Mauritius: Double Tax Treaties
Other International Treaties
Mutual Assistance Treaties: Until 2005, Mauritius had entered no mutual assistance treaties as such, and there were no formal procedures for cooperating with other countries. The Reciprocal Enforcement of Judgements Act 1923 covers most British Commonwealth countries; non-Commonwealth countries would have to obtain a Mauritian court judgement before being able to enforce judgement locally.
However, in May, 2003, Sushil Khushiram, Mauritius Minister of Economic Development, Financial Services and Corporate Affairs set out details of the country's current moves in combatting money laundering and terrorist financing, at the opening of a Financial Intelligence Unit seminar.
'Since this Government took office in September 2000', said the Minister, 'the political will to combat money laundering and terrorist financing and promote clean and reputable financial services has been strong and steadfast. We have implemented a programme of deep seated reforms in the regulatory and supervisory framework of financial services, which led to the establishment of the FSC and the FSPA. In parallel, we have modernised our Companies Act and introduced a new Trusts Act.
'We know the dramatic changes that took place in the international financial environment in the wake of global terrorist threats and amplified money laundering. Government introduced a series of legislation in early 2002, namely the Prevention of Corruption Act, The Prevention of Terrorism Act and the Financial Intelligence and Anti-Money Laundering Act, following which the ICAC, and soon after the FIU, became operational.
'Mauritius also volunteered for a diagnosis of the strengths and vulnerabilities of our financial sector by the IMF/World Bank under a Financial Sector Assessment Programme (FSAP) at the end of last year. This exercise is designed to help countries enhance their resilience to financial crises, and to foster growth by promoting financial soundness and stability. The assessment included a review of AML/CFT regime in place. It is now in the process of being completed. The FSAP reports will be presented to the IMF Executive Board next month, and Mauritius will then seek an upgrading of its ranking by the Financial Stability Forum. You will recall that Mauritius was ranked in the third and lowest category of offshore financial centres by the FSF in April 2000 with regard to the quality of its financial supervision. It has not been an easy toil, but we are almost there, and the expected adjustment the country's FSF ranking will further strengthen our credibility in attracting new and better business in financial services.
'As part of the FSAP exercise, certain amendments have been proposed to the existing legislation to fine-tune some provisions and clear certain ambiguities. We obtained technical assistance from the World Bank and IMF to look deeper into the proposed AML/CFT amendments. A TA Team of two AML/CFT experts visited us in March 2003 and submitted their final report in April. A broad-based National Coordination AML/CFT Committee set up in early 2003 under the aegis of my ministry met with the experts and discussed the final report. The Committee, which has been meeting regularly to coordinate national AML/CFT policies, comprises the intelligence and investigative bodies, namely FIU, ICAC, the Police, the regulators, i.e. the BOM and the FSC, the relevant ministries - the Prime Minister's Office, the Ministry of Finance, the Ministry of External Affairs, the State Law Office and the Commissioner for Drugs.
'Further measures will be examined with IMF/World Bank technical assistance to reinforce the operational effectiveness of the institutions involved in AML/CFT. A Task Force has been set up by the AML/CFT Coordination Committee to streamline and formalize procedures for dealing with financial crime, from a STR to final prosecution. Moreover, we are consolidating the AML/CFT framework through other supporting legislation to be introduced in the coming months. A Convention for the Suppression of Terrorism Bill, in obligation to UN requirements, a Mutual Legal Assistance Bill and an Extradition Bill are being finalised.
'No one should entertain any doubts about Government's commitment to combating corruption, money laundering and the financing of terrorism. Institutions such as ICAC and FIU are coming up fast on their learning curve and will soon reach their cruising speed. ICAC is investigating several high profile cases, while some 80 suspicious transactions reports have been received by the FIU. I understand that a number of these STRs have already been disseminated by the FIU to ICAC or Police for investigation. The regulators, namely the Bank of Mauritius and the Financial Services Commission have finalised AML/CFT guidelines for their licensees. I am sure that during the presentations this morning you will learn more about the operations of these organisations and the role they play in achieving our common AML/CFT objectives.
'Ladies and gentlemen, the most effective way to combat money laundering is for both the public and the private sectors to play their part in understanding and targeting criminal finance. This involves intelligence, investigation and prosecution. Without these three components, an AML/CFT strategy cannot be truly effective. There is a clear divide between those who receive and disseminate financial intelligence i.e. the Financial Intelligence Unit, and those whose job is investigate, determine the criminality and prosecute, e.g. the ICAC, Police and Customs. The logic behind this approach is that intelligence is different from evidence. Intelligence reports prepared by experts produce pictures of the criminality - not just who is doing what, but what type of crime is being committed, how criminality is evolving and where the next threat is coming from. Using intelligence to follow the money - identified through suspicious transactions reports - can often lead to the criminal.
'However, some banks and financial institutions are not making sufficient efforts to understand the institutional or legal framework that emphasizes financial intelligence in combating money laundering and terrorist financing. A few banks are invoking legal or other reasons in refusing to provide full and complete information to the FIU. Let me make it clear that the existing legal ambiguities in the Banking Act will be dealt with very shortly. Those of you who are familiar with the forty recommendations of the Financial Action Task Force on Money Laundering, or more precisely Recommendation 5, will know that a country's banking secrecy laws must not conflict with, or inhibit, the effectiveness of a national anti-money laundering strategy. The FATF recommendations are applied worldwide.
'Let me also comment on the role that 'gate keepers' i.e. accountants, barristers and other professional advisers are expected to play in the AML/CFT combat. While I understand that new legislation may need time to sink down, I think that we need an accelerated culture change here. The Financial Intelligence and Anti-Money Laundering Act makes it mandatory for members of the relevant professions or occupations to make suspicious transactions reports to the FIU. But it seems that the submission of STRs by them will take some time to come by. The Bar Council, the Law Society, the Association of Notaries and Accounting Bodies represented in Mauritius are no doubt calling members to take disclosures of suspected money laundering cases seriously.
'Ladies and Gentlemen, AML/CFT also has a regional and international dimension. International action to combat money laundering started in the late 1980s with the ensuing development of international standards and national initiatives. The Financial Action Task Force which was set up in 1989 by the G7 nations has a leading role in the global drive to combat money laundering, and more recently terrorism financing. Its 40 plus 8 recommendations constitute the international benchmark for assessing the standards of an AML/CFT regime. Mauritius is initiating action to obtain observer status in the FATF, on the same basis as was granted to South Africa.
'At another international level, the Egmont Group is an informal forum open to all Government agencies having the means to prevent criminals from using the legitimate financial system and other economic sectors to profit from illegal activities. Membership of Egmont means direct involvement in the decision making process of the Group, participation in the activities of its Working Groups, participation in training sponsored by Egmont and more importantly access to Egmont Secure Web for information sharing and intelligence gathering.
'The Mauritian FIU was sponsored by the US FIU (FinCEN) for membership of the Egmont Group and I am pleased to announce that at its meeting of 31st March 2003 the Legal Working Group of Egmont has endorsed the application of Mauritius to join the Egmont Group and will make a formal recommendation on our candidacy before the 69 Egmont member FIUs during the next plenary meeting of the Group in Sydney on 23rd July, 2003. This will put Mauritius to the top league of countries with world class standards and structures to combat global financial crime.
'The Mauritius FIU is working closely with the newly created Financial Intelligence Centre of South Africa and the French FIU - Tracfin. As for FinCEN, it continues to be active in our FIU development and will be organising a regional training session in Mauritius in September this year for FIU and law enforcement officials from South Africa, UAE and India.
'Mauritius is also actively associated with a regional AML/CFT initiative, as a founding member of the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG), which is an FATF-style regional body receiving the full support of all international organisations involved in AML/CFT. ESAAMLG members have started a mutual evaluation of their respective AML/CFT regimes to assess compliance with the FATF 40 + 8 Recommendations.'
In April, 2003, the Mauritius Financial Services Commission (FSC) issued three Codes on the prevention of money laundering and terrorist financing, namely:
- Code on the Prevention of Money Laundering and Terrorist Financing intended for Management Companies;
- Code on the Prevention of Money Laundering and Terrorist Financing intended for Investment Businesses; and
- Code on the Prevention of Money Laundering and Terrorist Financing intended for Insurance Entities.
Said the FSC at the time:
'These Codes aim to preserve high standards of practice and the integrity of Mauritius as a reputable financial services center. Mauritius is fully supportive of international initiatives to combat money laundering and terrorist financing and so the Codes take account of international standards.
'These Codes state minima criteria to be followed by companies and market intermediaries to prevent the exploitation of the financial services industry in Mauritius by money launderers and terrorist financiers.
'Economies with emerging financial centers and inadequate controls are particularly vulnerable. Money laundering poses a serious threat to the integrity and soundness of the financial system of all countries. It affects economic development, and foreign investors' perception that the financial services industry functions within a framework of high legal, professional and ethical standards.
'It is therefore vital that all operators in the financial industry in Mauritius avoid exposure to the risk of involvement in relationships concerning money laundering or terrorist financing.
'The Codes issued by FSC describe the regulatory anti money laundering practices that operators involved in these three disciplines are expected to consistently follow and include:
- The "Know Your Customer" procedures;
- The obligation for operators to check the identity of clients;
- The need to retain records; and above all
- The need to comply with the legal provisions of the Financial Intelligence and Anti Money Laundering Act 2002, particularly as regards Suspicious Transaction Reporting.'
The Codes came into force on 2nd May 2003.
The Information Exchange Agreement With India
In December, 2002, Mauritius and India signed a Memorandum of Understanding laying down rules for information exchange between the two countries.
Discussions began in April, 2002, when the Deputy Prime Minister and Minister of Finance of Mauritius, on a visit to India, suggested the signing of an MoU, and in June the Mauritian Financial Services Development Act was amended to give wider powers to the FSC for investigation and exchange of information with other regulators.
The MOU provides for the two signatory Authorities to assist each other in the detection of fraudulent market practices, including insider dealing and market manipulation in the areas of securities transactions and derivative dealings. Its principal objective is to support the sound development of the securities markets in both countries by encouraging legitimate best practices. Structures have been established for effective implementation of exchange of information, both on request and on a voluntary basis, about suspicious securities dealings between the two countries. The intention behind the MOU is to track down transactions tainted by fraud and financial crime, not to target bona fide legitimate transactions.
It was expected that the MOU would go a long way towards dispelling doubts about the unwillingness of the two Authorities to engage in the effective exchange of information in accord with standing international best practices.
Indian Government officials said the agreement would deter traders from routing money with doubtful origins through Mauritius.
The Indian government had recently introduced the SEBI Act 2002 to give the market regulator greater powers to deal with market abuse. The agreement with Mauritius was one of a series that SEBI has signed with major trading partners.
The Financial Intelligence Unit
In 2003 Mauritius's Financial Intelligence Unit (FIU) was admitted to the Egmont Group, an informal coalition which provides a forum for FIUs to improve support to their respective national anti-money laundering programmes.
The Mauritian FIU, which was sponsored for entry into the group by its US counterpart, FinCEN, was admitted prior to the Egmont Group's 5-day plenary meeting of that year, which was held in Australia.
In March, 2005, Indian Prime Minister Manmohan Singh signed a Free Trade Agreement with Mauritius. Entitled the Comprehensive Economic Cooperation Partnership Agreement, the pact is aimed at strengthening the existing economic cooperation between the two countries. While it will liberalise trade in goods and services and facilitate joint ventures, the most important aspect of the agreement is that it will encompass the existing double taxation avoidance agreement between the two countries.
This DTAA had been the focus of much worry for Mauritius over the years, as the Indian tax authorities have sought to strengthen the standards of proof for tax residency in Mauritius, and had attempted to disallow tax exemptions granted by Mauritius to investors using the island as a conduit for Indian investment (see above). Mauritius is the second largest source of FDI for India.
In October, 2004, the Indian Supreme Court upheld the validity of a circular issued by the Indian Central Board of Direct Taxes, which stated that a certificate of residence issued by the Mauritian authorities constituted sufficient evidence of residence in the jurisdiction to allow a firm or investor to take advantage of the provisions of the bilateral DTA between India and Mauritius. And earlier in the year the Supreme Court threw out a 'curative petition' which would have reversed the situation.
However, the issue of Indian resident entities 'round-tripping' investments via Mauritius is, as previously mentioned, still a concern.
Mutual Assistance Treaties
In October, 2005, India and Mauritius, which has an Indian community of more than 800,000, signed a batch of agreements including a Legal Mutual Assistance Treaty aimed at limiting the scope for money-laundering between the two countries.
The agreements were signed in the presence of Indian Prime Minister Manmohan Singh and his Mauritian counterpart Navinchandra Ramgoolam after the two leaders held talks on a wide array of bilateral issues.
Indian Home Affairs Minister Shivraj Patil and Mauritian Foreign Minister Madan Murlidhar Dulloo signed the agreement which will promote better co-operation among police and investigative agencies in both countries and envisages sharing of information and data relating to crimes and criminals.
India has signed similar Treaties on mutual legal assistance in criminal matters with around 21 countries, including the United Kingdom, Canada, Russian Federation, France, Kyrgyzstan, Kazakhstan, United Arab Emitrates, Uzbekistan, Mongolia, Tajikistan, United States of America, Turkey, Switzerland, Ukraine, South Africa, Baharain, Thailand, Kuwait, South Korea, Singapore and Belarus.
Salient features of the Agreement are:
- To improve the effectiveness of both counties in the suppression, investigation and prosecution of crime, including crime relating to terrorism, and tracing, restraint, forfeiture or confiscation of the proceeds and instruments of crime through cooperation and mutual legal assistance in criminal matters.
- 'Criminal matters' means, for India, investigations, inquiries, trials and other proceedings relating to an offence created by Parliament or by the legislature of State; and, for the Republic of Mauritius, subject to the laws of the Republic of Mauritius, investigations, inquiries or other proceedings relating to a statutory offence.
- Mutual legal assistance includes: locating and identifying persons and objects; serving documents, including documents seeking the attendance of persons; providing information, documents and records; providing objects, including lending exhibits; search and seizure; taking evidence and obtaining statements; authorizing the presence of persons from Requesting State at the execution of requests; making detailed persons available to give evidence or assist investigations; facilitating appearance of witnesses or the assistance of persons in investigations; taking measure to locate, restrain or forfeit the proceeds of crime and other form of assistance not prohibited by the law of the Requested State.
- Mutual legal assistance is to be granted irrespective of whether the assistance is sought or to be provided by a court or some other competent authority.
- Assistance may be refused if the execution of the request would impair sovereignty, security, public order or other essential interest, or prejudice the safety of any persons; if the execution of the request would be contrary to the domestic law of the Requested State; or if the request relates to an offence in respect of which the accused person had been acquitted or pardoned.
In January, 2006, the Mauritius Financial Services Commission and the Jersey Financial Services Commission signed a Memorandum of Understanding effective from 26 December 2005 covering mutual assistance and the exchange of information.
The Memorandum establishes a formal framework for mutual assistance and the exchange of information between the two regulators to facilitate the enforcement of, and compliance with, the laws of each jurisdiction. Such collaboration, say the two FSCs, should help to protect investors and depositors and to promote the integrity of financial services markets in the two jurisdictions.
The Memorandum of Understanding commits both regulators to providing help within the limits of each jurisdictions' laws, and establishes procedures and liaison points so that requests for information needed for tackling financial regulatory offences can be handled rapidly and efficiently.
Milan Meetarbhan, Chief Executive of FSC Mauritius, said:
"Mauritius is keen to establish itself as a reputable International Financial Centre and in addition to our wide Double Taxation Treaty network which already provides for extensive exchange of information, we now have a number of agreements on exchange of information with regulators across the world. We are pleased to have an MOU with Jersey Financial Services Commission as this will further enhance the cooperation between our two jurisdictions."
David Carse, Director General of the Jersey Financial Services Commission, said:
"I am delighted to sign this Memorandum of Understanding with FSC Mauritius. It is the latest in a number established between the Commission and other regulators around the world and reflects the Commission's commitment to cross-border regulatory co-operation."
In February 2007, around six months after the Trade and Investment Framework Agreement (TIFA) between the United States and Mauritius was signed (in September 2006), the first TIFA Council meeting between the two countries took place.
The US delegation was led by Florizelle Liser, Assistant US Trade Representative for Africa.
The TIFA was established as a vehicle for strengthening and expanding bilateral trade ties between Mauritius and the United States. It provides an opportunity to work more closely on a broad range of trade-related issues, including the moving of the WTO Doha Development Round forward and the implementing of the AGOA. The Agreement is considered as a first step towards the creation of a Free Trade Area.
The TIFA also includes provisions for the establishment of a bilateral Trade and Investment Council that will monitor trade and investment relations and identify opportunities for expanding trade and investment, as well as important issues and challenges that both Mauritius and the United States need to address.
Commenting following the conclusion of the first Council meeting, Deputy US Trade Representative Karan Bhatia announced that:
“I’m pleased that, within six months of its signing, we are using our TIFA agreement with Mauritius to deepen and strengthen our engagement with that country and to stimulate our relationship with key African trading partners.”
“Our TIFA Council is an important part of our continuing effort to improve the US-Mauritian trade and investment relationship.”
The meeting allowed the two governments to set priorities, identify objectives, establish benchmarks, outline impediments, and chart the way forward for work under the TIFA.
During the TIFA Council meeting, officials from the United States and Mauritius explored common objectives – including cooperation in the World Trade Organization, implementation of the African Growth and Opportunity Act, export diversification, trade and investment promotion, and economic development. They also examined opportunities for a more comprehensive trade and investment relationship.
The TIFA Council reviewed a common workplan that the United States and Mauritius will jointly undertake in order to implement the TIFA, including a wide-range of programs and activities to support, facilitate, and ensure progress and success in strengthening the US-Mauritian trade and investment relationship.
In August 2009, US Trade Representative Ron Kirk and Secretary of State Hillary Clinton announced that the United States and Mauritius will begin formal negotiations toward a Bilateral Investment Treaty (BIT).
Kirk and Clinton announced the launch of the BIT negotiations during the African Growth and Opportunity Act Forum in Nairobi, Kenya. The principle aims of the treaty would be to strengthen investor protections and encourage the continuation of market-oriented economic reforms in Mauritius.