Mauritius may be off FATF 'grey list' this month: Report

Mauritius was added to the grey list in February 2020, which furthered fueled scrutiny and black-listing by the EU and investment restrictions by the RBI

Investors entering India through Mauritius have indicated that soon the tax haven will come out of the 'grey list' of the Financial Action Task Force (FATF).

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

As per a report by the Economic Times, FATF is considered a re-rating of Mauritius following some regulatory changes made in the last 20 months, to combat terror funding and money laundering. It also stated that the decision could be taken as soon as the end of the week. The FATF has a week-long plenary session which began October 17.

Mauritius was added to the grey list in February 2020, which furthered fueled scrutiny and black-listing by the European Union and investment restrictions by the Reserve Bank of India.

"Doing this would have a dual impact: First, it could pave the way for RBI lifting the curbs on ownership and control by entities in Mauritius investing in Indian non-banking finance companies (NBFCs) and other payment service operators; second, there would be lesser scrutiny on the 'beneficial ownership' (BO) of Mauritius vehicles coming in as foreign portfolio investor (FPI) and foreign direct investor (FDI)," the report stated.

After its grey listing, while the RBI took a stern view, Sebi had allowed category-1 FPIs from Mauritius to trade on Indian stock exchanges. Despite this stance, the MNC banks which are custodians of FDIs have tagged the tax haven as a 'high-risk jurisdiction.'

Funds from such jurisdictions have to disclose details about investors having beneficial ownership.

"Typically, an investor which contributes 25 per cent or more in a fund or exercises control through the board of the asset manager is considered to have a BO in an FPI. This threshold for determining BO is lowered to 10 per cent for investors from high-risk jurisdictions like Mauritius. So, once Mauritius is white-listed, the threshold for BO would be revised to 25 per cent for investors from the tax haven," the report added.

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