately by changing international investors’ perception of Mauritius at first. The final blow is programmed to be delivered as from 1st April 2017. Thereafter, it is India which takes over the right the DTAA conferred on us to charge capital gains tax on investments made by companies resident in Mauritius investing in India.

Mauritius Times

The Mauritius Loophole: The Story Of Its Origin And How India Finally Managed To Shut It

Between 2001 and 2011 nearly 40% of all FDI that came to India came from Mauritius - thanks to a loophole that exempted such investments from capital gains tax.

India and Mauritius have recently agreed to amend a 1982 treaty between the two countries that would effectively seal this loophole.

Here is the story of how (and why) the loophole came into existence.

EPW: Mauritius No Longer India's Treasure Island

Was the decision to amend the treaty with Mauritius an answer to the growing criticism within the country and outside to plug loopholes that blatantly facilitated conversion of black money into white by moving funds quickly through different no-tax jurisdictions, a phenomenon sometimes described as “treaty shopping”? Senior officials in the Ministry of Finance have acknowledged that the old treaty with Mauritius had become untenable in view of the government’s intention to implement a general anti-avoidance rule or GAAR aimed at curbing tax avoidance with effect from April 2017.

EPW: Revisiting Capital Gains Tax on Securities in India

India has one of lowest tax-gross domestic product ratios in the world. There is a need to utilise every tax instrument, including the capital gains tax on securities, to broaden the tax base. Comparing tax-GDP ratio and capital gains tax on securities across G-20 countries, the paper argues for eliminating the distinction of long-term and short-term capital gains classification and move towards progressive taxation of both. Estimates for revenue potential of the desired capital gains tax regime further substantiate the argument. Revenue loss estimates, on account of Double Tax Avoidance Agreement with respect to capital gains, with low tax jurisdictions like Mauritius and Singapore, are provided to give a comprehensive view with respect to capital gains tax policy in India.

Bank of Mauritius: Double Tax Avoidance Agreement between Mauritius and India

Following concerns expressed in the media and in certain quarters regarding the likely impact of the revision of the DTAA between Mauritius and India, the Bank wishes to highlight some recent trends in the evolution of the robustness of the domestic banking system for the benefit of the public

India: Grandfathering provision may lead to FDI surge from Mauritius

The government expects a one-time surge in foreign direct investment (FDI) and portfolio inflows to take advantage of the few months that the India-Mauritius treaty will remain in its current form before recently announced changes take effect. 

The biggest share of this could be venture capital going into startups, analysts said.

India-Mauritius tax protocol: Investors taxed over grey zone in pact

There's a grey zone in the new rules of the game between India and Mauritius. 

Many offshore institutional investors, private equity houses and portfolio managers - which used vehicles in Mauritius to buy convertible instruments of Indian companies - are unclear whether they would be taxed if the conversion of these securities happens on or after 1 April 2017.

Mauritius - DTAA with India: The death sentence signed?

Was it a death sentence that was signed on Tuesday? After years of tenacious negotiations between Mauritius and India, the latter finally won the match against Mauritius this week in the long battle to revisit the sensitive Double Taxation Avoidance Agreement (DTAA) that has been unarguably the backbone of a flourishing sector which has had a crucial weight in the whole financial services industry of Mauritius up to now.

Protocol amending the Convention between the Government of Mauritius and the Government of the Republic Of India for the Avoidance Of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains, and for the Encouragement of Mutual Trade and Investment

This Protocol amending the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains between India and Mauritius was signed by both countries on 10 May 2016 at Port Louis, Mauritius.

India: After Mauritius tax treaty, government looking to rework pact with Singapore

After successfully amending the 33-year-old India-Mauritius tax treaty to prevent loss of revenue and round-tripping, New Delhi is now looking to start talks with Singapore to tweak the double taxation avoidance agreement (DTAA) with the nation to plug any similar leakages. 

Moody's: Banks - Mauritius: Resilient Economy, Strong Capital Provides Support but Offshore Sector Holds Liquidity and Asset Quality Risks

While Mauritian banks are supported by their strong capital buffers and the country's resilient economy, they face risks stemming from their large offshore exposure and asset quality pressures, Moody's Investors Service said in a report published today.

Mauritius has stable operating conditions, with real GDP expected to grow by 3.5% in 2016, supported by public investment and low oil prices. Moody's expects credit growth of 6%-7% will support banks' profitability which will remain broadly flat in 2016, and the banks' sound capital ratios.

''We expect the sector's Tier 1 capital ratio to remain strong, at around 16% by end-2016, supported by moderate growth in risk-weighted assets and relatively low dividend pay-outs'', said Elena Panayiotou, Assistant Vice President -- Analyst and co-author of the report.

Mauritius's offshore sector, however, is a source of vulnerability for the economy and the banks. The offshore sector, which according to the International Monetary Fund holds assets worth more than $630 billion, is vulnerable to any revision of the Double Tax Avoidance Agreement Treaties, an intensification of efforts to counter tax avoidance or a significant increase in the country's tax rates.

"Any disruption to the offshore sector would expose the Mauritian economy and banking sector to contagion risks," adds Constantinos Kypreos, a Vice-President and Senior Credit Officer. For banks, offshore deposits account for a significant proportion of the total liabilities (in excess of 40%), hence any significant withdrawals would affect their funding bases, leading to deleveraging pressures.

Another source of vulnerability for the Indian Ocean island's banks are the high concentrations of loans to local conglomerates. Problems at one company can affect the whole conglomerate, which is typically exposed to numerous banks.

Problem loans comprised 7% of gross loans as of September 2015. Moody's expects credit risks to remain high due to sizeable borrower concentrations, heavy exposure to the troubled construction sector and offshore lending estimated at 53% of total loans, primarily in India and Africa.

Africa’s growth: meltdown or slowdown?

Economic growth across the region is likely to remain slower in coming years than it has been over the past 10 to 15 years. The International Monetary Fund’s (IMF) projection for 2016 is now down to 3%, from what was a forecasted 6.1% in April 2015.

The main reasons for a relative slowdown are not unique to Africa and are the same as those weighing down the global economy: a general slowdown in emerging market economies, and in particular the rebalancing of China’s economy; ongoing stagnation in most developed economies; lower commodity prices; and higher borrowing costs.

However, although growth in region has relatively slowed, two-thirds of Sub-Saharan African economies are still growing at rates above the global average, and will remain the second fastest-growing region in the world for the foreseeable future, after Emerging Asia. This is further supported by the year-on-year increase in FDI project numbers in Africa in 2015 that occurred in a context in which the total number of FDI projects globally dropped by 5%. In fact, Africa was one of only two regions in the world in which there was growth in the number of FDI projects over the past year.

Sugan Palanee, Africa Markets Leader at EY says, “From an investment perspective, the next few years may be challenging – this is not because the opportunities are no longer there, but rather because these opportunities are likely to be more uneven than they have been. It is now more important than ever for organizations and investors, who sometimes place to great an emphasis on shorter term economic growth trends, to adopt a granular, fact-based approach to assessing investment and business opportunities for the long-term.”

Measuring potential and progress: the Africa Attractiveness Index

To support investors in adapting to a more uncertain environment and to assess variable opportunities and risks across the continent, the EY Africa Attractiveness Index (AAI) tool provides a balanced set of shorter and longer term-focused metrics. The index helps to measure both likely resilience in the face of current macroeconomic pressures, as well as progress being made in critical areas of longer-term development, namely governance, diversification, infrastructure, business enablement and human development.

Michael Lalor, EY’s Lead Partner Africa Business Center, comments, “It is important to recognize that this kind of indexed ranking does not provide a definitive assessment of any of these markets; there are obviously no absolute answers in searching for market potential. However, the Africa Attractiveness Index does provide a useful starting point for analysis and helps enable a strategic dialogue on growth priorities, risk appetite and investment criteria.”

EY Africa Attractiveness Index country ranking

The index illustrates that:

• Despite macroeconomic challenges (and a low-growth environment): South Africa still outperforms most other African economies due to relatively high scores across every other dimension (partly a reflection of the fact that the South African economy is more developed than any other African economy).
• Kenya and Cote d’Ivoire benefit from strong economic growth performance and prospects, with both performing moderately well in terms of infrastructure and business enablement.
• Botswana, Mauritius and Rwanda, although small markets, have all got a strong track record in areas of business enablement, social development and economic management, and so perform relatively well.
• The North African countries of Egypt, Morocco, Tunisia, as well as Ghana, in West Africa, remain under some pressure economically, but have the advantage of a relatively business-friendly environment, good infrastructure and, in the case of Ghana, a strong governance track record.
• Nigeria’s relative ”underperformance” on the AAI (ranked at number fifteen overall) is perhaps somewhat surprising; while the Nigerian economy ranks as one of the most resilient in Africa, lower scores on the business enablement, governance and human development pillars are reflected in the overall ranking.
• Similarly, other high-growth economies like Tanzania, Uganda and Ethiopia are all ranked in the top 10 in terms of macroeconomic resilience (with Ethiopia at number one, but are also relative underperformers on other longer-term focused dimensions.

The index clearly indicates that there will be different answers for different organizations and investors with different priorities; and as priorities change over time, so will the answers.

Lalor concludes, “Given the scale, complexity and fragmented nature of the African continent, making well-informed choices about which markets to enter when and via which mode will be more critical than ever. A country’s macroeconomic resilience is also only one of several factors that investors and organizations needs to consider when conducting this kind of analysis. We are at an inflection point in terms of the structural evolution of most African economies; decisions made and actions taken now will determine, which of these economies consolidate the gains made over the past decade as a platform for sustainable growth in coming decades, and which of them begin to slide backward.”

EY’s attractiveness program Africa 2016 - Navigating Africa’s current uncertainties

EY’s attractiveness program Africa 2016 - Staying the course

India Changes Investment Treaty With Mauritius: Foreign Investment In India To Fall

India has negotiated a change in the investment treaty the country has with Mauritius. The net effect of this will be that foreign investment into India will fall and in the future the wages of the average Indian worker will be lower than they would have been without this change. This is not what we might call good public policy: but that’s the way governments tend to think about these things. Far more important that they get their slice of tax money than that the economy in general be encouraged to grow. It’s important to note that this analysis is not as the result of some strange neoliberal or right wing theory. This is the absolutely standard view about the taxation of capital investment. The more it’s taxed, and especially the more foreign capital is taxed, then the greater the effect on domestic wages.

Forbes

Who gains, who loses in new tax pact with Mauritius? Will FIIs run away?

The Press Note states that the protocol amends the prevailing residence based tax regime under the India-Mauritius DTAA and gives India a source based right to tax capital gains which arise from alienation of shares of an Indian resident company acquired by a Mauritian tax resident.

However, the protocol provides for grandfathering of investments and the revised position shall only be applicable to investments made on or after April 1, 2017. In other words, all existing investments up to March 31, 2017 have been grandfathered and exits/shares transfers beyond this date will not be subject to capital gains tax in India.

Additionally, the protocol introduces a limitation of benefits provision which shall be a prerequisite for a reduced rate of tax (50% of domestic tax rate) on capital gains arising during a two year transitionary period from April 01, 2017 to March 31, 2019. Further, the article on exchange of information has also been updated to match the prevailing international standards.

The Economic Times

Mauritius Hosts the 23rd International Council for Commercial Arbitration Congress

Arbitration is one of the peaceful means to resolve many disputes at the negotiating table and the United Nations has contributed significantly to the development of international arbitration, said the Secretary-General of the United Nations, Mr Ban Ki-Moon, yesterday in his keynote address at the 23rd International Council for Commercial Arbitration (ICCA) Congress. Mr Ban Ki-Moon is on a three-day official visit to Mauritius.

The Congress is being held from 8 to 11 May 2016 at the Swami Vivekananda International Convention Centre in Pailles. In his address, he recalled that Mauritius was chosen as the host for the ICCA Congress because of the progress that Mauritius has made to improve its legal system for international arbitration and to position itself as a centre of excellence for international arbitration in Africa.

This progress includes the adoption of the International Arbitration Act 2008 (IAA), an advanced law based on the UNCITRAL Model Law, with further refinements to make the Mauritian legal system for international arbitration as supportive and attractive as possible. Mauritius has also put in place institutions and systems which support international arbitration, he said.

According to the Secretary-General, arbitration contributes to economic development, protects human rights and deepens partnerships of business community. It also helps the world to overcome hatred and upholds dignity, he added. According to him, a robust legal system ensuring the rule of law is often seen as a necessity both for economic development and the protection of human rights.

For his part, the Prime Minister, Sir Anerood Jugnauth, pointed out that international arbitration is now the global dispute resolution mechanism. Mauritius has taken the lead in our region in this field, and has shown consistent determination and flexibility in improving our system to cater for international arbitration matters. This reflects our understanding of the importance of international arbitration. The effort made by Mauritius in the field of international arbitration is also part of a broder approach which underlies the development of our economy in recent decades, he said.

Speaking about the rule of law, the Prime Minister said that Mauritius has always been a country in which the respect for the rule of law has been deeply anchored in the Constitution as well as in the society. Our courts are fiercely independent, he said, and enjoy protections such as genuine and effective security of tenure, which allow them to do their work entirely free from outside influence.

Sir Anerood Jugnauth stressed that Africa has been an important participant in international arbitration proceedings in recent years and in this context, Mauritius is positioning itself to become a centre of excellence for international arbitration.  

ICCA 2016 Mauritius: The first African ICCA Congress

Delegates from Europe, Africa, the Americas, Asia and Australia are focusing on the subject of international arbitration and the rule of law. The Congress is serving as a platform to enable delegates to be up to date with the latest developments in the subject and to be involved in the discussions that will shape developments in the field in years to come.

The ICCA Congress is the largest regular conference devoted to international arbitration. It takes place every two years, on each occasion in a different city. The host city for the Congress is selected by ICCA on the grounds that it is a place which has made significant recent advancements as a venue and centre for international arbitration. The 2012 Congress, held in Singapore, and the 2014 Congress, held in Miami, each attracted over 1,000 delegates.

The Congress is a major academic and professional event, representing a significant milestone in the advancement of international arbitration law and practice. It includes presentations of papers from the leading experts in the field of international arbitration, as well as substantial opportunities for discussion and sharing of ideas.

Jersey Financial Services Commission (JFSC) action taken re Mossack Fonseca

Since the initial publication of the Panama Papers, the Jersey Financial Services Commission (JFSC) has been closely monitoring developments and any relevant connections between Jersey financial services practitioners and the Panamanian firm Mossack Fonseca or any other subject material that has so far emerged into the public domain from the Panama Papers publication.

The JFSC, as quoted in the media has relied primarily on self-disclosure by licensed and regulated financial firms in Jersey as there has been a high level of awareness amongst the regulated community of their obligations in this respect under both local anti-money laundering legislation and the relevant Codes of Practice issued by the JFSC. The Codes set requirements for conduct of business in the jurisdiction with a clear expectation for open and transparent reporting to the JFSC of significant matters.

This process has yielded a relatively small number of such relevant connections to date, all of which are being scrutinized carefully. Some are very historic and none to date suggest significant evidence of misconduct or failure to identify correctly persons for whom Jersey financial practitioners are acting, or other important anti-money laundering information such as source of wealth and purpose of business being conducted.

The level of attention globally generated by the Panama Papers matter, linked to further anticipated public disclosures covering worldwide financial dealings over the coming days, suggest that the authorities in Jersey should be as well prepared as possible to offer further detailed comment on any arising matter for this jurisdiction. Accordingly, the JFSC has now set out a more structured request for information from financial services firms regulated by the JFSC in order to be as fully sighted as possible on material connections to Jersey which may require further follow up, scrutiny or possibly in what it would anticipate to be rare cases a level of formal investigation.

This request should not be read as an indication that we expect Jersey to be any more linked to the developing Panama Papers situation than has until now been the case with the few connections made to date. Nonetheless, the JFSC is of the view that a comprehensive and clear understanding of all such connections to Jersey would be timely and relevant in the current situation, above all to be assured that the conduct of Jersey financial practitioners is as expected and that any such connections are set in a relevant context given current high levels of global media attention.

John Harris, Director General, commented:

“We realise that in a fast moving and demanding situation such as this, flexibility is required and two of the JFSC's key objectives, are aiming to protect the reputation of Jersey in commercial and financial matters and in so doing pursuing the Island's best economic interests. These aims will always guide our actions and we are monitoring the developing events very carefully and will take any appropriate action needed.”

India signs revised tax treaty with Mauritius

In a bid to prevent "abuse" of the tax avoidance treaty, India today signed with Mauritius an amendment to the pact to get rights to tax capital gains on shares of Indian company sold after April 1, 2017.

With the signing of the amendment to the Double Taxation Avoidance Convention (DTAC) with Mauritius, sale of shares of an Indian resident company will be taxed at 50 per cent of the applicable rate between April 1, 2017, to March 31, 2019.

Full capital gains tax will apply from April 1, 2019.

"The Protocol will tackle the long pending issues of treaty abuse and round tripping of funds attributed to the India-Mauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment and stimulate the flow of exchange of information between India and Mauritius," a finance ministry statement said.

India had in 1983 signed a Double Taxation Avoidance Treaty with the island nation of just 1.3 million people which had become one of the biggest single source of foreign direct investment into India.

New Delhi had often complained about the deal's terms as a chunk of the funds were not real foreign investment but Indians routing cash through the island to avoid domestic taxes, a practice known as "round tripping".

And today an amendment to DTAC was signed in a bid to ensure that firms in Mauritius that invest in India are not just 'shell' companies who could earlier avoid paying capital gains tax in India. The DTAC till now provided that capital gains on sale of assets in India by companies registered in Mauritius can only be taxed in Mauritius. While short-term capital gains are taxed at 10 per cent in India, they are exempt in Mauritius. So, such companies escape paying taxes in both countries.

The Protocol for amendment of the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains between India and Mauritius was signed at Port Louis, Mauritius today.

Revenue Secretary Hasmukh Adhia said that the treaty amendment "brings about a certainty in taxation matters for foreign investors".

ICIJ releases database revealing thousands of secret offshore companies

The International Consortium of Investigative Journalists publishes today a searchable database that strips away the secrecy of nearly 214,000 offshore entities created in 21 jurisdictions, from Nevada to Hong Kong and the British Virgin Islands.

The data, part of the Panama Papers investigation, is the largest ever release of information about offshore companies and the people behind them. This includes, when available, the names of the real owners of those opaque structures.

The database also displays information about more than 100,000 additional offshore entities ICIJ had already disclosed in its 2013 Offshore Leaks investigation.

ICIJ is publishing the information in the public interest.

The new data that ICIJ is now making public represents a fraction of the Panama Papers, a trove of more than 11.5 million leaked files from the Panama-based law firm Mossack Fonseca, one of the world’s top creators of hard-to-trace companies, trusts and foundations.

ICIJ is not publishing the totality of the leak, and it is not disclosing raw documents or personal information en masse. The database contains a great deal of information about company owners, proxies and intermediaries in secrecy jurisdictions, but it doesn’t disclose bank accounts, email exchanges and financial transactions contained in the documents.

Panama Papers - Legal Implications for Lawyers

On Lawyer 2 Lawyer, hosts Bob Ambrogi and Craig Williams join Jessica Tillipman, the assistant dean for field placement at George Washington Law School, and Professor William Byrnes, a member of the law faculty and an associate dean with Texas A&M University School of Law, as they take an inside look at the Panama Papers. They discuss Mossack Fonseca’s role, shell companies and offshore bank accounts, the issue of data security, tax evasion, investigations into these clients, and the future of Mossack Fonseca.

A 12 Point Practical Checklist: The Consequences of 40 Years of Tax Haven Secrets Revealed

In light of recent events relating to leaked documents, Howard Fisher, Alexander Fisher and Geoffrey Morson explore what happened and ponder the consequences for ‘offshore’ service providers who ignore their obligations, they look at the potential problems clients may face and provide the following ‘12-Point Practical Checklist’ for onshore and offshore advisors when dealing with clients and customers, especially those clients with a US connection:   

• Adopt and implement a genuine and sincere compliance culture within your organisation and remember: ethical conduct starts at the top. 
• Adopt and implement due diligence for your legacy transactions as well as for all ongoing and future ones.  Audit yourself, before an outsider does it.  Transnational companies need to be mindful of multi-jurisdictional conflicts in the requirements of due diligence and compliance.  Think globally but act locally. 
• Be aware of the full range of investigative powers and “dawn raid” powers of your local regulators and that they may be acting at the request of foreign governments and sharing data with them. 
• Be aware of the hundreds of crimes over which the US asserts extra-territorial jurisdiction and may seek extradition. 
• Be aware that the USA may now be coming after individuals as well as enterprises. 
• Be mindful of the many different ways that the term “ultimate beneficial ownership” may be interpreted from country to country and from situation to situation.   Use common sense.  Look behind the smoke and mirrors.  Do the right thing that reflects the realities. 
• KYC.  Really and truly Know Your Customer.   Ask your customers straight questions and require straight answers and then document them. And then periodically refresh them by asking the customers about any “changed circumstances”. 
• Be wary of “asset protection” plans that are simply disguised “fraudulent transfers”, designed to evade tax, conceal the proceeds of crime or evade lawful creditors. 
• “He who trains avoids the pains”.  Institute regular training sessions in your organisation.  This will not only help steer the organisation and its personnel clear of trouble:  but if mistakes do occur, it helps show your regulatory agencies (and insurers) that the errors were an aberration, not the result of culpable negligence or the result of systematic lack of internal controls or “wilful blindness.” 
• Comply with FATCA, AEoI / GATCA / CRS and all applicable laws. 
• Don’t overlook cybersecurity and keep monitoring and update it.  If data breaches do occur, take appropriate steps to notify your regulators and customers. 
• Consult with your legal advisors, but note that in many countries the confidentiality of the attorney-client relationship is only granted for outside lawyers, not to in-house counsel, let alone to accountants and other non-lawyers.

India: Government clarification on issues regarding M/S Agusta Westland International Limited (AWIL)

In the matter pertaining to acquisition of Agusta Westland helicopters, the undisputed central issue that stands out is corruption, especially bribery. Any other line of assumption, approach and effort, as is being attempted in some quarters, is misleading, tries to hide the wrong-doers and is driven by instincts of self preservation. 

Ever since the new government was given the responsibility to serve the people, it has acted with speed, drive and purpose to empower the country's masses. It continues to relentlessly pursue fearless and transparent governance. One of the core goals of our governance has been to unearth and uproot corruption, and punish the corrupt. 

It is indeed tragic that a small section of the Indian polity has attempted, unsuccessfully, to divert and diffuse the public discourse on this matter. They question the speed of the government processes, especially the investigation. But, they do not ask how the corrupt influenced the process of acquisition in the first place and bled the nation. They do not admit corruption; they instead boldly proclaim, "catch us if you can". 

The present government has taken effective action to bring out the truth and will leave no stone unturned in pursuing all means to bring to justice the corrupt and the wrong-doers in this case. 

The investigative agencies remain determined to bring to justice the key perpetrators of this misdeed, both inside and outside the country. 

The government has acted proactively and with alacrity against Agusta Westland International and Finmeccanica. It is the present government which through its order dated 3 July 2014, put on hold all procurement/acquisition cases in the pipeline of six companies figuring in the FIR registered by the CBI, namely: M/S Agusta Westland International Ltd., UK, M/S Finmeccanica, Italy, and its group companies, including subsidiaries and affiliates, M/S IDS, Tunisia, M/S Infotech Design System (IDS), Mauritius, M/S IDS Infotech Ltd, Mohali and M/S Aeromatrix Info Solution Pvt Ltd, Chandigarh. 

In doing so, we did not let the preparedness of our defence forces suffer. At the same time, we also ensured that no new capital procurement was made thereafter from these companies in the tenure of the present Government. 

The factually misinformed have also made a mention regarding clearance of a joint venture involving Agusta Westland by the Foreign Investment Promotion Board. This proposal was approved on 2nd September 2011 based on an application by Indian Rotorcraft Ltd a joint venture of Tata Sons with Agusta Westland NV, Netherlands. This was later changed to Agusta Westland S.p.A Italy due to reorganization within the group. On 7th February 2012, an industrial licence for the manufacture of helicopters was granted by the Department of Industrial Policy and Promotion to Indian Rotorcraft Ltd. However, the validity of licence has since expired. 

In their drive to divert the public attention from their own corruption, some have said that the Modi government permitted Augusta Westland to bid for 100 Naval Utility Helicopters in April, 2015. The fact is that a techno-commercial Request for Proposal (RFP) for Naval Utility Helicopters was issued to eight vendors on 4 August 2012. In response to the RFP, M/S Eurocopters, France and M/S Agusta Westland S.p.A Italy submitted their techno-commercial proposals on 4 March 2013. RFP of the procurement case was retracted by the Government on 13 October 2014. 

The Indian Navy has hosted on the website a Request for Information for more than 100 Naval Utility Helicopter in October 2014. No Request for Proposal has been issued, therefore the question of permitting Agusta Westland to bid for the Naval Utility Helicopter in April 2015 does not arise. The government is exploring whether their manufacturing can be pursued under "Make in India". 

On the core issue of corruption, the timeline of actions taken by the CBI and Enforcement Directorate clearly shows due rigour and diligence with which these agencies have pursued all aspects of their investigations, including the arrest and extradition of three foreign nationals namely Mr. Carlo Gerosa, Mr. Guido Haschke Ralph and Christian Michel James. 

CBI has so far investigated over 100 witnesses. In September and November 2014, couple of accused have been arrested and their property attached. A criminal complaint was also filed. Letter of Requests were sent out by ED and CBI to Mauritius (July 2013), Tunisia and Italy (December 2013), British Virgin Islands, Singapore and U.K. (September 2014), UAE and Switzerland (December 2014). The agencies are continuing to pursue responses to the LRs from the countries concerned. 

Further, an open ended non bailable arrest warrant was issued by CBI against Mr. Christian James Michel on 24 September 2015. Red Corner notices were issued in December 2015 and January 2016 through Interpol under Prevention of Money Laundering Act and Prevention of Corruption Act on charges of conspiracy and abuse of official position in giving favours to M/s AWIL. 

Extradition request has also been made for Christian Michel James. A request for provision arrest for the purpose of extradition was made to the U.K. authorities on 4 January 2016 by CBI. Enforcement Directorate, another autonomous agency to handle private money laundering and Foreign Exchange irregularities, has also separately sent a Red Corner seeking arrest and a request for his extradition from the U.K. on 29 February 2016. 

By asking why did Prime Minister and BJP government not take any action on the alleged offer dated 08.11.2015 made by James Christian Michael to be questioned by CBI and ED including on Indian soil, some have even tried to side with a wanted criminal. 

It is well known that any understanding/agreement with an accused outside the frame of law is a criminal act in itself. James Christian Michael is a criminal wanted by the Indian law enforcement agencies. We are pursuing all legal means to arrest him and have him extradited to India. Mr. Michel should submit himself to the Indian legal system rather than make elliptical references to offers that are suspect in intent and reality. We are determined that the law must take its course against Mr. Michel and his associates in this matter. 

Those who cannot see Prime Minister succeed even hint at him cutting a deal. Nothing could be farther from the truth. Prime Minister Modi did not cut any deal of any sort. His only goal and priority is the development of comprehensive national power, and empowerment of our masses. 

A few have even sought to link one of the accused with Shri Ajit Doval, present NSA, as also Shri Nripendra Mishra, Principal Secretary to the Prime Minister. This is a totally baseless assertion, devoid of reason and logic, and indicative of malicious intent. In reality, there is no such connection. 

Individuals in some quarters have even gone to the extent of ascribing intent to the technicalities of the CAG audit of the state governments of Rajasthan and Chattisgarh. They ask as to whey did Modi government not take any action against Chhattisgarh Chief Minister, Dr. Raman Singh despite an indictment of Chhattisgarh government by CAG in purchase of Agusta Westland Helicopter, which led to loss to public exchequer (according to CAG) of Rs.65 lakh? 

But, the government has been proactive in seeking response from the State governments also. As per the State Government of Chattisgarh, the Public Accounts Committe of the Chattisgarh Vidhan Sabha took cognizance of the CAG report regarding the acquisition that was done in 2007, and took the evidence of State Government officials. After analyzing the evidence of officials and the report of the State Government, the PAC closed the matter. 

Similarly, as per the State Government of Rajasthan, the alleged loss to public exchequer according to CAG was not on account of any irregularity in the procurement process, but due to the expenditure incurred on account of lack of planning and basic infrastructure prior to procurement, such as pilot training and maintenance. In this case too, the acquisition was done in 2005. 

The Government appeals to the countrymen to recognize the nature and depth of corruption in Agusta Westland case. The investigative agencies will stay their course in unveiling the corrupt and holding them accountable to our public. 

Four Seasons Announces Global Culinary Journey Developed with Noma

Four Seasons Hotels and Resorts, the world’s leading luxury hospitality company, today announced Culinary Discoveries, a first-of-its-kind journey developed in partnership with one of the world’s best restaurants, Copenhagen-based Noma, and its acclaimed head chef René Redzepi.

Beginning in May 2017, the three-week Culinary Discoveries itinerary will take travellers on an extraordinary journey to explore the people and places of many of the world’s most exciting culinary destinations. Tracing food influences and cultures across Asia and Europe, from the vibrant history and traditions of Chiang Mai, Copenhagen and Florence to the cosmopolitan energy of Tokyo, Seoul and Paris, guests will discover or reconnect with the cities and cultures that continue to shape the tastes and flavours of the world.

More than just a journey of the senses, Culinary Discoveries will explore each destination through a variety of angles, from visiting some of the world’s best restaurants and private kitchens to joining local chefs and producers as they travel to markets and farms to taste the best of what is in season. Guests will also visit each location’s historical and cultural landmarks, many of which have influenced cuisine well beyond their borders – all while enjoying Four Seasons legendary service and staying exclusively at Four Seasons hotels and resorts.

Along the way, guests will also participate in a series of hosted talks and conversations about the past, present and future of food and its intersection with creativity, innovation and community.

“We have always enjoyed the opportunity to travel and explore, and to learn about the ingredients and cultures that have helped shape what people eat and how they cook,” said Noma head chef René Redzepi. “From our team’s travels across Scandinavia to relocating our restaurant to Tokyo and Sydney, our international journeys have helped expand our minds and our tastes, and influenced the creativity of the Noma kitchen. We look forward to working with Four Seasons to help develop their first-ever Culinary Discoveries journey, and to create an experience that is truly memorable.”

“This new itinerary is the perfect example of why the Four Seasons Private Jet was launched, and furthers our innovative approach in planning exceptional travel journeys that create unforgettable memories,” said Elizabeth Pizzinato, Senior Vice President, Marketing and Communications, Four Seasons Hotels and Resorts. “Private Jet itineraries open doors to some of the world’s most exclusive experiences and extraordinary destinations. Through this collaboration and partnership with Noma we will explore new synergies and create a journey for our guests unlike any other.”

Destinations highlights on this all-new itinerary include:

Culinary Discoveries (May 27 – June 14, 2017)

Seoul – Tokyo – Hong Kong – Chiang Mai – Mumbai – Florence – Lisbon – Copenhagen – Paris

Culinary Discoveries opens in Seoul, where guests will begin their culinary expedition with a private dinner at Chef Jong Kuk Lee’s home to experience his renowned farm-to-table cuisine before visiting the Jin-Kwan temple to learn the spiritual Buddhist preparation of ancient temple food. In Tokyo, Private Jet passengers will explore one of the world’s most heralded culinary destinations, joining world-renowned Chef Namae Shinobu for a day of foraging outside the city, followed by a private dinner at his Michelin-starred restaurant L'Effervescence.

From there, guests will venture on to Hong Kong, where they will enjoy transcendent street food, tours of local markets and cooking classes with Michelin-starred chefs. In Chiang Mai, guests will select from a curated mix of experiences, exploring traditional Thai markets, embarking on an elephant trek through the verdant jungle, and enjoying a private dinner with Garima Arora, a native of India and former Noma chef now based in Thailand. Culinary Discoveries will then continue on to Mumbai, where guests will savour the distinctive flavours of the city, enjoying the aromatic curries and colourful spices of Mumbai’s delectable street-food.

From India, guests will travel to Florence where they will meet with pioneering wine makers in their medieval estates and explore the Chianti countryside. The Four Seasons Private Jet will then continue to Lisbon where guests will enjoy gala dinners, Michelin star dining, and an insider’s tour of the historic Mercado da Ribeira before jetting on to Copenhagen, home to Noma. There, guests will join the Noma team in foraging for local ingredients to be used at their private dinner at Noma that evening. Culinary Discoveries will continue on to Paris, culminating with a farewell dinner at the famed Michelin-starred Le Cinq at Four Seasons Hotel George V, Paris.

FSC Mauritius: Termination of the Licence of The HongKong and Shanghai Banking Corporation Limited

Pursuant to Section 28(9) of the Financial Services Act 2007, the public is hereby notified that the licence of The HongKong and Shanghai Banking Corporation Limited as Distributor of Financial Products will be terminated with effect from 30 April 2016.

Artificial Intelligence seen as opportunity and threat by financial services sector

• Majority believe AI and other fintech will make financial markets more competitive by 2018
• But more than three-quarters say regulators are unable to keep pace with changing technology
• Sixty percent say more regulation of AI and machine learning is needed to offset risks
• Almost half think their own companies don't understand the material risks inherent in AI

Global law firm Baker & McKenzie has paired with Euromoney Thought Leadership to reveal what is driving the global financial services industry towards a rapid embrace of Artificial Intelligence and Machine Learning, and the implications both for the industry and financial markets as a whole.

Ghosts in the machine: Artificial intelligence, risks and regulation in financial markets shows an industry rapidly seeing the potential benefits of AI, while being increasingly concerned about risk and the ability of regulators to keep pace.

The survey asked 424 senior executives from financial institutions and fintech companies around the world as well as leading experts in the field for their view on how AI will affect the financial sector, what risks and benefits AI will bring to the sector, what the associated regulatory and legal challenges will be and many more questions. Surprisingly similar views emerged from across the globe, with only a few notable variations, such as AI investment seen as lagging slightly in Asia Pacific compared to other regions and Latin American participants seeing AI as a regulatory tool to combat money laundering first rather than market misconduct, the top choice elsewhere.

Key findings

The results provide some insights into the likely  future of the financial sector. The most dramatic changes brought about by AI and machine learning within three years are expected to be in the areas of provision of credit, asset management, trading and hedge funds. 

On the positive side, AI is expected to improve financial institutions' risk management, through more in-depth assessment of risk in portfolios and more incisive, comprehensive and informed credit-risk assessment.  Machine learning is also predicted to make financial markets more competitive by as soon as 2018.

On the flipside, the use of AI in the financial sector brings about significant uncertainties and risks, such as the risk of malfunctioning algorithms, humans' misuse of technology and concerns surrounding the security, privacy and quality of data.  

Regulatory inadequacy and the rise of the machines

Survey respondents expressed great unease about the future regulatory response to AI. Over three-quarters are not confident that regulators have the adequate knowledge and skills to stay abreast of new financial technologies and understand the potential implications of AI for financial markets.

Arun Srivastava, head of Financial Services Regulation at Baker & McKenzie says, “Financial institutions have been fined billions of dollars because of illegality and compliances breaches  by traders. A logical response by banks is to automate as much decision-making as possible, hence the number of banks enthusiastically embracing AI and automation. But while conduct risk may be reduced, the unknown risks inherent in aspects of AI have not been eliminated."

Survey participants suspect that regulators are only just beginning to understand the potential implications of AI for financial markets and companies. For now, much of their attention is still focused on fighting the last war, identifying compliance breaches by humans directly abusing technology.  Their attention is only now beginning to turn to the integrity of algorithms, and any rule-writing on machine learning in the next few years will focus here.

The most popular solution revealed by the survey is more collaboration between fintech companies and regulators, with the second most popular choice coordinated, cross-border cooperation between regulators.

Financial sector calls for yet more regulation 

Experts interviewed acknowledge the degree of risk surrounding the use of AI. The survey backs up these concerns, with the risk of malfunctioning algorithms and concerns surrounding the security, privacy and quality of data leading 60% of respondents to call for new laws and regulations. 

Remarkably, only 16% believe financial institutions are already overregulated. A surprising finding perhaps for an industry that has seen relentless waves of new laws and regulation since the global financial crisis.

Almost half of those surveyed are doubtful that that even their own organisations fully understand the legal risks associated with new financial technologies.  Such risks include, for example, corporate liability as well as data protection and privacy risk. 

Adrian Lawrence, Partner at Baker & McKenzie expects access to data to play a central role in the scope and impact of AI systems, noting that "Data, and the various rules and processes which both enable and regulate access to and use of that data, stand at the heart of disruptive fintech businesses.  Even the most advanced and intelligent algorithms and models are useless without efficient, secure and legal access to detailed, accurate and up-to-date data sets."

Human error versus machine error

Just like humans - programmes, computers and machines have the capacity to be stupid. The danger is that they can act at a far greater scale and speed. The importance of maintaining human oversight, comprehension and control of emerging AI systems exposes the contradiction at the core of the technology. When confronted with inherently risky tasks – such as making investment decisions and bets on unknown future events – over-reliance on AI can magnify systemic risks. Yet the same technology can improve the depth and quality of financial institutions’ due diligence of companies. Through their powerful data-crunching capabilities, such applications can also help identify fraud, money-laundering, bribery and other corrupt practices that more conventional methods would struggle to uncover. 

With these examples in mind, the survey respondents appear hopeful that machine learning will help them to minimise risks, in some cases. Nearly six in ten (58%) believe it will “greatly enhance” their risk-assessment processes. Machine learning techniques can, for example, be used to alert fund managers about emerging weaknesses in invested companies . Astrid Raetze, Partner at Baker & McKenzie also expects consumer credit risk assessment to be enhanced through more thorough risk profiling of customers suggesting that, “AI should also reduce risk in some areas if deployed properly. Market misconduct and anti-money laundering (AML)/Know Your Customer (KYC) processes are areas where regulators could harness AI to improve regulatory oversight and scrutiny.”

With great power comes….?

Jeremy Pitts, Global Head of Baker & McKenzie's Financial Institutions Group, concludes: 

"Many survey respondents are cautiously optimistic about AI’s future role in financial markets. This optimism derives from the recognition that it will transform entire market segments, product lines and greatly increase aspects of risk assessment capability. Concerns on the other hand highlight the potential dark side of AI and the need for banks and other financial institutions to feel they can rely on the rule of law and effective regulation to protect them and their customers by creating a safe environment for innovation to flourish. Applying the truism that business hates uncertainty, the survey results show there is much work to be done."

Ghosts in the machine: Artificial intelligence, risks and regulation in financial markets

A global survey of 424 senior executives from financial institutions and fintech companies, and interviews with leading experts in the field, reveal tension as artificial intelligence (AI) is pioneered across financial markets.

Solving the Beneficial Ownership Conundrum: Central Registries and Licenced Intermediaries

Professor Jason Sharman’s discussion paper on the effectiveness of central registries and regulated corporate service providers in combatting financial crime has just been published.