Mauritius: Offshore Business Sectors
Mauritius adopted a cautious attitude towards banking development. Until November 2004, banks were required to have separate licences for operating 'domestic' and 'offshore' banking activities. This distinction between the two was lifted when the Banking Act 2004 came into effect in November of that year.
The legal and supervisory regime for banks is to be found in the Banking Act 2004, the Finance Act 2004 and the Financial Services Act 2007. The Bank of Mauritius (the Central Bank) is responsible for licensing, regulation and supervision of the banking sector. Banks are free to conduct business in all currencies. See Offshore Legal and Tax Regimes for details of their tax treatment.
The application process is fairly rigorous, and includes provision of audited financial statements for the past 5 years. The licence processing fee is MR250,000 (US$7,385 at the time of writing), and the annual licence fees range from MR3,000,000 (US$88,626) to MR5,000,000 ((US$147,710). Updated regulations, in the form of the Banking (Processing and Licence Fees) Regulations 2007 were introduced.
In March 2005, the Mauritian National Assembly passed two bills - the Bank of Mauritius Bill and the Banking Bill - designed to give the Central Bank more autonomy and to remove differences between the offshore and onshore banking regimes.
The existing rule that 40% of a bank's directors should be independent, forming part of the Rules on Corporate Governance issued in 2001, is part of the new law. The definition of independent director is: “having no relationship with, or interest in, whether past and present, the financial institution or its affiliates, which could reasonably be perceived to materially affect the exercise of his judgment in the best interest of the financial institution”. The minimum capital requirement for a bank was increased from Rs 100m to Rs 200m in 2006.
The law gives the central bank power to appoint a 'Conservator' to protect the assets of a bank's depositors if 'the financial institution has, or its directors have (i) engaged in practices detrimental to the interests of its depositors, (ii) knowingly and negligently permitted its chief executive officer, any of its managers, officers or employees to violate any provision of the banking laws, any enactment relating to anti-money laundering or prevention of terrorism or guidelines and instructions issued by the Central Bank. The law also enables the central bank to establish a deposit insurance scheme as a protection 'against the loss of part of all of deposits in a bank that will contribute to the stability of the financial system in Mauritius and minimize the exposure to loss'.
Other provisions included a strengthening of KYC rules, laying down that 'every financial institution shall only open accounts for deposits of money and securities, and rent out safe deposit boxes, where it is satisfied that it has established the true identity of the person in whose name the funds or securities are to be credited or deposited'. Banks will also have to rotate their auditors at least once every five years.