EU lists Mauritius as high risk country for money laundering

Monday May 18 2020

Port Louis, Mauritius, is considered a tax haven.

Port Louis, Mauritius, is considered a tax haven. PHOTO | FILE 

JAMES ANYANZWA
By JAMES ANYANZWA
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Companies operating in Mauritius face a test of integrity after the European Union included the island on its revised list of high risk jurisdiction for money laundering and terror funding.

Mauritius has been a popular financial haven for the region’s wealthy individuals, with several companies registering their subsidiaries in Port Louis mostly due to its favourable tax regime with corporate and export taxes of 15 per cent and three per cent, respectively.

The country also allows a 100 per cent foreign ownership with no capital gains tax.

However, about a fortnight ago, the European Commission (EC), the executive branch of the EU, put Mauritius on its list of high-risk countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks.

In a statement on its website, EC said the revised list will now be submitted to the European Parliament and Council for approval within one month (with a possible one-month extension) and the country status of the new listing will take effect on October 1.

The methodology takes into account the interaction between the EU and the Financial Action Task Force (FATF) process, an enhanced engagement with third countries and consultation with member states.

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The FATF is an inter-governmental body that sets anti-money laundering standards.

Signals that Mauritius could be blacklisted started earlier this year when the country was put on the FATF’s “grey list” if they did not curb the mushrooming of terror funding and money laundering activities.

The EU’s revised list for high risk countries considered developments that have taken place at the international level since 2018.

The new list also includes Botswana, Ghana, Zimbabwe, Bahamas, Barbados, Cambodia, Jamaica, Mongolia, Myanmar, Nicaragua, and Panama.

Countries which have been delisted include Ethiopia, Tunisia, Bosnia-Herzegovina, Guyana, Lao People's Democratic Republic and Sri Lanka.

East Africa has recently seen a surge in investments from Mauritius, with banking, insurance, agriculture, telecoms, trade and the oil and gas sectors receiving most of the capital.

In the region, Kenya has attracted the largest number of investors: Data shows that Mauritian companies have invested over Ksh10 billion ($100 million) in the country, mostly in financial services and the sugar sector.

Several investors in East Africa, like commercial and investment banks and insurance firms, have registered firms in Mauritius because of the tax benefits, eliciting calls for investigations of the double taxation agreements.

In April last year, Kenyan President Uhuru Kenyatta met Mauritian Prime Minister Pravind Kumar Jugnauth in Mauritius and they agreed to jointly support private sector investments by reducing the bureaucratic procedures required to set up businesses.

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