In March 2022, the International Monetary Fund (IMF) acknowledged the importance of offshore centres in the global economic landscape by releasing a new database. This comprehensive report measured cross-border flows and positions of Special Purpose Vehicles (SPVs) resident in 26 participating economies, including Mauritius, and insightfully concluded that certain resident SPVs are responsible for channelling remarkably high flows of foreign direct investment (FDI).
Significantly, Mauritius secured second place in the database with FDI flows that were 30 times the size of its GDP, showing clearly that the importance of the Mauritius International Financial Centre (IFC) as a regional investment hub remains high.
Indeed, it cannot be denied that Mauritius has come a long way in investor rankings, with the decisions of the FATF and UK Government to de-list Mauritius from their high-risk watchlists in October and November 2021 respectively. The final feather in its cap came when the jurisdiction secured its removal from the EU’s list of high risk third countries from 13 March 2022 onwards. The icing on the cake though – and which has fittingly come on the heels of the Mauritius IFC celebrating its 30th anniversary last year – has been the FATF re-rating of the jurisdiction on 02 September 2022 which has placed Mauritius among leading jurisdictions globally to be rated ‘compliant’ or ‘largely compliant’ with 40 of 40 FATF recommendations, including Recommendation 15 on New Technologies.
There is now no doubt in investors’ minds that, while the FATF and EU listing have been setbacks, the silver lining is that it has accelerated changes in the IFC to further bolster the standing of the Mauritius centre and take it to the next level.
How the VAITOS Act sets up Mauritius for cutting-edge innovation in virtual assets
Indeed, the FATF’s firm seal of approval on the jurisdiction’s ability to compete in a technology-fuelled financial services arena has translated into international investors warming up to Mauritius as an economy not just operating with the highest norms and standards of international regulations itself, but also setting high standards for others in the region.
Here, one of the foremost steps to help Mauritius meet global standards in the AML/CFT arena has been the implementation of the Virtual Asset and Initial Token Offering Services (VAITOS) Act on 07 February 2022. It is clear to all onlookers that this significant legislation has poised the island economy to become a regional crypto powerhouse by regulating Virtual Asset Service Providers (VASPs), and helped cement its status as a jurisdiction of substance. With the collapse of unregulated VASPs such as FTX having evidenced how these firms pose a clear and present danger to financial ecosystems where their investors are based, Mauritius’ ability to offer not just innovative but also suitably regulated avenues for investments is making investors sit up and notice the jurisdiction.
Since the enactment of the regulation in February 2022, three licences have already been issued in the intervening period to a digital custodian, a digital exchange, and a digital clearing and settlement house respectively, showing that the Financial Services Commission (FSC) of Mauritius intends to follow suit with empowering players on the ground to provide the innovative services expected by investors under this enabling framework.
How Mauritius is wooing investors with innovative structures such as the VCC
In addition, another noteworthy milestone for the jurisdiction has been the introduction of the Variable Capital Company (VCC) Act on 15 April 2022. The VCC Act allows Mauritius to introduce an innovative investment structure that places the IFC at par with other best-in-class jurisdictions such as Singapore.
Indeed, the VCC structure features an in-built flexibility that puts fund managers in position to use the entity for multiple strategies. It has an easy entry point but, more interestingly, it gives fund managers a number of options in terms of exit. Significantly, a key characteristic of the Mauritius VCC is that the sub-funds or SPVs can have separate legal personality, provided they are incorporated as companies, a feature that gives it a distinct advantage. Moreover, it balances enhanced substance requirements such as 2 resident directors being mandated vis-à-vis one for Singapore with practical considerations such as allowing the fund manager to be domiciled in Mauritius or another jurisdiction upon the regulator’s approval, while the Singapore structure only allows the fund manager to be based in the city state.
All in all, the Mauritius VCC is a unique proposition when compared to other jurisdictions offering similar types of products and places the IFC in a preferred position with fund managers and investors.
How Mauritius fares against alternative jurisdictions
Apart from Singapore, a comparison with other best-in-class jurisdictions appears inevitable, since Mauritius clearly competes with other investor favourites for its place in the sun.
Against this backdrop, it is worth noting that closely competing IFCs such as Dubai and the Cayman Islands have recently come under FATF scrutiny, with recommendations to bolster their Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regimes.
To elaborate, the FATF added the United Arab Emirates (UAE) to its greylist in March 2022 following seven strategic deficiencies outlined in its AML/CFT regime. Since then, the UAE had agreed to take a number of steps in response, and further developments were announced at the FATF plenary session in February 2023 where the UAE demonstrated significant progress, including a sustained increase in outbound MLA requests to help facilitate the investigation of TF, ML, and high-risk predicates; showing greater use of financial intelligence to pursue high-risk ML threats; and combating UN sanctions evasion, including inculcating a better understanding among the private sector. Having said that, with four recommendations remaining to be addressed, it is still expected to be some time before the UAE completes its action plan and secures its removal from the FATF greylist.
Meanwhile, the Cayman Islands has been actively working to complete the necessary steps to secure its removal from the FATF list since February 2021. In its latest plenary session of February 2023, the FATF expressed concern that the Cayman Islands’ action plan fully expired in May 2022 and urged the jurisdiction to “swiftly demonstrate significant progress in completing its action plan by June 2023”.
Why Rogers Capital is the perfect partner on your journey to investing in Africa
It is clear from the above that Mauritius is presently placed in an optimum position to support investments into Africa as a jurisdiction compliant with all 40 FATF Recommendations.
At Rogers Capital, we have developed solutions for our management company which could be easily deployed to fund managers eyeing Africa-centric investments. At the outset, Rogers Capital Fiduciary can be your strategic partner for structuring investments as an international provider of fiduciary, trust, fund and professional services – including actuarial, tax, accounting, fund, trust and captive insurance. With this year marking the 30th anniversary of Rogers Capital Fiduciary, following closely on the 30th anniversary of the Mauritius IFC last year, it is clear that we have the experience and expertise to accompany you on your forays into the continent.
Contact us to find out more about our solutions and to understand how we can leverage our in-depth experience and technical expertise for your business success!